Growing at 30%, the wellness and premium products market area of Indian Dairy Industry (IDI) has abundant investment opportunities. Besides the segment has low competition and what’s more it offers up to 20% profit margin that is almost 3.5 times greater than what is realised by selling milk.
Not surprising most of the established and renowned dairy players such as Amul, Nestle, Danone, Parag Milk Foods, etc. are focused on premium end.
- Amul, the market leader of Indian Dairy Industry, has been investing up to INR 10 billion year on year to build infrastructure for premium products and set up new milk processing units. Moreover, to maintain its firm grip in premium segment, Amul has been procuring milk from four states—Haryana, Maharashtra, Rajasthan and West Bengal.
- Parag Milk Foods raised almost INR 7.5 billion through Initial Public Offering (IPO) last year to gear up its operation.
- Nestle and Danone, on the other hand, are expanding their product line-ups to compete in the industry as well as in the premium products market end.
Besides established market giants, smaller and new market entrants are eyeing this segment by devising premiumization as competitive tool. Product differentiation and premiumization have been the keys to astronomical growth of Parag – in the last seven years the company grew slightly under 25% (AAGR).
From customers’ perspective, the change in food consumption habit of increasing middle-class is triggering demand for wellness and premium products. They prefer to shop and consume premium products such as probiotic yogurt and drinks, flavored milk, Greek Yogurt, etc. than basic products such as milk.
By 2020, it is expected that 62% of India’s population will join middle-class and their estimated income will be between US $7,500 to $44,000 per annum. This well-defined consumer segment will be driving the market area into higher growth.
Subarna Poudel is a researcher with Frost & Sullivan. He can be reached at firstname.lastname@example.org
Sapan Agarwal drives content and marketing for Frost & Sullivan. Sapan is based out of Kuala Lumpur Malaysia and can be reached at email@example.com | +603 6204 5830