CHEESE IN INDIA

Euromonitor International February 2012

CHEESE IN INDIA

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LIST OF CONTENTS AND TABLES

Headlines ..................................................................................................................................... 1 Trends .......................................................................................................................................... 1 Competitive Landscape ................................................................................................................ 2 Prospects ..................................................................................................................................... 3 Category Data .............................................................................................................................. 4 Table 1 Table 2 Table 3 Table 4 Table 5 Table 6 Table 7 Table 8 Table 9 Table 10 Table 11 Table 12 Table 13 Sales of Cheese by Category: Volume 2006-2011 ...................................... 4 Sales of Cheese by Category: Value 2006-2011 ......................................... 4 Sales of Cheese by Category: % Volume Growth 2006-2011 ...................... 5 Sales of Cheese by Category: % Value Growth 2006-2011 ......................... 5 Spreadable Processed Cheese by Type: % Value Breakdown 20062011 ............................................................................................................. 5 Unprocessed Cheese by Type: % Value Breakdown 2009-2010 ................. 5 Cheese Company Shares 2006-2010 .......................................................... 6 Cheese Brand Shares 2007-2010 ................................................................ 6 Sales of Cheese by Distribution Format: % Analysis 2006-2011 ................. 6 Forecast Sales of Cheese by Category: Volume 2011-2016........................ 7 Forecast Sales of Cheese by Category: Value 2011-2016........................... 7 Forecast Sales of Cheese by Category: % Volume Growth 2011-2016 ....... 8 Forecast Sales of Cheese by Category: % Value Growth 2011-2016 .......... 8

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CHEESE IN INDIA
HEADLINES
Current value sales of cheese increase by 23% to reach Rs7.8 billion in 2011 Processed cheese again leads absolute value sales after falling behind unprocessed cheese in 2010 Spreadable processed cheese registers the fastest current value growth in 2011 All cheese types other than soft cheese record double-digit growth in current unit prices in 2011 Gujarat Co-operative Milk Marketing Federation retains its value sales lead in cheese in 2010 Cheese is expected to increase by a constant value CAGR of 14% over the forecast period

TRENDS
Packaged and branded soft cheese (primarily paneer in India) overtook processed cheese for the first time in terms of value sales in 2010. With non-traditional cheese (all forms of cheese apart from paneer) being considered surplus to requirements in a year of limited consumer spending, 2010 saw soft cheese brands cropping up throughout India. However, aggressive brand positioning by processed cheese brands is expected to lead to growth in 2011 exceeding that of soft cheese. Whilst soft cheese is used in traditional Indian preparations, processed cheese is used for Western food items such as sandwiches and pizzas. The current value growth of 23% expected in 2011 is higher than the review period CAGR. Rising demand for multiple cheese formats (spreadable and unspreadable) which are not native to India drove growth over the year. Cheese products were increasingly accepted by urban consumers as butter or ghee substitutes served with traditional meals and those with Western influence. The popularisation of pizzas by consumer foodservice brands such as Dominos Pizza and Pizza Hut in India saw increasing retail demand for the unprocessed cheese used to make such products at home. Spreadable processed cheese is expected to be the smallest cheese category in terms of retail value sales in 2011. Due to its comparatively small size and its population with key brands, the category is expected to see appreciable growth in 2011. Amul (from Gujarat Cooperative Milk Marketing Federation) and Britannia (from Britannia Industries) were key brands which drove the spreads format of spreadable processed cheese in 2010. This product type was occasionally used as a substitute for butter in food preparations made with white/brown bread, or even local bread variations such as parathas. The national brands mentioned above were also complemented by regionally popular brands such as Go (from Parag Milk & Milk Products) and Mother Dairy (from Mother Dairy Fruit & Vegetable) in the review period, thus adding to the growth of spreadable processed cheese. A consistent rise in the price of milk and milk powder is expected to lead to average unit prices of cheese increasing by 8% in 2011. Branded players in soft cheese, however, were cautious about incorporating price increments, as they looked to compete with unbranded paneer retailed through local kirana stores and dairies in India. On the other hand, processed cheese is targeted towards a specific urban consumer group, and could hence afford to apply higher price increments. The product range of spreadable processed cheese in India is expected to be significantly skewed towards reconstituted cheese in 2011, which was the product type adopted by the

