entry strategy for foreign player in india yogurt market

Entry Strategy for foreign player in India Yogurt Market

Submitted by: Samarth Dargan (Roll No 52)

Table of ContentsI. Executive Summary...........................2II. Introduction......................................2III. Review of Literature..........................3IV. The Methodology...............................4V. Discussion and Findings...................5VI. Conclusion and Summary.................8

Executive Summary• Yogurt, traditionally known as Dahi in India, has been a part of the

Indian meal, with home-made dahi consumed daily. But now people become aware about the difference between traditional dahi and yogurt.

• India dairy industry's rapid growth is attributed primarily to the advent of functional products with characteristics such as low-sugar, low-fat, cholesterol-reducing and favourable impact on digestive health.

• Among all functional foods, yoghurt is considered an ideal medium for delivery of beneficial functional ingredients.

• In addition, demand for organic yogurt products with natural ingredients is also on the rise. Innovative and premium products such as bio yogurts or yogurts enriched with juice and fruits are also finding favor among consumers.

• India Packaged Yogurt Market is growing with a CAGR of 17% from last three years and is projected to get double by the year 2018 due to rising awareness about product, increasing disposable income, growing demand in middle class people and affordable price of yogurt.

• India yogurt market is divided into two segments viz. Spoonful and Drinkable range. Spoonful segment dominates the market heavily while drinkable yogurt is growing fast. Keeping in point, the health and nutritional benefits of yogurt, the youngsters, women, athletes, etc. majorly fuelled the sales in yogurt market.

ENTRY STRATEGY FOR FOREIGN PLAYER IN INDIA YOGURT MARKET - [DATE] 2

IntroductionIndian Dairy IndustryOn BIG Growth Path

‘Operation Flood’, initiated by Dr V Kurien, brought about a major transformation in India’s dairy industry, propelling India to become world’s No. 1 milk producer. From 1/10th of the world production fifteen years go, India’s production now accounts for 1/ 6th of total global milk output. Milk production in India is growing at 4 per cent per annum, whereas in the rest of the world it grows at 2.1 per cent. The current production in India is 116 million tonnes. But there are many shortcomings that need to be corrected to take the industry further forward. A major shortcoming is the low average per animal productivity. While the milk output growth is high, the demand is increasing at even a higher pace. Clearly, there is no room for complacency. Much needs to be done to boost both production and productivity. This underscores the importance of time-tested techniques like ‘progeny testing’ and artificial insemination. The country’s 12th Plan would aim at taking the current milk output from 115-116 million tonnes to 150 million tonnes or so by 2017. The plan strategy lays much emphasis on productivity increase, one of the surest ways of keeping costs down.

Milk Prices

Cost is important since higher milk prices are a cause for concern for the government trying to address inflation worries. Compared to countries like U S, milk production in India is costly because land is expensive and interest rates are higher. But India enjoys the advantage of having cheaper labour. Labour is also easily available. But the cost of cattle feed is high due to exports and this has also contributed to high cost of milk. . The challenge is how to enhance milk output with limited resources and meet the growing demand, particularly in the cities, while at the same time keeping rising milk prices in check.

Milk Production Outlook


India’s White Revolution has attracted world-wide attention and Indian performance is expected to continue to play a major role in the future of the dairy industry in the world in coming years. It is expected that the world milk production will rise to 867 MMT by 26 per cent from current 714 MMT. However, as per the current CAGR of 4 per cent and optimistic projection of 4.5 per cent, India`s milk production is estimated to touch 180 million MT by 2020. This will lead to increase of India`s share in the world milk production from the current 16 per cent to 21 per cent in 2020. The core of the dairy industry lies with the milk producing farmer, who gets affected by many factors ranging from fuel and agricultural input prices to government`s foreign policy. Hence, the state of milk producing farmer is crucial for the dairy industry. To sustain the milk production there has to be a right mix of social, environmental and economic factors influencing the farmer.

National Policy

Against this backdrop, the national policy on dairy is critical for the growth of dairy industry. Milk production in US has been growing at a very good pace as a result of policies of the US government which nurture and protect cooperative marketing by dairy farmers. Experts feel India should also continue its emphasis on dairy development through cooperatives and private investments to ensure long term growth and sustainability of the


industry. India has the largest bovine population in the world with a large processing capacity of 98.3 million litres per day. Figures show, milk producers in India enjoy highest percentage share of consumers` rupee -- 70 to 86 per cent. This is more than double that in other countries like US, European countries and New Zealand where the returns to milk producers is less than 40 per cent of the consumers’ spending on milk.

Challenges

However, there are challenges to dairy in India, mostly in the form of rapid urbanization, low interest of younger generation in dairy farming and increasing real estate price that leads to loss of farm lands. Due to these factors, some dairy regions may come under pressure. The preventive measures would be to implement changes in the dairy production to make farming system more competitive. In addition, there is a need to develop infrastructure to enhance production, followed by investment at farm level and improving feeding methods. More importantly, Government could consider giving relaxation in tax on farmer`s income from milk to encourage him to invest in dairy.

