Chapter 3: SWOT & STEEP Analysis for the Dairy

Industry in India

"We are all time travellers on a journey into the future. However, we are not
tourists accompanied by a guide who can tell us just what lies ahead and will
keep us safe and comfortable. Instead, we are explorers in an unknown and
dangerous region that no one has ever seen before". Edward Cornish (2004)

The understanding of technology foresight sets on stage to look systematically into

long-term perspective of dairy industry in India for identification of areas, issues and
emerging technologies. The dairy industry has evolved through consistent efforts and
application of science and technology during pre and post independence period of
India. Consequently, India has become leading milk producer in the world with 104
million tonnes production in 2008-09. At the same time India is second highest
populous country with 1.027 billon persons in 2001 along with largest milk and milk
products consumer in the world. India's population rose by 21.34 % between 1991 and
2001 and this trend is, aggressively, estimated to reach at 1.17 billion by July 2009.
Majority of population is dependent on agriculture and allied sector and their future
still revolve around the agricultural sector for employment, livelihood and income.
The shaping of future has high significance for the people who are dependent on
Agriculture, first, and those who get food and nutritional security from Dairy sector.
There can't be one future of the Dairy sector, in same voice; it can't be predicted at a
certain point of time. But the future could be created through well deliberated goal
oriented efforts through technological, institutional and Governance Innovations. The
stakeholders' involvement in development of dairy sector could set path for shaping
the desired future of dairy sector in India.
The technology foresight can provide an opportunity to explore the plausible future of
dairy sector then set to achieve that through appropriate policy initiatives. The
concept of foresight does convey that there can not be a single future of the dairy
sector. Therefore, to achieve desired future it is essential to identify the major trends,

49

drivers, actors and factors of the dairy sector. Further, it needs to setup priority for
Research and Development (R&D), Technological transfer and diffusion, investment,
sociological and political agenda, governance and trade policies.
In the preceding context, this chapter is aimed at carrying out a technology foresight

exercise for the dairy sector in India. It investigates different weakness and threats of
the sector, along with the opportunities and strengths. The next section identifies and
analyses sociological, technological, economical, ecological or environmental, and
political drivers and factor for dairy industry. Furthermore, it merges the SWOT
analysis and STEEP analysis (in an effort to evolve a model) for attaining
competiveness of innovation system in the dairy sector. It discusses details of creating
future competitive dairy industry through turning weaknesses and threats in
opportunities and strength through operations of STEEP drivers. This is inorder to
pursue objectives for setting up priority for Research and Development (R&D),
Technological transfer and diffusion, investment, sociological and political agenda,
governance and trade policies.

3.1 SWOT Analysis

The dairy industry has its own strengths and weaknesses to build on present scenario
for future growth. Strengths and weaknesses are the internalities of the present
situation of dairy industry within the country.

Opportunities and threats are the

externalities of the future situation, not only within the country, but also expected
from outside the borders. The analysis attempts to identify the strengths to meet the
opportunities and the threats of the future and weaknesses are going to be challenged
or shown up by these threats and opportunities. The following table of strengths,
weaknesses, opportunities and threats is to be used as a guide for the analysis that
follows.

50

Table 3.1: SWOT (Strengths, Weaknesses, Opportunities, Threats)

Weaknesses

Strengths
o

Largest milk producer

Fast growing economy

Annual highest milk production

growth

Emerging competent
system and authority

Low
milk
productivity
veterinary services

Lack of data on dairy sector

Weak organised retailing

established cold chain

Large unorganised dairy sector

Poor

and

regulatory

New Food safety and standard law

Poor raw milk quality

Trained S&T human resource

Lack of Good dairy practices

Research and Educational Institutes

Weak financial services

'Strong successful cooperative

movement', in particular parts of
India

Low dairy plants efficiency

Inappropriate milk collection system

in certain areas

Opportunities

Threats

Large rural market

Food safety

Increasing quantity of available milk

for processing

Unhygienic practices by farmers at

farm

Fast growing economy

o

Diversification

Uncontrolled use of antibiotics and

medicines on milch animals

large
market
opportunity

Unfriendly WTO regime

Imports from other countries

increasing income of consumers,

o

Drought and flood

o
o

and

investment

changing life style and preference for

milk and milk products,
more number of adult consumers,
untapped indigenous milk products
market
low cost human resource and
em loyment generation

51

and

3.1.1

Strengths

Largest milk producer in the world with highest milk production growth: Since
1998-99 India has emerged as largest milk producer in the world with 75.4 MT
(Million Tonnes) by surpassing USA. India has witnessed approximately 4% growth
of milk production annually in last three decades, which far exceeds the average
global growth of about 1% (Singh, 2009). India produces 65.8% buffalo milk, 21.7%
goat milk, 7.3% cow milk, and 14.6% total milk of the total world milk production in
respective categories in year 2005 (F AO, 2007). India has attained the total milk
production of 104 MT (estimated) during the year 2007-08 as per results revealed by
Department of Animal Husbandry and Dairying, Govt of India.

Growth in milk

production has exceeded the growth in India's population, elevating per capita milk
availability 114 grams per day in 1970 to 252 grams per day in 2007-08, as shown in
table 3.2.
Table 3.2 : Trend of per capita milk availability in India, 1970-20 I 0
Year

Per capita availability

Per capita availability

Kg/year

Grams/day

1970
1980
1990
1995
1996
1997
1998
1999
2000
2001
2005-06
2007-08
20 IO(projected)

42
47
65
72

74
76
78
78
80
82
88
92
100

Department of AH&D, Govt oflnd1a

52

114
128
178
197
202
207
213
214
219
226
241
252
275

The per capita milk availability is projected to reach 275 grams per day by year 2010.
Therefore, India can be said a self sufficient milk producing country in the world.
Indian dairy can fulfil demand of the milk and milk products in Indian market. The
total milk production and per capita milk availability is a strong pillar of Indian dairy
industry.
Food Regulatory System: New Food safety and Standards law and authority
With a view to consolidate the laws relating to the Food in the country and for laying
down science based standards for articles of food and to regulate their manufacture,
storage, distribution, sale and import, to ensure availability of safe and wholesome
food for human consumption and for that purpose to establish the Food Safety and
Standards Authority of India, Parliament enacted the Food Safety and Standards Act
(FSSA), 2006. Single food law has merged the following orders/acts.
I. The Prevention of Food Adulteration Act, 1954 (3 7 of 1954).
2. The Fruit Products Order, 1955.
3. The Meat Food Products Order, 1973.
4. The Vegetable Oil Products (Control) Order, 1947.
5. The Edible Oils Packaging (Regulation) Order, 1998.
6. The Solvent Extracted Oil, De oiled Meal, and Edible Flour (Control) Order,
1967.
7. The Milk and Milk Products Order, 1992.
Further, the FSSA is amended to Food Safety and Standards (Amendment) Act, 2008
to expedite the selection and appointment of Chairperson and Members of the Food
Authority. Therefore, removing certain hurdles and ensuring a smooth constitution of
Food Safety and Standard Authority of India.