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leading spreadable processed cheese brands in India. Within reconstituted cheese, however, manufacturers offer a variety of flavours, such as pepper, garlic, masala herbs and plain cream. Unspreadable processed cheese in India is expected to be strongly dominated by cubes and slices in 2011. Whilst cheese blocks are also available through all the leading brands, retail consumers prefer smaller and more manageable formats for sporadic consumption, or for specially prepared dishes from non-Indian cuisines. Cheese slices in particular gained appeal amongst urban consumers due to the elimination of the need to spread the cheese. Cubes and blocks are popular amongst foodservice operators which do their grocery shopping at local kirana stores. In 2011, paneer (classified under soft cheese) was the single most popular type of cheese in India. Whilst it has historically been prepared in households, or bought through local dairy shops, branded products commanded a notable consumer following amongst hygieneconscious consumers in 2011. Cheddar and gouda were the major hard cheese variants, even though the category itself was almost non-existent in respect of retail sales in 2011. Even the average urban consumer in India has not developed an appreciation of the various cheese variants on offer through retail shelves.

COMPETITIVE LANDSCAPE
Gujarat Co-operative Milk Marketing Federation accounted for a 47% share of value sales in cheese in 2010, as its flagship brand Amul accumulated the bulk of its sales through its leadership of unspreadable processed cheese and soft cheese. Britannia Industries was a distant second to Gujarat Co-operative, as the extensive retail network commanded by the latter allowed it to overshadow all other retail cheese players. The brand Amul enjoys consumer appreciation even outside the metropolitan areas in India, which was unheard of in the case of other non-soft cheese brands in 2010. Gujarat Co-operative lost minimal share in 2010, as nearly all the players maintained their positions from the previous year. Regional or relatively new players, such as Heritage Foods (India), Parag Milk & Milk Products and Mother Dairy Fruit & Vegetable used increased retail visibility to grow volume sales for their respective brands over the year. Regional dairy cooperatives such as Karnataka Cooperative Milk Producers Federation and The Punjab State Cooperative Milk Producers Federation also entered soft cheese through paneer offerings over the review period. Despite new entrants and many product launches in 2010, Gujarat Co-operative suffered only a small decline in its value share. This was largely due to a well-established distribution network, which helped it to back its marketing campaign with product availability even in semiurban areas of India. With cheese not commanding a large pool of loyal consumers in India, companies tend to rely on distributor partnerships and retail footprints to garner interest, rather than investing in mass media tools. In 2010, international cheese manufacturers had a negligible presence in the Indian retail environment. The top four players in terms of value sales which were all domestic in 2010 accounted for a combined 68% share of value sales. International brands from players such as Groupe Lactalis, Gebrder Woerle and Kraft Foods cater to an extremely niche consumer segment. Such consumers are either used to these products from stays in foreign countries, or want to experiment with premium products. Parag Milk & Milk Products continued its foray into cheese over 2011, as the brand Go added nacho cheese and shredded cheese to its portfolio. Several private dairy players entered soft cheese in 2010 and 2011. Due to the already established consumer acceptance of paneer in

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India, regional players such as MMD Dairy and Hatsun Agro Product introduced new or improved variants of this product type in 2010. In order to generate brand and product awareness, Gujarat Co-operative depends largely on print advertisements in regional publications. In-store advertising at dedicated dairy retailers and retail partnerships with kirana stores form an essential part of marketing strategies for cheese manufacturers in India. In 2010, MMD Dairy introduced recipe books to educate consumers about the preparation of cheese products, in conjunction with new product launches. Parag Milk Foods signed a licensing agreement with Warner Bros Consumer Products, as it looked to use cartoon characters Tom & Jerry to tailor marketing campaigns for Go Cheezoos towards children in 2011. Go Cheezoos was a cheese offering introduced in the form of a 100g tube, and was launched with various flavours in 2011. Concentrating on modern retail formats, the brand variant was present in chocolate, peanut and tomato salsa flavours. Standard-priced brands such as Amul by Gujarat Co-operative and Britannia Milkman by Britannia Industries were dominant in cheese in 2010. Meanwhile, a few private label brands, such as Pantaloon Retail Indias Fresh & Pure and The Nilgiri Dairy Farms Nilgiris Malai Paneer, received a lukewarm response from consumers frequenting supermarkets in 2010. Most of the other regional dairy cooperatives (such as Punjab State Cooperative Milk Producers Federation and Rajasthan Co-operative Dairy Federation) commanded a limited retail presence with their cheese portfolios in 2010. The premium end of cheese in India consisted of imported products under well-known brand names such as Happy Cow, Prsident and Kraft.