Rising consumption

India is not only the largest producer of milk but also the largest consumer of milk. The policy approach should be to create growth path for the dairy industry. Currently, milk constitutes 15 per cent of the average households’ expenditure on food. However, with increasing urbanization and growing GDP, income rises are leading to fall in share of food as percentage of total expenditure.

The Cooperatives

A big success story in India’s dairy development is of dairy cooperatives. In the forefront is Gujarat Cooperative Milk Marketing Federation (CCMMF), the apex body of farmers` milk cooperatives. It markets the milk products produced by its member cooperatives under the brand name Amul and Sagar. Milk is sourced from 15,301 village dairy cooperatives where more than three million farmers collect their milk produce. Amul apart from being


Asia`s largest milk brand is a vehicle for economic and social development through which farmers manage their own resources. Amul has long been dedicated to providing best prices to its member producers for their milk and at the same time providing value for money to its consumers. Amul is also developing wide range of products to meet future demand, including calcium fortified milk, flavored yoghurt, frozen yoghurt, sugar free ice-cream and pro-biotic products. In order to keep pace with the growing market and production base, GCMMF has planned a total investment of $600 million for milk processing and village level infrastructure enhancement in the next five years.

Sustained Growth

Undoubtedly, dairying has provided gainful employment to millions, primarily women, in the villages. Investments under ‘Operation Flood’ have resulted in sustained growth and self-sufficiency in dairy: Amul Model has demonstrated the capacity of a single commodity to have multi dimensional effect on producers, consumers as well as the economy of the country. This model has also delineated the importance of commercial approach to development and nil interference of government in commercial enterprise. By the year 2020, India`s GDP is targeted to cross that of UK and will be ready for a steep rise till 2050. But it can be realized only by active government support to vital sectors like dairying and implementation of well formulated ideas provided by dairy scientists and experts

Attractiveness of Indian Market


• Organized market is growing at nearly 10% in value terms annually, with value added products gaining the popularity among the consumers

• The operating margins in value-added products are almost 2x liquid milk business

• The increase of popularity of healthy food

• There is an incremental change in premium milk consumption segment

• An increase of readiness to experiment with the new foods

Indian Yogurt MarketWith the advent of functional products, and the emphasis on low calorie, low sugar, digestive products, the global dairy industry is undergoing a paradigm shift. Instead of the traditional milk, cheese, and butter concepts, more functional products such as yogurt, probiotics, etc. are now being accepted as the medium of delivery for beneficial functional ingredients. As per the GIA, the European and Asia-Pacific markets, which account for a more than 80% share of volume consumption, dominate the global yogurt market. Within the Asia-Pacific region, China is the fastest growing regional market for yogurt in terms of consumption (value and volume). As per Euromonitor estimates, emerging markets, including China and India, will contribute 95% of the global dairy market’s growth between 2011 and 2016. Yogurt, traditionally known as “Dahi” in India, has been a part of the Indian meal, with home-made dahi consumed daily. The Indian palate is well-accustomed to the taste of not only plain yogurt but also such form and taste variants as Lassi, Chaas, Srikhand, Mishti Doi, Raita, etc.

In spite of being ingrained as the staple consumable, yogurt consumption in India lags far behind the average consumption in most developed markets. When compared to such high consumption markets as France (which sees an annual consumption of25 kg), Germany (24 kg), and Holland (23 kg), the per capita consumption in India is a meager 2.3 kg per year. Again, the per capita consumption of the packaged, store-purchased variety is 300 grams, and this too is heavily skewed toward urban India (~1 kg), and is near-zero in rural India


Market Evolution

The Indian yogurt market is valued at an estimated INR 1000 crore, or ~USD 182 million, comprising organized, packaged yogurt and its varieties, packaged drinks, etc., and also the frozen yogurt service market. This is expected to grow at a CAGR of 20-25% with the expectation that it will double itself in the next three years.

Market Segments: Yogurt Market

In terms of segments, apart from the classical organized vs. unorganized, and product vs. service segmentation, the yogurt market can also be classified as the Drinkable range and the Spoonful range. Drinkable yogurt is emerging as a competition for flavored milk drinks and fruit/vegetable juice, while fruited yogurt is competing against the high calorie ice-cream. In terms of product share, plain/ natural yogurt constitutes the largest share and dominates retail sales, while such smaller categories as drinkable yogurt, and flavored and fruited yogurt, are likely to challenge specific packaged food and soft drink segments.