53

The Food Safety and Standard Authority of India (FSSAD has been established under
Section 4 of the Food Safety and Standards Act, 2006 as a statutory body for laying
down science based standards for articles of food and regulating manufacturing,
processing, distribution, sale and import of food so as to ensure safe and wholesome
food for human consumption. The authority came up at a time when there was urgent
need to club together numerous laws and regulations in single law. Therefore, it may
create a vibrant regulatory system when food safety and regulation is a major concern
world over. FSSA and FSSAI are the major strength of the dairy sector in India.
FSSAI has drafted the recall regulation in exercise of powers conferred by section 28
(4) read with section 92 (2) (m) of Food Safety and Standards Act, 2006 (34 of2006),
with the previous approval of the Central Government and after previous notification.
The regulations are called Food Authority's Food Recall Procedures Regulations,
2009 and have come into force from date of notification. The Recall can be of two
types Firm Initiated and Food Authority Initiated. Recall may be carried out
voluntarily by manufacturers and distributors to remove unsafe food from the market
to prevent injury to consumers. Seizure or other court action may be taken when a
finn refuses to undertake a recall directed by the LCA, or where the LCA/Food
Authority has sufficient reasons to believe that a recall would not be effective,
determines that a recall is ineffective, or discovers that a violation is continuing. The
efforts for evolving food recall rules in case of food contamination and other
outbreaks have further strengthen the food regulatory system in India for dairy
industry.
Strong institutional set up and Technical and skilled human resource: India has
more than 25 institutes dedicated to train and educate technical human resource in
Dairy science and technology. In addition, there are more than 50 veterinary
educational institutes specifically dedicated to training of veterinarians. The
educational institutes chum out thousands of trained technologists, veterinarians,
managers, and technicians.

54

'Strong successful cooperative movement' and National Milk Grid: The AMUL
model of cooperative system in India has been highly successful in certain areas.
India's 96,000 dairy cooperatives were integrated through a three-tier cooperative
structure known as "The Anand Pattern." The farmers organize themselves into
village level cooperatives, which in tum are organized into district-level cooperatives
(comprising about 400 to 1,000 primary village cooperatives). The district-level
cooperatives federate into a state-level cooperative organization. At the apex is the
National Cooperative Dairy Federation, India (NCDFI), which coordinates the
marketing efforts of all the state-level cooperatives. The cooperative movement has
brought about paradigm shift in Indian dairy industry through creating of new
institutions in dairy sectoral system of innovation. ANAND model has been
successful in certain parts of the India (Singh, 2004). Over the years, brands created
by cooperatives have become synonymous with quality and value. Brands such as
Amul (GCMMF), Vijaya (AP), Verka (Punjab), Saras (Rajasthan), Nandini
(Kamataka), Milma (Kerala) and Gokul (Kolhapur) are among those that have earned
customer confidence (Bhatnager et al, 2002). Cooperative movement is proved as
strength of the dairy sector in India. In addition, the modernization and expansion of
the dairy industry and its infrastructure has created a national milk grid. A fleet of
insulated rail milk tankers operates throughout India. This whole network has
provided great strength to dairy industry for supply of raw material and finished milk
products all over India.
3.1.2

Weaknesses

Highest numbers of livestock with low milk productivity

The structure of milk production worldwide is diverse. The farming system differ in
farm size (1-3000 cow per farm), milk yield (< lOOOkg to > 10,000 kg I cow per
lactation), feed basis, milking technology and the linkage to the dairy chain. Small
scale farms dominate the South Asia, Switzerland, Australia, Norway, Finland and
Poland whereas large farm provide most of the milk production in USA, Israel,
Argentina, Oceania, Hungry, Czech Republic, Estonia, Denmark, Netherlands and

55

UK. In India the livestock keeping system is more complex. According to the 2003
Census data, India, had 485 million livestock population, have the second highest
numbers of cattle (185 million), the highest number of buffaloes (97 million), and
second highest number of goats (124 million) in the world. Despite being a largest
milk producer, India has very low per cattle milk productivity per lactation period. Per
animal productivity in Indian dairy industry is the lowest in the world that is around
8-9-times lower than dairy-developed countries.
The average yield of non-descript cows, Indigenous breeds, is less than 2 kg per day
as shown in table 3.3.
Table 3.3: Productivity of Milch Animals in India
Average Yield per Animal in Milk (Kg/day)

Years
Crossbred
Cows

NonDescript
Cows

Buffalo

Goat

19992000

6.434

1.886

3.96

0.31

2000-01

6.441

1.919

4.05

0.33

2001-02

6.437

1.913

4.09

0.33

2002-03

6.52

1.903

4.126

0.314

2003-04

6.528

1.923

4.241

0.323

2004-05

6.395

1.945

4.287

0.325

2005-06

6.437

1.97

4.3

0.346

Source: Department of Ammal Husbandry, Dmrymg & F1shenes, Govt. oflndm .

However, crossbred cows have better performance but it can not be called an
optimistic scenario for milk productivity.
Small Dairy herd size with Jack of efficient dairying practices: Dairying, in India
is more than a business, has broader social and economical dimensions. Dairy herd is

56

small but largely a rural-based activity involving 750 lakh rural families in dairying
and about 98% of the milk is produced by them. It involves tens of millions of small
farmers, each with 1-3 milch animals and is more equitable. It is based on family
labour, crop residues and natural grasses. On the other hand, high producing animals
are supplemented with concentrate feed.

Moreover, it is considered as a

supplementary source of income to producers. The farmers do not have training and
knowledge on modem dairying. They practice traditional dairy farming, not as core
activity but a subsidiary to agricultural cropping system.
Poor veterinary and animal health services: Indian farmer do not get veterinary
services for their animal at farm gate. They have to travel either to the city or distant
place where veterinary hospitals or dispensaries are located. It discourages farmers to
get access to advanced available technologies in dairy sector. Artificial insemination
technology is yet to reach the appropriate destination in such condition (Singh, 2008).
Table 3.4: Number of Veterinary Institutions in India
Year
Veterinary
Veterinary
Hospitals/Polyclinics
Dispensaries

Veterinary
Aid
Centre
(Stockmen Centres/Mobile
Dispensaries)

2006

8732

18830

25195

As
on
31/03/07

9009

19162'

26443

As
on
31/03/08

9578

20443

26583

Source: Mmutes of Meetmg of the T echmcal Commmee of DirectiOn for Improvement of Animal
Husbandry & Dairying Statistics during 2006,2007, 2008; DAHD&F, Govt. oflndia

The numbers of veterinary hospitals are not sufficient for the total livestock
population of India i.e. 485 millions. Each veterinary institute has to serve
approximately 10,000 livestock population. Veterinary services are poor in villages
where farmers live as field visit and government report suggest. When the institutions
for animal health conceived were based in towns or urban part of India. The rural part