PROSPECTS
With the evolution of chained and independent foodservice operators in India, packaged branded cheese saw a consistent rise in foodservice volume sales in the review period. However, a greater number of branded players entering soft cheese, coupled with the popularity of foreign cuisine such as pasta, pizza, and burgers, is likely to drive the retail volume growth of cheese in India. The increase in branded activity is expected to culminate in retail volume sales exceeding foodservice volume sales in the forecast period. Many foodservice suppliers focusing on cheese (such as Dynamix Dairy Industries) may look to penetrate the retail market, making use of their already established infrastructure in India. Constant value sales are expected to increase by a CAGR of 14% in the forecast period, thus overshadowing the growth registered in the review period. All the existing categories within cheese are likely to benefit from heightened brand presence, and increasing popularity amongst the masses. Soft cheese variant paneer will see several regional dairy brands outside the traditional market of North India emerge over the forecast period, thus channelling the demand for hygienic and high-quality products even for traditional Indian preparations. Processed cheese products will benefit from the existence of nationally popular brands such as Amul and Britannia Milkman, even as new brands such as Go drive extensive marketing campaigns in the near future. Spreadable processed cheese is expected to see the highest constant value CAGR in the forecast period, as it will gradually serve as a viable alternative to spreads in India. The dairybased nature of cheese spread offers an option different from traditional spreads in the form of jams and honey in India. Butter, which is often used for the same purpose, is thus likely to see intense competition from spreadable processed cheese in the forecast period. With their product offerings catering to a largely urban consumer base, cheese manufacturers in India are not expected to shy away from increasing unit prices over the forecast period. As

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such, the constrained milk production and ever-increasing demand for packaged cheese will result in a trend of regularly rising unit prices in processed cheese in constant value terms. However, with paneer brands focusing on mass consumers for volume sales, soft cheese is expected to see a decline in terms of constant unit prices over the forecast period. Local dairy retailers in India account for a significant proportion of sales of unbranded soft cheese in India. As its packaged form gains consumer appeal, the contribution of other grocery retailers and kirana stores is expected to decrease in the forecast period. Supermarkets/hypermarkets will be increasingly popular amongst cheese manufacturers looking to market processed cheese. Cheese manufacturers are likely to experiment with Indianised flavours and variants of cheese in the forecast period. As such, spicy variants of processed cheese and various product developments in packaged paneer will dominate the national players push towards product diversification. Tapping into a substantial distribution network inherited from Cadbury India, Kraft Foods is likely to enter cheese in India with brand launches in the forecast period. Parag Milk & Milk Products is also expected to carve out an appreciable value share in cheese, as it continues to aggressively market its cheese variants. The introduction of several soft cheese brands from regional players such as MMD Dairy and Parag Milk & Milk Products is likely to eat into the dominant share of Gujarat Co-operative over the forecast period. Regional availability and local marketing campaigns may help these brands to connect with consumers.