The packaged yogurt brands in action comprise two broad segments: national level players like Amul, Mother Dairy, Nestlé, and Britannia, which constitute about 80% of the total packaged yogurt market thanks to their


distribution networks and product penetration, with the remaining 20% made up by such strong regional players as Karnataka Cooperative Milk Producers Federation, Parag Milk & Milk Products, Himalaya International, Tirumala Milk Products, The Nilgiri Dairy Farm, and VRS Foods, along with new international entrants in the markets e.g. Danone, Fonterra, etc. The space is expected to become more competitive with other major business houses such as Reliance, ITC, and CavinKare planning to enter the dairy space. The product offerings in the packaged segment range from plain yogurt to a plethora of varieties including probiotic, vitaminfortified, stirred, creamy, and pulp-laced, and span both the most basic of flavors like vanilla, mango, pineapple, and strawberry and also more exotic fruits such as raspberry and plum. In terms of pricing, INR 18-20 is the usual price point for a 100 ml cup

The other existing but quickly emerging segment includes retail service brands like Cocoberry, Red Mango, Kiwi Kiss, and Yogurberry, which sell flavored/frozen yogurt through their exclusive/ standalone outlets stocking their respective brands and signature flavors. The retail service outlets are using modern trade institutions like colleges, schools, office canteens, airports, fivestar hotels, and independent kiosks, apart from traditional spaces such as malls, high streets, and popular markets, for tapping their target consumer group.


One visible trend in the market is the rapid overlap of product offerings in both these segments with more varieties of flavored yogurt being offered by dairy brands to tap into the frozen yogurt market. Domestic players like Amul, on the one hand, offer frozen yogurt brands (Amul Flaavyo, in this instance) along with other offerings in the packaged fruited yogurt category. Nestlé also offers a range of fruited yogurts (branded as Nestle Real Fruit yogurt, in mango and strawberry flavors), while Mother Dairy’s fruited yogurts offer such flavors as blueberry, raspberry, and plum. At the same time, both new entrants and existing brands are enhancing their outlet reach to maximize the availability of their products. The surge in consumer demand is one of the prime drivers of the yogurt market’s growth. The rising awareness about lifestyle related health concerns such as diabetes and obesity, and the benefits of yogurt, with its positioning as a health-promoting product that improves metabolism, has a positive impact on digestive mechanism, and enhances the immune system, ensures a repeat purchase. This awareness is complemented by the consumers’ willingness to try the new and innovative product offerings available, as a result of their wider international exposure. As a result, the conventional spoonful of plain yogurt is increasingly substituted by drinkable yogurt, organic yogurt, bio yogurt, or fruited / flavored yogurts. The consumer’s experimentation is supported by the changing nature of family earnings, especially the emergence of dual income households with higher disposable incomes, in terms of spending on products that were not considered ENTRY STRATEGY FOR FOREIGN PLAYER IN INDIA YOGURT MARKET - [DATE] 10

imperative for daily consumption or used to be generally home-made. The other macro factors that are supporting growth include the wide availability of raw material that ensures an easy entry, and easy exit, from the market. The existing distribution network of established players and channel partners can be utilized to reach the final consumer, and the increasing reach of organized retail formats, in showcasing their extensive product range to a larger target audience, along with attractive packaging and competitive promotions, helps in enticing consumers to both for trials and in making repeat purchases. With the broad consumer acceptance of packaged yogurt and frozen yogurt products which satisfy their lifestyle and convenience needs, the market is expected to grow, encouraging more regional, national, and international players to enter the market. The existing players are making efforts to widen the consumer base, by, for instance, introducing pack sizes and variants at lower price points to target rural consumers.

Review of LiteratureOut of many research done by different Marketing research firms one is from Technopak done in February 2014 showing the domestic yogurt industry, market evolution, market segments, relevant Industrial polices and related laws.Another Research done by Dairy Tech India showing growth path of dairy industry, Milk Prices, Milk Production Outlook, National Policy, Challenges, Competition, Rising Consumption, Sustained Growth.


The MethodologyResearch Background and Objective

Research Design


Exploration Phase

Piloting PhaseENTRY STRATEGY FOR FOREIGN PLAYER IN INDIA YOGURT MARKET - [DATE] 13

This phase will be conducted primarily to scan the yogurt market & check existing market dynamics - presence of yogurt brands in market, key sources of purchase, identifying key Target Segment, channel dynamics and identification of further contact points for interviews Conduct researcher driven in-depth interviews with Consumers & few competitorsThese will be conducted with the help of discussion guides. It will be an exploratory open end discussion of approximately 30-35 minutes. Below listed info areas will be collected from selected target group From competitors– market size and forecast related questions will be asked, sales value and volume of brake lining & forecast , Market share of competition From Consumers– Key Drivers for yogurt? Form of Purchase? Purchase Frequency? Brand awareness & most purchased brands? Why? Parameters considered while purchasing ? Purchase process? Source of purchase? From channel partners/Retailers – Locating key cities? Main driver for consumer? Pricing Analysis, price margins at different levels,?

Main PhaseWith the help of information collected from pilot phase,

Sample split of Consumers, Competitors, Channel Partners will be finalized Structured questionnaires will be designed All this will be done in conjunction with the company

In this phase we will conduct two type of interviews In depth interviews will be conducted with competition companies and raw material

suppliers and few consumers.o We will use the understanding gained from the pilot phase in moderating the

discussion to ensure sharing quality information and free flow of information from the respondents

In this phase structured questionnaires will be used to conduct interviews with consumers, channel partners and respondents from Competitor company.

o These interviews will be conducted by corporate interviewers


Discussion and FindingsMode of Entry


Conclusion and Summary


entry strategy for foreign player in india yogurt market

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