57

could not get those institutions and they remained in the urban where farmers have to
visit to get animal health facilities for their animals. It has created a number of
troubles for the farmers. The farmer has to take animal to urban area where as animal
needs such services in villages or on farm. Farmer losses a working day along losing
economically in terms of farm work which s/he could have done in case services
would have been provided in rural area close to fanner's fann or village. Even,
farmers do not prefer to visit to veterinary hospitals in urban and prefer to follow
some traditional system of animal health practices. Hence, animal does not receive
any appropriate health services. The net result is absence of veterinary services for
farmers even government has created them to provide benefits to farmers. It results in
under utilisation of animal health services in India (Singh, 2008). The veterinarians
too prefer urban living and postings which create more obstacles in providing quality
animal health services. The private investment is also a challenge in the veterinary
services. The private individuals do not find incentives in making any investment due
to low demand of such services in India. The farmers are not much educated.
Therefore, they do not have much awareness about benefits of animal health services.
The findings in case study on Rajasthan by author and evidence from UNCTAD FAMER study indicate willingness on the part of the farmers I entrepreneurs to pay
for veterinary services. Therefore, availability of efficient veterinary services at fann
gate is a weak area in Indian dairy Industry.
Lack of efficient cold chain: India does not have a sufficient cold chain
infrastructure to cater the dairy industry and maintain the low temperature from
'milking to mouth' (M2M). Milk is highly perishable product and it can not sustain

without contamination for more than 5 hours in higher temperature conditions of

India. Therefore, milk and milk products can not reach to consumer safely and in
good condition in such a scenario.
Quality raw milk collection: Quality milk production is always a challenge for dairy
industry because of lack of good dairy practices from the stage of milk collection at
farm to processing plant. The milk that comes at milk reception dock always has high

58

microbial count, acidity and dirt, barring few regions and places in India. The poor
quality of raw milk hampers the scope of producing exportable quality milk products.
Lack of data and information availability on dairy sector: Indian dairy sector does
not have appropriate and accurate data which could be used for proper planning and
development of the sector. There is no practice of recording milk production, feed
demand, animal health, and productivity related data. Policy makers always face
problem of right information at right time to provide best policy for the sector.
Therefore, "database on dairy sector is a major weakness in India" (Patel A, 2009)

10

Weak organised retailing: India has witnessed a significant growth of organised

retailing after year 2004, but still, it's a weak part of the supply chain in dairy sector.
However, Gujarat Cooperative Milk Marketing Federation (AMUL), Mother Dairy,
and some other cooperatives have their milk booths in different cities. They could
deliver up to some extent in metro cities and few other cities in the country, but well
developed retail chain, to deliver and provide access to quality milk and milk
products, is a distant dream, to consumers in India.
Efficiency of cooperative dairy plants: All the registered dairy plants under
cooperative dairy sector are unable to operate to their full capacity. There are 246
registered dairy plants in cooperative sectors. Out of that 141 are registered by Central
authority Government of India and remaining 105 are registered with different state
authorities, as shown in table 3.5. They can process up to 36.5 million litres milk per
day. India has got 98 million litres per day processing capacity in fonn of registered
plants in cooperative, private and other sector.

10

Dr Amrita Patel, Chairperson, NDDB, interviewed on 13 March 2009 at NDDB Head office, Anand,
Gujarat.

59

Table 3.5: Number of Registered Dairy Plants under MMPO* in India (As on 31st
March, 2006)
(capacity '000 Litre per day)
Cooperative

Other**

Private

Total

No.

Capacity

No.

Capacity

No.

Capacity

No.

Capacity

By Central
Authority

141

31204.5

103

28289

26

14490

270

73983.5

By State
Registering
Authority

105

5365

390

17796

24

906

519

24067

Total

246

36569.5

493

46085.3

50

15396

789

98051

..
Source: Mtmstry of Agnculture, Govt. of Indta

Note:*Milk and Milk Product Order

**includes Govt. Milk Scheme, Govt. Dairies, & Mother Dairies.
Figures don't include trading/marketing capacity, unit closed & cancelled.
Registered capacity in total solid form is not included.

All the dairy plants are not sufficient to process the available liquid milk in the
market. Therefore, the full capacity falls short of required capacity. In addition, the
dairy cooperative plants have ample scope for cutting cost and bringing more
efficiency as compared to what majority of the dairy plants under dairy cooperatives
are performing at present. The results indicate that there is a significant scope for
efficiency improvement in the dairy industry wherein mean cost could be reduced by
37 per cent. However, privatisation alone is not the answer to higher performance in
the processing sector of the industry (Singh S. et al, 2000). But, private sector needs
to make more investment in setting up dairy plants. Plant managers and public policy
makers need to make efforts to achieve higher performance through actions on both
the demand and supply side of the milk and milk products industry.
3.1.3

Opportunities

India has large market and investment opportunity in dairy industry which is still

not competitive and has enough possibilities for higher profit on investment. The

60

private sector investment is less than the cooperative and government investment in
milk processing and distribution. India has one billion plus market which largest milk
and milk product market in the world (Singh, 2009). The food processing segment has
shown highly positive performance for all food processing companies. This sector has
minimal effect of economic slow down. Therefore, India with a population of 1.17
billion presents huge market which is growing at 7%.
Increasing quantity of available milk for processing: the milk production in India
has persistently been growing with more than 4% annual growth during last three
decades. The dairy industry data demonstrate that the pattern will be continuing in
future as well. It has provided more surplus milk with farmer for processing and
manufacturing diversified dairy product mix. Less than one-fifth of the milk produced
is processed in India, compared with a world average of over 50 per cent. Investors
and consumers have more opportunity to make investment for their interests. An
NDDB Road Map group developed a plan under which India's milk production is
projected to rise from 102 MT per year in 2006 to 170 MT per year by 2022. This
scenario would be achieved at 5% annual growth with enhanced milk productivity of
the present population of the animals.
Increasing income level of consumers: Consumer demand will also shift with rising
incomes and changing tastes; the market for milk products, for instance, is now
growing rapidly (editorial EPW, 2005). The per capita income has trebled in India
during last one decade. A per capita income has increased to USD 1000 in 2008 from
miniscule USD 418 in 1998. The growth has not been restricted to urban India, as the
per capita income in rural India has grown by 50 percent in past 10 years (KPMG
report, 2009). This phenomenal growth has provided a great opportunity for dairy
industry. This trend is likely to continue in future as well. Therefore, dairy industry
would explore this opportunity for its own phenomenal growth.
Changing life style and preference for milk and milk products: fast changing life
style in India has created new interest in milk and milk products. India is largest milk
and milk products consumer in the world. India has large numbers of vegetarian

61

consumers who find milk and milk products as major sources of protein. An estimated
demand for milk would likely to be approximately 180 million tonnes in 2021-22.
Increasing number of adult consumers: The adult proportion of Indian population
is likely to rise at approximately 20 percent decadal growth rate during coming
decade. Therefore, relative numbers of adult milk and milk products consumers are
projected to increase by 2020. The population below 15 years of age (currently 35
percent) is projected to decline to 28 percent by 2016 as shown in table 3.6. The
population in the age group 15 -59 years (currently 58 percent) is projected to increase
to nearly 64 percent by 2016. The age group of 60 plus years is projected to increase
from the current levels of7 percent to nearly 9 percent by 2016.
Table 3.6: Age Composition as Percentage of the Total Population
Between 15-59
Below
5
years
0-15
+ 60 years
Between
Year
years
1991

12.80

37.76

55.58

6.67

2001

10.70

34.33

58.70

6.97

2011

10.10

28.48

63.38

8.14

2016

9.7

27.73

63.33

8.94

Source: NatiOnal PopulatiOn Pohcy 2000

Untapped indigenous milk products market: dairy industry has been unable to tap
the full potential of Indian dairy products market. Indigenous milk products segment
presents numerous opportunities for innovation and marketing. There are certain
products like Chhach, Lassi and Dahi, which were never marketed products in India.
However, they were part of culture and every house hold practices. The last one
decade has revolutionised this sector. Therefore, the sector presents open
opportunities.
Low cost manpower and employment generation: Employment is major issue for
each economy in the world when economic recession and slow down has affected
almost each of them. However, India provides very low cost efficient human resource