CATEGORY DATA
Table 1 '000 tonnes 2006 Processed Cheese - Spreadable Processed Cheese - Unspreadable Processed Cheese Unprocessed Cheese - Hard Cheese - Soft Cheese - Spreadable Unprocessed Cheese Cheese
Source:

Sales of Cheese by Category: Volume 2006-2011

2007 8.4 1.5 7.0 11.3 11.3 19.7

2008 9.3 1.6 7.7 13.4 13.4 22.7

2009 10.0 1.7 8.2 15.6 15.6 25.5

2010 10.7 1.9 8.8 17.8 17.8 28.6

2011 12.0 2.1 9.8 20.7 20.7 32.6

7.7 1.3 6.4 9.8 9.8 17.5

Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Table 2 Rs million

Sales of Cheese by Category: Value 2006-2011

2006 Processed Cheese - Spreadable Processed Cheese - Unspreadable Processed Cheese 1,597.0 221.9 1,375.2

2007 1,869.3 263.0 1,606.3

2008 2,190.1 316.1 1,874.0

2009 2,500.6 370.3 2,130.3

2010 3,141.3 465.2 2,676.1

2011 3,885.1 591.4 3,293.7

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Unprocessed Cheese - Hard Cheese - Soft Cheese - Spreadable Unprocessed Cheese Cheese
Source:

1,289.0 1,289.0 2,886.0

1,591.5 1,591.5 3,460.9

2,015.7 2,015.7 4,205.8

2,493.6 2,493.6 4,994.3

3,156.7 3,156.7 6,298.0

3,866.3 3,866.3 7,751.4

Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Table 3 % volume growth

Sales of Cheese by Category: % Volume Growth 2006-2011

2010/11 Processed Cheese - Spreadable Processed Cheese - Unspreadable Processed Cheese Unprocessed Cheese - Hard Cheese - Soft Cheese - Spreadable Unprocessed Cheese Cheese
Source:

2006-11 CAGR 9.2 9.6 9.2 16.0 16.0 13.3

2006/11 Total 55.6 58.4 55.0 110.4 110.4 86.3

11.4 11.7 11.4 15.9 15.9 14.2

Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Table 4

Sales of Cheese by Category: % Value Growth 2006-2011

% current value growth 2010/11 Processed Cheese - Spreadable Processed Cheese - Unspreadable Processed Cheese Unprocessed Cheese - Hard Cheese - Soft Cheese - Spreadable Unprocessed Cheese Cheese
Source:

2006-11 CAGR 19.5 21.7 19.1 24.6 24.6 21.8

2006/11 Total 143.3 166.6 139.5 200.0 200.0 168.6

23.7 27.1 23.1 22.5 22.5 23.1

Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Table 5 % retail value rsp

Spreadable Processed Cheese by Type: % Value Breakdown 2006-2011

2006 Cream Cheese Reconstituted Cheese Total

Source:

2007 5.0 95.0 100.0

2008 5.0 95.0 100.0

2009 5.0 95.0 100.0

2010 5.0 95.0 100.0

2011 5.0 95.0 100.0

5.0 95.0 100.0

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Table 6

Unprocessed Cheese by Type: % Value Breakdown 2009-2010

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% retail value rsp 2009 Mozarella Paneer Others Total

Source:

2010 21.0 74.0 5.0 100.0

20.0 75.0 5.0 100.0

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Table 7 % retail value rsp Company

Cheese Company Shares 2006-2010

2006 55.7

2007 52.7

2008 50.2

2009 47.5

2010 47.2

Gujarat Co-operative Milk Marketing Federation Ltd Britannia Industries Ltd MMD Dairy Heritage Foods (India) Ltd Pantaloon Retail India Ltd Britannia New Zealand Foods Pvt Ltd Other Private Label Others Total
Source:

0.2 17.8 1.2 25.1 100.0

3.2 0.2 0.2 17.3 1.2 25.1 100.0

3.8 0.5 0.2 16.5 1.1 27.7 100.0

15.6 4.0 0.7 0.2 1.1 30.9 100.0

15.6 4.0 0.9 0.2 1.1 31.1 100.0

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Table 8 % retail value rsp Brand Amul

Cheese Brand Shares 2007-2010

Company Gujarat Co-operative Milk Marketing Federation Ltd Britannia Industries Ltd MMD Dairy Heritage Foods (India) Ltd Pantaloon Retail India Ltd Britannia New Zealand Foods Pvt Ltd

