OVERVIEW

LIQUID MILK Regulations Industry delicensed in 1992; dereserved in 1996 Milk and Milk Products Order (MMPO) 1992 regulates the dairy industry MMPO requires units handling more than 75,000 litres per day of liquid milk or 3750 MT of milk solids per year - to register with the Central Government Proposal to amend the MMPO Overview India - the second largest milk producer, after USA Total milk production in the country - 74 million MT during 1998-99 Per capita milk consumption in India has grown from 132 gms / day to 233 gms per day in 1997-98

Operation Flood Launched in 1970, Operation Flood under Dr Verghese Kurien Aim to achieve self sufficiency in milk Operation Flood - successful - in modernising the dairy sector in India and

creating a strong network for procuring, processing and distribution of milk through the co-operative sector Operation Flood also organised dairy co-operatives in milkshed areas of villages and link them to metros - the major market for milk First dairy co-operative - National Diary Development Board (NDDB), at Anand, Gujarat.

LIQUID MILK : MARKET Market Liquid milk production - 74 million MT / year Milk production growing at around 5 % CAGR Around 33 million MT consumed in liquid form Of this, around 9 MT is pasteurised & packed while the rest is sold loose Demand from metros for packaged milk - around 6 million MT Major milk procuring centres : Anand (Gujarat), Mumbai (Maharashtra) , Chennai, Erode, Salem (Tamilnadu), Bangalore (Karnataka), New Delhi, Hyderabad (Andhra Pradesh) Trends - Milk output

Dairies Over 300 dairies in the organised sector in India; Of thus - 90 in the public sector, 105 in co-operative sector and 45 in the private sector Gujarat Co-operative Milk Marketing Federation Anand, Gujarat is the largest dairy (6 million litres per day - MLD) Amul brand milk products are household names in India Other regional brands (dairy co-operatives) - Aarey, Gokul,

Warana (Maharashtra), Saras (Rajasthan), Verka (Punjab), Vijaya (Andhra Pradesh), Aavin (Tamilnadu). Mother Dairy Delhi and Bangalore Dairy (Nandini brand) have tie ups with GCMMF, Anand Private sector dairies - JK Dairy, Heritage Foods, Indiana Dairy and Dairy Specialties.

PROCESSED MILK PRODUCTS : MARKET

Malted Milk Food

Market (1998-99) : 1,01,000 MT (Estimated) Also called in the industry as Milk Food Drinks (MFDs) Characterised by white segment (65 %) and the brown (chocolate) segment Major brands in white segment SmithKline Beecham (Horlicks), Heinzs Complan), Jagajit (Viva) Major brands in brown segment Cadburys (Bournvita), SmithKline Beecham (Boost), GCMMFs (Nutramul), Jagajits (Maltova) and Nestle (Milo) Sales of white MFDs strong in South and East zones Pack sizes : 500 gms, 1 kg, 2 kgs; recently, 15 gms Boost sachets were introduced - to cater to the rural market

1998-99 Market : 160 million litres (estimated) Reserved till 1997 for Small scale sector Unorganised sector holds 40% market share Products - ice cream (milk fat based) and frozen desserts (oil fat based) a variety of flavours (vanilla - most popular), combinations 100 - 150 ml scoops / helpings in paper / plastic tubs & cones 0.5 & 1 litre bricks for take home packs Segments - retail sales (70-75%), home consumption 10%,

Ice Creams

institutional / catering 15-20% (volume terms) Distribution - through distributors / stockists (with owned / leased cold storage facilities; retail outlets (company owned / franchised / other outlets such as provision stores, restaurants, hotels etc. Major manufacturers (brands) Hindustan Lever (Kwality, Walls, Max, Magnums), Vadilal (Dairy Fresh), GCMMF (Amul) ; several regional and local brands of ice creams are available Market (1998-99) : 130,000 MT (estimated) Milk Powder Milk powder of two types - whole milk powder, skimmed milk powder Dairy whitener, containing more fat than skimmed milk powder, gaining popularity in urban areas Major brands for skimmed milk powder - Anikspray (Hindustan Lever), Sagar (GCMMF), Nandini (Karnataka Milk Federation), Aavin (TN) Major Dairy whitener brands Everyday (Nestle), Milkana (Hindustan Lever), Amulya (GCMMF), Sapan (Dalmia), Farm Fresh (Wockhardt) and Britannia Dairy Whitener (Britannia)

Market (1998-99) : 102,000 MT (estimated) Market still restricted to large cities, middle & upper income groups Infant foods - infant milk powder and weaning foods Weaning foods have several variants - rice based, wheat based - and come in several fruit based flavours Major brands - Nestles Cerelac, Nestum and Heinzs Farex

Infant Milk Foods

MILK PRODUCTS : MARKET Cheese Market (1998-99) : 25,000 MT Processed cheese (50 %), cheese spread (30 %) are the major segments Other cheese varieties available today Edam, Gouda, Mozzarella (for pizzas), Cheddar and flavoured cheeses Processed cheese (cubes / slices) consumed primarily in metros GCMMFs Amul - market leader; other brands of cheese - Vijaya (AP), Verka (Punjab), Aavin (TN), Nandini (Karnataka), Britannia, Vintage New entrants - Le Bon (Dabon), Kraft.

Market (1998-99) : 40,000 MT Traditional product, dominated by unorganised sector Branded butter available salted and unsalted Co-operatives dominate organised segment Major brands (manufacturers) Amul (GCMMF), Vijaya (AP), Aavin (TN), Nandini (Karnataka) New entrant - Britannia

Butter

Market : (1998-99) 1,00,000 MT (Estimated) Ghee Clarified butter or ghee is a popular, fat rich indigenous product Colour varies from white to yellow depending on milk source Over 30% of ghee is from organised sector - most of it from the state cooperative dairies Major brands - Aavin (TN), Nandini Karnataka), Amul (GCMMF) Umang (J K Dairy), Sapan (Dalmia)

FUTURE Liquid Milk Key Sucess Factors Sourcing Distribution Dairy Products Branding Cold store infrastructure Distribution Demand Drivers Technology Branding Positioning Packaging sizes Milk powder sales threatened by better milk availability

Business Concerns

Poor financial health of most co-operatives Inadequate infrastructure Availability (packed milk) Per capita income

Poor penetration Poor infrastructure

Demand Drivers

Per capita income increase Changes in food habits Availability - in smaller towns Packaging smaller packs

Per capita income

increase Changes in food habits Availability - in smaller towns Packaging - smaller packs

A 6 % growth Market to grow by 10-12 % for dairy & processed food products New entrants & capacity expns Dairy Punjab Agro (0.15 million LPD) Dairy Products Dynamix (35 TPD), GCMMF (20 TPD) APDDCF (10 TPD) Malted Foods SmithKline Beecham (26,000 TPA)

Future