62

that is an opportunity for the sector. Food processmg m dairy sector leads to
significant employment generation, not only directly but across the supply chain in
production of raw milk, storage milk and milk products, and distribution and sale of
the dairy products to consumers. Food processing creates 1.8 jobs directly and 6.4
indirectly across the supply chain for every Rs. 1 million investment. A grant of Rs.
66.7 (a total investment of approximately Rs. 250 to 300 million) to 35 food
processing units in Uttar Pradesh in 2003-04 has resulted in direct employment of
2500 and indirect employment of 20,000 (Rabo Report, 2005). Therefore, any kind of
investment and development of dairy industry creates great opportunity for creating
employment.
3.1.4

Threats

Food safety: Food safety is a major concern in India from the clean milk production
to consumption by consumer the whole chain has too many potential points of
microbial and chemical contamination. The farmers follow traditional milking and
dairying practices where hygiene practices and good dairy practices (GDPs) are not
up to the mark. Farmers do not appropriately clean the hand, milk bucket, milk cane,
and other milk handling equipments at farm level. The first environmental contact of
milk, after coming out of udders, at farm level get exposed to microbial contamination
which affects milk shelf life as raw material as well as final milk product. Therefore,
the present scenario, at farm level for clean milk production, can not support the food
safety requirements for high quality milk and milk products which can be exported. It
is a major troubling area for Indian dairy industry to ensure food safety.
The concerns for food safety are of high gravity when one observes the every day
reporting in media for adulteration of raw milk, Ghee, Khoa, Sweets and other Indian
dairy products, specifically in lean season.
Use of Drugs and pharmaceutical for animals: Animals are administered with
antibiotics and other medications without following any standard practice while they
fall ill. The veterinary practitioners have no imagination about the impact of such
practices on human health and animal health. The ignorance of farmers and non

63

professionalism in veterinarians in India pose a severe threat to safety of the milk and
milk products and consumer health. These evidences clearly emerged during
interactions and interviews with farmers and veterinarians in northern India. The
farmers do not give much importance to such issues due to their ignorance and lack of
knowledge about adverse effects on human health 11 .

WTO regime and Imports from other countries: under WTO regime trade in
imports of dairy products has been threat to India dairy industry. Through
liberalisation in last two decades, India has progressively decreased the support and
protection of its dairy producers unilaterally, although commitments under the Doha
round have helped as well (Rakotoarisoa and Gulati, 2006).
Protection in other OECD markets outside of Asia (e.g., the European Union, Canada,
and the United States) has a distorting effect on India's export in dairy sector (Beghin,
C 1, 2005). Though, India has become self sufficient in milk and milk products in
recent time, but some time the supply of milk fluctuates which made India to import
certain milk products. Ihdia produces raw milk at competitive price without any
subsidy but unable to grab much international value added milk product market
because of lack of competitiveness and capability to produce such products of high
standards. Indian dairy industry has major focus on domestic market. However, in
recent time dairy industry has different cooperatives, MNCs and TNCs with a focus to
serve value added milk product market in India as well as abroad. The imports of milk
products such as dairy whitener and butter oil at some cheaper and subsidised prices
could be challenge to Indian dairy industry. Certain countries, in past, were able to
export such dairy products at cheaper prices than the domestic produce. These
countries provide huge dairy subsidies to their farmers. Indian government can not
afford the luxury of providing subsidies to farmers. The fear is real till the current
WTO negotiations fail to arrive at elimination of export subsidies by western
countries in dairy sector and provide access to Indian dairy products to their dairy
market.
11

Farmers were interviewed by the author in Haryana and Rajasthan during July and August 2008.

64

In future, such imports will pose challenge to Indian dairy industry. It has to be
competitive with other dairy products exporting countries.
Draught and Flood: India faces both adverse conditions almost every 2nd or 3rd year.
The northern parts of India i.e. Rajasthan, Gujarat, and Haryana, face drought
conditions during summers. It affects the milk production adversely for a longer
period. Even, flood has the same impact on animal husbandry activities.
It is essential for competitive dairy sector that all the weaknesses of the sector need to
convert in strengths. This is possible only through consistent and goal directed efforts
to capture the opportunities available at right time and handling the threats and
challenges of the Indian dairy industry. This process involves lots of driving factors
which have potential to make industry dynamic and vibrant.

3.2 STEEP Drivers of Indian Dairy Industry

The opportunities can be captured through timely understanding the drivers of dairy
industry from present to future. The drivers will provide momentum and direction to
growth of the dairy industry. The driving factors have potential to turnaround the
weaknesses and threats of the sector in opportunity and strength of dairy industry in
India. The drivers of the dairy industry in India are identified through the literature
survey, discussions, and interviews of the decision makers, academics, industry, and
government representatives. The STEEP (Sociological, Technological, Economical,
Environmental, Political) drivers are forces which are likely to provide ways and
thrust to technological and products innovations, market demand and supply,
investment, institutional development, cold chain development, dairy infrastructure
development and over all growth of Indian dairy sector.
There are a number of STEEP driving factors for dairy industry when they are
identified at different time horizons. The table 3.7 presents a summary of all the
STEEP factors in three different years such as 2008, 2015, and 2020. These all
driving factors are discussed in detail later.

65

Table 3.7: Summary of Sociological, technological, economical, environmental and

political driving factors for dairy industry
Drivers
2008
2015
2020
Vision
-Favorable
demographic
change

Sociological

-Changing
consumption
pattern
-local
perceptions and
traditions
regarding dairy
products
-Nutritional and
food security
-Communication
and exchange of
information,
and
ideas
knowledge
(among
academia, govt,
farmers
and
industry)

-Favorable
demographic
change

-Favorable
demographic
change

-Highly satisfied
consumers

-Changing
-Changing
consumption pattern consumption
pattern
-Convenience and
-Convenience and
Health
Consciousness
Health
Consciousness
-Food safety and
hygiene
-Food safety and
hygiene
and
-Nutritional
food security
-Nutritional
and
food security
-Communication
and exchange of -Communication
information, ideas and exchange of
and
knowledge information, ideas
(among academia, and
knowledge
govt, farmers and (among academia,
industry)
govt, farmers and
industry)
-Consumer
confidence
-Consumer
autonomy/choice

-Serving
customised needs
of healthy milk
and
milk
products at door
steps to people

-consumer
confidence
-More working
woman
Technological

-Technology
intensive
infrastructure
sharing
-Bulk
coolers-

milk

-Cold
chain -Integrated Cold
technologies
chain technology
, -ICTs

-Mechanised
small dairy farms

-Automation
of
indigenous milk & -Automation

66

at

quality
-high
indigenous dairy
products
technology
-High
Packaged

quality
dairy

Drivers

2008

2015

2020

Vision

introduction

milk
product
manufacturing

farm level

products

-Fodder and feed

technology

-Using
technology
packaging

-Fodder and feed

technology

-Indigenous
milk
product
-indigenous milk techno1ogi es
& milk product
manufacturing
-Fodder and feed
technology
technology
-Innovative
product
technology-Appropriate
Technology
access
and
transfer