2007 52.7

2008 50.2

2009 47.5

2010 47.2

Britannia Milky Mist Heritage Fresh & Pure Britannia Other Private Label Others Total
Source:

3.2 0.2 0.2 17.3 1.2 25.1 100.0

3.8 0.5 0.2 16.5 1.1 27.7 100.0

15.0 4.0 0.7 0.2 1.1 31.5 100.0

15.0 4.0 0.9 0.2 1.1 31.7 100.0

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Table 9

Sales of Cheese by Distribution Format: % Analysis 2006-2011

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% retail value rsp 2006 Store-Based Retailing - Grocery Retailers - - Supermarkets/ Hypermarkets - - Discounters - - Small Grocery Retailers - - - Convenience Stores - - - Independent Small Grocers - - - Forecourt Retailers - - Other Grocery Retailers - Non-Grocery Retailers - - Health and Beauty Retailers - - Other Non-Grocery Retailers Non-Store Retailing - Vending - Homeshopping - Internet Retailing - Direct Selling Total
Source:

2007 100.0 100.0 12.0 49.3 49.3 38.7 100.0

2008 100.0 100.0 12.5 48.4 48.4 39.1 100.0

2009 100.0 100.0 12.0 49.0 49.0 39.0 100.0

2010 100.0 100.0 13.0 49.0 49.0 38.0 100.0

2011 100.0 100.0 13.5 49.0 49.0 37.5 100.0

100.0 100.0 11.0 50.3 50.3 38.7 100.0

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Table 10 '000 tonnes

Forecast Sales of Cheese by Category: Volume 2011-2016

2011 Processed Cheese - Spreadable Processed Cheese - Unspreadable Processed Cheese Unprocessed Cheese - Hard Cheese - Soft Cheese - Spreadable Unprocessed Cheese Cheese
Source:

2012 13.4 2.4 11.1 23.8 23.8 37.2

2013 15.2 2.7 12.5 27.1 27.1 42.3

2014 17.3 3.0 14.2 30.6 30.6 47.9

2015 19.8 3.5 16.2 34.3 34.3 54.1

2016 22.8 4.1 18.7 38.2 38.2 61.0

12.0 2.1 9.8 20.7 20.7 32.6

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Table 11 Rs million

Forecast Sales of Cheese by Category: Value 2011-2016

2011 Processed Cheese - Spreadable Processed Cheese 3,885.1 591.4

2012 4,426.6 673.8

2013 5,084.6 777.2

2014 5,888.7 909.8

2015 6,871.8 1,077.1

2016 8,078.6 1,285.5

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- Unspreadable Processed Cheese Unprocessed Cheese - Hard Cheese - Soft Cheese - Spreadable Unprocessed Cheese Cheese
Source:

3,293.7 3,866.3 3,866.3 7,751.4

3,752.8 4,403.8 4,403.8 8,830.4

4,307.4 4,974.5 4,974.5 10,059.1

4,978.9 5,572.1 5,572.1 11,460.9

5,794.7 6,188.6 6,188.6 13,060.4

6,793.1 6,827.0 6,827.0 14,905.6

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Table 12 % volume growth

Forecast Sales of Cheese by Category: % Volume Growth 2011-2016

2015/16 Processed Cheese - Spreadable Processed Cheese - Unspreadable Processed Cheese Unprocessed Cheese - Hard Cheese - Soft Cheese - Spreadable Unprocessed Cheese Cheese
Source:

2011-16 CAGR 13.8 14.2 13.7 13.1 13.1 13.4

2011/16 Total 90.6 94.5 89.8 85.1 85.1 87.1

15.2 16.3 15.0 11.4 11.4 12.8

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Table 13

Forecast Sales of Cheese by Category: % Value Growth 2011-2016

% constant value growth 2011-16 CAGR Processed Cheese - Spreadable Processed Cheese - Unspreadable Processed Cheese Unprocessed Cheese - Hard Cheese - Soft Cheese - Spreadable Unprocessed Cheese Cheese
Source:

2011/16 TOTAL 107.9 117.3 106.2 76.6 76.6 92.3

15.8 16.8 15.6 12.0 12.0 14.0

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