-Animal
health
technologies
-Functional
product
technologyprobiotic

dairy

-Nutraceutical
-Cross breeding products
of animal
technologies
-productivity
enhancement
technologybiotechnlogy,
embrio-transfer,
Artificial
insemination
-ICTs
-Product
innovations
-Packaging
technology

Economical

-Private
investment

-Bulk milk coolers

-Appropriate
Technology access
and transfer
-productivity
enhancement
technologybiotechnology,
embryo-transfer,
Artificial
insemination

-Appropriate
Technology access
and transfer
-Animal
health
technologies
-Productivity
enhancement
technologiesbiotechnology,
embryo-transfer,
Artificial
insemination
-ICTs
-Functional
and
dairy
healthy
product
technologyprobiotic
-Consumer needs
driven Packaging
technologies'
-GPS
and
Remote sensing
Technologies

-Packaging
technology
-FDI

-Export revenue

-Private investment

-Skilled
resource

-lnterest rates
-Rural market

67

human

Nano
for

-need
based
technology
led
milk products

Drivers

2008

2015

2020

-Available
financing
facilities

-Credit/Finance
facilities/availabilit
y and accessibility

-Large
market

-Economic slow
down
-Higher mcome
of the consumers
-More
surplus
available money
for spending with
consumers
-Cooperative

rural

-economy of milk
-Marketing
and production
retail chain- rural
-Competitive
and urban
retail chain
-Low cost skilled
-Procurement of
human resource
raw
quality
-Marketing
material
-Competition for -Competition for
of
Procurement
of Procurement
raw
quality raw milk
quality
material

-Assured Income
generationfemale/small
farmer
-Large
demand

Vision

demand
-More
from rural India
for
dairy
products

market

-Marketing
retail chain

and

Commercialisati
on of indigenous
dairy products
and
-WTO
sanitary & phytosanitary
Environmental

waste
-Whey
management

-Organic milk and -Organic milk and

milk products
milk products

waste
-Dairy
management

waste
waste -Dairy
-Dairy
management
management
-Converting waste -Converting waste

68

Environmentally
sustainable dairy
industry

2008

Drivers

2015

2020

Vision

to
commercial to
commercial
products
products
-emission norms
and obligations of
Government
Political

-Elections
cooperatives

-Cooperative-Politically
sector uninterrupted
in Private
partnership
sound
dairy
-Govt
policies
(public,
sector
dairy -Cooperative
for
-Pressures for new private
and
development
elections and parties labelling laws
cooperative)
Ill

-Political
interference
cooperatives

-Ministerial and -New policy for

political
cooperativeintervention
private
industry
alliance
-Political parties
participation Ill -Pressures for new
cooperative
labelling Jaws
elections
-Food
recall
system

-Efficiency
of
Food
recall
system
-Politics
cooperatives
system

and

..

Source: Author's analysis from different reports, articles, news, government VISIOn, mterviews,
discussion with representatives from government, NGOs, industry, cooperatives, academics, and
consumers.

3.2.1

Sociological

Favorable demographic change: India is the second largest populous country in the
world. It has majority of young population which create huge market and demand for
milk and milk products. This trend is likely to continue tiJI 2030 when India may
catch china as projected by population estimates by the government of India.
Dairy products as a culture: the milk and milk products have been part of Indian
culture from Harapan civilisation to Vedic tradition to present globalised India. The
curd and ghee are most important part of that, which are used on each occasion like
festival, religious ceremonies, and celebrations. Cultural preference for milk and milk
products create demand for indigenous milk products. Therefore, traditional Indian

69

dairy products drive growth of dairy industry. However, bottom of the pyramid is
unserved and poorly catered by dairy industry. That segment can infuse high growth
rate.
Vegetarian culture: India has a strong culture of vegetarian food consumption which
drives the dairy products demand and market, as reflected in consumer surveys and
interviews. Indians attach food habits to culture and religion (Jains, Hindus and
Budhist don't take non-vegetarian food) as well as way of life. As a result, these
become strong factors in their decisions about eating food (milk and milk products)
every day along with special occasion.
Milk sweets as a common gift:. milk sweets are most commonly exchanged as a gift
whenever people visit one another's home. On occasion of festivals like Holi, Divali,
and Id people exchanges lots of gifts in form of milk sweets as part of social customs.
Therefore, it triggers demand of milk sweets on such occasions.
Convenience and Health Consciousness: the growing numbers of educated
consumers and increasing awareness among consumers about healthy dairy products
has emerged as an important driver for development and introduction of new
functional, pro-biotic and healthy products in dairy sector. According to consumer
survey 12 , people prefer the convenience dairy products which are easy to access,
purchase, carry, consume, and exchange. People give importance to easy availability,
need less time to prepare for consumption, in desired amount and size, and close to
residence.

12

Author has carried out a consumer survey in January, 2009 for studying consumer preferences for
dairy products and their responses to probiotic and functional dairy products. Consumers have
appreciated probiotic Dahi launched by AMUL, Nestle and other dairy firms. They are ready to accept
such health beneficial products in future. The awareness spread about such products communication
means have affected their decisions and view positively to probiotic and functional dairy products.
High income groups give more importance to such healthy products.

70

3.2.2

Technological

Technological innovations have changed shape and size of dairy industry in India.
The first indigenous baby powder 13 technology developed by CFTRI (Central Food
Technological Research Institute) has driven the dairy industry to new heights, white
revolution. The major technologies which drive, and will do so, the dairy sector are
as follows:

Indian dairy products technology

Packaging technologies

Transportation

Cold chain and low temperature technologies

Probiotic and Nutraceutical product technology

Information communication technologies

Due to technology Indian dairy product segment has shown very high growth rate.
This segment of products has a great demand in market but demand is not fully
catered due to lack of cold chain and storage. Therefore, cold chain related
technologies are critical driver. ICTs are applied by all cooperative dairies but AMUL
has been most advance and innovative for making payments, farmer education,
veterinary services and communication. This pattern is likely to be followed as a
major factor in the sector.
Further, animal productivity enhancement technologies are likely to be significant
drivers for dairy sector. The fact that majority of farmers have access to artificial
insemination services indicate the possibility of bringing a change in the scenario
through appropriate breeding strategies clubbed with scientific record keeping, as
results of study by FARMER - Fellowship for Agri Resource Management and
13

Buffalo milk was regard as unsuitable for manufacturing of baby powder by western scientists and
experts. The buffalo was regarded as wild animal and its milk unsuitable for consumption and
manufacture milk powder.

7l

Entrepreneurship Research, has shown. Crossbreeding technologies have produced

two new cross breeds namely Karan Fries and Karan Swiss at NDRI by the scientists.
NDRI research has proved that selective breeding through artificial insemination has
proved that such high pedigree cross bred cattle could be produced at farmer's door.
Hence, such technologies will be key factors in future.
3.2.3

Economical

The economic drivers of dairy industry are high growth of Indian economy, high
surplus income available with more numbers of employed young consumers,
relatively low interest rates and available financial sources with banking and capital
market, and increasing FDI. The slow down of Indian economy and recession in other
part of the world are critical factor in dairy industry. Recession has affected all
financing resources for dairy sector. Government funding is one of the factors for
taking dairy industry on next stage. Private investment is emerging key driver ofthe
sector. WTO and international trade related issues also have importance. In case
India is unable to create strong demand in its domestic market it has export market as
a major driver. In recent time, EU countries have reduced subsidies which have
provided opportunities to Gujarat Cooperative Milk Marketing Federation. AMUL
brand has shown it presence in markets of24 countries (Jesse, 2006).
Large domestic market demand and dairy products: India's domestic market has

created huge demand of milk and milk products. The trend of market demand for
certain milk products portray highly optimistic and positive scenario. The demand for
chocolates has doubled in 7 years from 22.1 to 44.2 thousands metric tonnes in 200001 and 2007-08, respectively. This fast growing market size and demand pattern has
been followed aggressively by other products such as ice cream and processed cheese
as shown in table 3.8. Cheese market demand of Rs. 3 billion has reached to 6.6
billion from 2000-01 to 2007-08.

72

Table 3.8: Past Trends and Forecasts of Demand for certain Dairy Products in India
Year
Demand pattern: Past & Future
Baby
Foods
(thMT)

Chocolates
(thMT)

Dairy
Whiteners
/Creamers
(th MT)

Ice Cream
(mn ltrs)

Processed
Cheese
(Rs bn)

1990-91

155

10.5

80

12.5

0.5

I99I-92

I60

Il.3

83

14.4

0.6

I992-93

165

I2.5

85

I6.5

0.69

1993-94

I85

II

86

19

0.8

I994-95

I95

13.2

89

21.9

0.9

1995-96

212

14.4

91

25.2

1.05

I996-97

229

I5.7

99

32

1.35

I997-98

247

I7.1

95

41.2

1.65

I998-99

266

.I8.6

135

56. I

2.1

I999-00

285

20.3

I83

63.3

2.5

2000-01

302

22.1

147

70.4

200I-02

320

24

I60

8I

3.45

2002-03

340

30

I75

92.6

3.9

2003-04

363

32.7

I90

105.3

4.45

2004-05

387

35.5

206

119.1

4.95

2005-06

413

38.4

224

134

5.5

2006-07

440

41.3

243

150

2007-08

470

44.2

263

I67.2

6.6

2008-09

503

47.2

284

185.5

7.2

2009-10

538

50.2

307

205

7.75

2014-15

755

67.2

450

330

11.1

Data Source: India Stat (http://www.mdJastat.com), Downloaded on 02/02/2009 (Note: MN represents

Metric Tonnes)

But when it comes to the issue of future demand of dairy products in India, the
evidence from study by Jesse (2006) shows 6.7% growth per annum. The forecasts of
market demand of dairy product shows that the demand for the Ice cream in year

73

2014-15 will be 330 million litres which is almost double to 167.2 million litres in
year 2007-08.
Further, the future demand for baby foods in year 20014-15 is likely to reach 755
thousands metric tonnes from 503 thousands metric tonnes. The growth is 50% over a
period of six years that is equivalent to average 8.3% per annum. In case of processed
cheese, the demand would reach to a value of Rs 11.1 billion by year 2014-15. It is 7.2
billion in year 2008-09. This period shows a market demand growth of more than
54% which is equivalent to 9% per annum. On the other, chocolates likely to have a
demand of 67.2 thousands metric tonne in year 2014-15 that is 42.40% growth from
47.2 thousand metric tonnes during 2008-09. The annual demand for chocolate is
likely to growth at 7.7% between 2008-09 and 2014-15.
Another real growth engine driving the country's dairy industry of late is liquid milk
sold in pouches. This demand is evident from analysis of data on the supply and sale
of milk by private and cooperative players in different regions of the country. The
proportion of liquid milk sales to procurement for all cooperatives is currently over 80
per cent, while it is hardly 20 per cent for the private sector. Gujarat Cooperative
Milk Marketing Federation (GCMMF), which, till around 2003, was supplying
roughly 1.5 LLPD of "Amul" milk in Mumbai and not a single litre in Delhi or
Kolkata. The Rs 4,200-crore cooperative has attained a sale of 5 LLPD in Mumbai,
6.5 LLPD in Delhi and 2.5 LLPD in Kolkata, besides penetrating into Pune, Nagpur
and Raipur. Delhi's 50 LLPD milk market demand is fulfilled by two major players
Mother Dairy (21-22 LLPD) and Amul (6.5 LLPD), with additional supplies from
private brands such as "Param", "Paras" and "Gopaljee" together accounting for just
3-4 LLPD, in year 2007. The supply by cooperatives/public sector in Mumbai's 40
LLPD market is contributed by "Mahananda" (5.5 LLPD), "Amul" (5 LLPD),
"Gokul" (4 LLPD), "Warana" (3 LLPD) and "Aarey" (2.5-3 LLPD). The estimated
total demand, 30 LLPD, ofliquid milk in Kolkata is met by Metro Dairy (3.4 LLPD),
Mother Dairy (3.5-4 LLPD) and Amul (2.5 LLPD) along with private sector players.
Further, assumptions are substantiated by growing supply by private sector in south

74

India. Chennai has a pouch milk market demand of 16.5-17 LLPD (besides 7-8 LLPD
small vendors market in loose) in year 2007. The demand is met by Tamil Nadu
Cooperative Milk Federation's "Aavin" (9 LLPD) and other private players. Private
player Hatsun Agro Product Ltd supplies about 9.5 lakh litres per day (LLPD) of milk
under "Arokya" and "Komatha" brands along with players Heritage Foods India (5
LLPD), Creamline Dairy Products (3.5 LLPD under 'Jersey' label), Tirumala Dairy
(3.5 LLPD) and Dodla Dairy Ltd (2.5 LLPD) (The Hindu, 2007).
Out of the 70 LLPD that GCMMF and its unions procure on an average, around 40
LLPD is marketed as liquid milk and the rest converted into products. In 2006-07, the
liquid milk volumes of GCMMF grew by 26 per cent, in 2007-07, it was 37 per cent.
Similarly other players too followed the trend. Therefore, the milk and milk products
are likely to have an average more than 7% growth per annum till2014-15. This large
market demand is likely to drive the future dairy industry as a major economic factor.
Economic slowdown VS Growth and liquidity crunch: According to Dairy India
2007 estimates Indian dairy sector has been growing at a rate of 5 per cent a year with
a size of the US$ 62.67 (Rs. 3050) billion in year 2007. The dairy industry as whole
has not much perceptible effect of economic slow down. While year 2008 showed
growth for the food retail industry on the whole, the last quarter of2008 was impacted
by the economic slowdown and liquidity crunch, and this is expected to continue year
2009 (KPMG report, 2009). The after effects of the global economic turmoil are being
felt in India as well, and the economy is expected to grow at a significantly lower rate
over the next 2 years between 5 to 7 percent according to IMF, Cushman and
Wakefield report 2009.

Finance minister of India has also claimed that Indian

economic growth may accelerate to as much as 7.75 percent in 2009 amid signs of a
"bottoming out" in the U.S. and harvests benefiting from monsoon rains. But the
realistic scenario of the economy would be 6 to 7 % growth of GDP in 2009 due to
poor monsoon and draught in many parts of the country.
The future projections of the economy are optimistic for India. The Deutsche bank
research findings through application of foresight models shows that India will be

75

growing fastest in 2020 closely trailed by Malaysian and China, as shown in figure
3.1. The economy will be growing with 5.6 % annual growth of GDP. On the other
hand, Indonesia and China will be growing at approximately 5.4% and 5.25% per
annum. The significant economic growth of India will help to growth in dairy sector
as well.

3.1: Who Deutsche bank research sees growing most by 2020

Foonei-G GOP fcrecasts 200&-20

lrdia
l\l:>la)sia

DiN
lh;jJ.;rd

uJtey
~e .;rd

Deutsche Bank Research's

Foresight Model for
evaluating long-term
growth: Formei-G

Finland comes out towards

the bottom close to
Germany, while China ond
Indio mnk nem the top.

lnd::n e5ia
tlll::.ico
J<aea

Chile
!?A
~D N
~i fl

Br..:lil
~

France

-.z::r

A.:stria
F'atl.:gal
U<
~

G-eece
Wn~

!.3y
B=!go.n
Gennany

rl.;rd
Ne!herlxd:s

Al~ ~~~

a~ .;nnu

SMtEri.;rd :L.,

Sooth lfuc.3 ~

GCP grcut.h

A.Jssia +----.,,-----.------,---,-----.,---1

.o

1~

20

~o

Source: Deutsche bank report

The economic growth is key factor in dairy industry and it will remain so. Therefore,
higher economic growth will be a major driver of the dairy industry in upcoming
future.

Investment: The combination of cooperative and private investment is driving the

dairy

industry presently.

The

GCMMF ' s brand

76

AMUL has

expanded its

manufacturing and marketing infrastructure out of Gujarat through large investments.

AMUL brand has its manufacturing unit near Delhi in Manesar. Significantly, CocaCola and PepsiCo have announced plans to enter the milk-based beverage segment in
India. Probiotic dairy products maker Y akult Dan one India, having invested US$
34.09 million in setting up a dairy product manufacturing facility in Haryana, will
pump in an additional US$ 25.05 million over the next 3-4 years to expand its
presence and market its product 'Y akult'. In addition, Reliance Industries Ltd will
probably invest US$ 1.25 billion in a dairy project in India 14 . Therefore, with the
domestic dairy sector slated to cross US$ 125.34 billion in revenues by 2011,
investment will remain a major economic factor for dairy industry in India.
Marketing and emerging retail chain: the major players in retail market have been

focusing on India since 2004. India, topping the list of most attractive retail
destination list for three years in a row, it had retail giants like Wal Mart, Carrefour
and Tesco sizing up potential partners and waiting to enter the fray. 15 Major retail
players like Mother Dairy, AMUL, State Cooperative Dairies, Subhiksha, Reliance
Fresh, Vishal Mega Mart, Super Bazar, Big Bazar, Apple, Food Bazar, and Spencer,
are key player who shape the retail scenario for milk and milk products.

The

emerging retail chains and food chains are driving forces for the food industry,
specifically for dairy, in India during 2008. But economic slow down has moderated
the impact of this driver on development of large retailers in India. The factors like
renegotiating

rentals,

store

rationalization,

working

capital

management,

regionalization, cost optimization and manpower resizing are some of the key Top of

Mind (TOM) issues for retailers in the current context of the downturn (KPMG report,
2009). These all issues will be managed by retailers. The organised retailing is
continued to be a strong economic factor for dairy industry to drive it to new level in
future as well.

14

The data on investment are based on reports in news papers, news based websites, discussion forums,
and articles
15
AT Kearney's Global Retail Development Index (GRDI), 2008

77

According to consultancy firm McKinsey & Co, the retail food sector in India in 2008
was worth US$ 70 (Rs. 3404) billion, which will reportedly scale up to around US$
150 (Rs. 7295) billion by 2025. Dairy products are significant part of the food retail
industry.

3.2.4 Ecological/Environmental
Green house emission, global warming and climate change are some of the
environmental issues under debate worldwide. India has been put under pressure time
and again, but India can not effort to assume responsibility for reduction in green
house gases, is such an issue that has potential to affect as a factor to dairy industry.
The methane gas production is directly related to numbers of animal who are least
productive. Each animal contributes the total methane gas production by animals.
Therefore, the question is how to make animals productive through enhancement of
yield per animal per unit emission of methane. In addition, dairy waste management is
a factor to the dairy plants. The whey, produced as by-product in process of
manufacturing paneer, cheese, chhana, srikhand, rashgola, and casein, is a waste and
it's a challenge for many dairy plants. As in Bikaner dairy plant large amount of whey
is produced in cheese making process. Suitable technologies are not accessible to the
plant. Therefore, it's an important factor for environment. However, whey can be
converted to the value added products. There are instances where whey is converted
to different kind of proteins, minerals, and whey based fruits drinks. Such innovative
utilisation of waste could be of great help to minimise the environment hazards.

3.2.5 Political
The politics have been important factor in success of dairy industry in India. The
AMUL has been successful a cooperative with it large market presence and
membership with best performance. On the other hand some cooperatives e. g.
Rajasthan Cooperative Dairy Federation could not be as much successful as GCMMF
due to political factors (Singh, 2004). The Anand model based cooperative system in
Indian dairy sector has elected member's representatives who fonn important part of
governing body. There have been involvement of political parties in election of dairy

78

cooperative and still it will be continue m future. The political involvement of

ministers of state government in affairs of dairy cooperative management is an
important factor in shaping and creating dairy cooperatives as part of dairy industry.
Such involvement directly affects the autonomy, financial condition, marketing
strategies, price of raw milk and final products, professionalism, and other key policy
decisions (Singh, 2008). The political factor has been important in setting up prices of
raw milk as assured minimum price in Rajasthan, a first case in India. This issue can
be picked up by other state as and when it becomes political need.
Political factor are likely to play important role in further liberalisation of dairy sector
and investment friendly policy for dairy sector in India. The present government has
food processing sector as major focus of its political manifesto for the coming five
years. The food processing sector is considered as most promising sector for the
future. Therefore, political will and devotion for setting up and formulation of future
food regulatory system, dairy policy, R&D policy, investment policy, financial
support package for the dairy sector will drive the dairy sector.

3.3 Creating Competitiveness: STEEP operations on SWOT

The SWOT analysis has revealed a numbers of opportunities and threats for dairy
industry in upcoming future. In addition, a numbers of STEEP driver are identified for
the industry. These STEEP drivers can be named as STEEP operators which perform
a number of operations in a sector. In a new model STEEP drivers or operators are
made to operate on Weaknesses and Threats of the industry under current part of
chapter. While such operators 16 perform certain operations on identified weakness
and threats of the industry they are bound to generate competiveness of the focussed
industry. The operations of operators either convert the weaknesses and threats to
strength and opportunities or minimise the weaknesses and threats from their present
level of severity for the dairy industry. The model is presented in figure 3.2.

16

Here the operator name is identified and designated to a number of drivers such sociological,
technological, economical, environmental, and political (STTEP).

79

Figure 3.2: Process of attaining competitiveness of Dairy Industry

-----I

------.. . ........

Innovation System

Operators=
STEEP Drivers

-,

Dairy Sector

I
I
I
I
I
Dairy Sector

Operators=
STEEP Drivers

.. ~~................]'"
:T"..! -;-. '

Innovation System

......,--------------Such identified operator's operations and functions make the focussed industry or
sector competitive by way of enhancement of overall productivity, efficiency,
networking, accessibility, and mobility in the sector. However, it may be presented as
a functional equation.

Competitiveness= f /STEEP Drivers {11 (Weakness + Threat)}]

=f

[STEEP Driver

(Strength+ Opportunities)] 17

17

This equation is proved by a case of dairy sector development in India between 1970 and 2000. The
dairy sector had a group of weakness such as lack of available technology, net importer of dairy
products, lack of any significant value addition to raw milk, lack of any national milk grid and milk
collection system, etc. At the same time sector had threats like large volume of imports of dairy
products and lack of any ensured supply of milk and milk products. The operation Flood program

so

This foresight process enhances General and overall competitiveness along with
specific competitiveness such as technological, product, market and institutional
competitiveness.

Consequently, the Sectoral System of innovation acquires

competitiveness and dynamism. The Indian dairy sector is analysed m previous

sections to identify a number strengths, weaknesses, opportunities and threats
alongside STTEP drivers.
The threats such as

food safety, uncontrolled use of drugs and pharmaceutical

products for animals, cheap imports due to subsidies in US, Canada, Australia, and
EU countries, and famine, draught and flood, unclean milk production or lack of good
dairy practices have to be controlled at first instance. Secondly, there need to be
systemic efforts to minimise their severity through adopting best dairy practices at
farm level, adoption of appropriate technologies, training of farmers, providing
incentives for best practices by farmers and milk handlers, policy reforms,
implementation of food safety and standard acts, bringing up new law on use and
administration of animal health services and use of drugs. Further, India needs to
pursue its interest in ongoing WTO negotiations on reduction of subsidies by EU
countries, USA and Canada. India needs to shape up the future scenario of world trade
regime through negotiating as a leading member of G20 with its other members for
the interest of group. The recent G8 meeting of heads of nations made some positive
signs about taking WTO negotiations taking to the conclusions.
The weaknesses of the dairy sector like low milk productivity per animal, poor raw
milk quality, ineffective milk collection system in certain part of the country, fragile
cold chain, largely unorganised dairy sector, weak organised retailing, poor veterinary

designed a numbers of identified operators (STEEP drivers) to apply them in the dairy sector through
three phases. The STEEP drivers, such as buffalo milk baby powder technology, a numbers of milk
processing technologies, transportation technologies, investment (government, cooperative and
private), restrictive trade policies, institutional R&D, political non interference in cooperative system,
and expanding milk processing capacity, have turned the some of the weakness and threats of the sector
in strengths and opportunities. For example India became largest milk producer in the world in year
1998 with 97.4 MT. In addition, India has become self sufficient in milk and milk products. India could
process it's approximately 17% of total milk production in organised sector dairy plant. This could
have been possible only through key role of all the drivers of dairy industry.

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servtces at farm gate, and paucity of data and information, need to be turned to
strength and opportunities of the sector. This task can be accomplished by operations
of STEEP drivers, identified in earlier parts of the present chapter, as crucial operators
and sectoral shaping forces. The articulation of such future shaping forces and
providing them right direction through participative approach and converting them in
principal outcome can ensure the competitive dairy industry. However, research and
educational institutes like NDRI and CFTRI and along with setting up such new
Institutes can also help in managing weakness and threats of the dairy sector.
At the same time some operator such private investment in dairy industry and cold
chain, consumer's consciousness for quality milk products, and large market demand
will help in shaping the challenges of the dairy sector in right direction. The identified
sociological drivers such as rising health consciousness, customised products
preferences, increasing awareness about milk and milk products, communication and
exchange of knowledge, consumer confidence and faith, more working women, and
changing perception about exiting and new dairy products will shape, directly or
indirectly, the future weaknesses and threats such as lack of organised retailing, weak
cold chain, large unorganised dairy sector. The demand of good quality and healthy
milk and milk product would infuse the competition for providing such products at
lower prices through satisfying the future sovereign and free consumer. As a result, it
will help to develop an organised dairy sector to provide high quality milk products at
high food standards.
Economic drivers like FDI, Private and cooperative investment, large demand milk
and milk products would likely to help in creating, setting and expansion of cold
chain, organised retailing, and milk collection system. These weaknesses would be
turned to strength through application and operations of technological drivers such as
availability of technologies on cold chain, transportation and storage, and ICTs.
In addition to already highlighted factors which drive dairy sector in India, there are
more drivers identified by the expert for future through Delphi Survey.

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3.4 Summary
The Strengths of the Indian dairy industry are Largest milk producer in the world with
highest milk production growth, Emerging competent regulatory system and
authority, New Food safety and Standards law and authority, Strong institutional set
up and Technical and skilled human resource, 'Strong successful cooperative
movement' and National Milk Grid. Further, weaknesses are largest numbers of
livestock with low milk productivity , small dairy herd size with lack of efficient
dairying practices, poor veterinary and animal health services, lack of efficient cold
chain, challenge of quality raw milk collection, lack of data and information
availability on dairy sector, weak organised retailing, and low efficiency of
cooperative dairy plants. On the other hand, the identified opportunities for the diary
industry are large market and investment opportunity, increasing quantity of available
milk for processing, increasing income level of consumers, changing life style and
preference for milk and milk products, increasing number of adult consumers,
untapped indigenous milk products market, and low cost human resource and
employment generation. Additionally, the dairy industry faces some of the threats
and challenges. The food safety is a major concern in India from the clean milk
production to final consumption by consumer the whole chain has too many potential
points of microbial and chemical contamination. That can be addressed through robust
food safety & regulatory system and awareness campaigns. Some additional threats
are unfriendly WTO regime and Imports from other countries, poor practices m
process of use of drugs and pharmaceutical for animals, and drought and flood.
Further, application of STEEP method has produced a numbers of drivers which drive
the dairy industry in India. The major sociological drivers are favorable
demographical change, dairy products as a culture, vegetarian culture, milk sweets as
a common gift, and convenience and health consciousness. Whereas identified
technological drivers are Indian dairy products technology, Packaging technologies,
Transportation technologies, Cold chain and low temperature technologies, Probiotic
and Nutraceutical product technology, and Information communication technologies.

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Further, large domestic market demand and dairy products, economic slowdown VS
growth, investment, marketing and emerging retail chain are the economical drivers
which will drive the dairy industry. Additionally, Green house emission, global
warming and climate change are some of the environmental issue with may affect the
dairy industry. Finally, some of the political factors in dairy industry are elections in
cooperative, political parties' participation in elections of cooperative and political
interference in cooperative system. The political will and devotion for setting up and
formulation of future food regulatory system, dairy policy, R&D policy, investment
policy, financial support package for the dairy sector will drive the dairy sector.
Further, a new model is created wherein SWOT and STEEP analysis methods are
merged to create future competitiveness of dairy industry, as results competitiveness
of innovation system. In a new model STEEP drivers or operators are made to operate
on Weaknesses and Threats of the industry. While such operators perform certain
operations on identified weakness and threats of the industry they are bound to
generate competiveness of the dairy industry. The operations of operators. either
convert the weaknesses and threats to strength and opportunities or minimise the
weaknesses and threats from their present level of severity for the dairy industry.

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