The Rs 80,000 crore milk business

If you thought that all the action in business was concentrated around the e-commerce sector, you could not be more wrong. The unlikely category of milk and dairy products has been seeing some of the most frenetic activity over the past couple of years. Multinational and Indian corporate giants have jumped into the market. Start-ups have cropped up. Fund raising is taking place at a frenzied pace, both from the equity markets and via private equity funding. And new products and innovations are being launched fast and furious. Meanwhile, the 800 pound gorilla in the market – the Rs 31,000 crore Amul (2015/16), is managed by the Gujarat Cooperative Milk Marketing Federation (GCMMF) – is aggressively throwing resources to protect its turf. It wants to hit Rs 65,000 crore in revenues by 2020.

But Amul is facing unprecedented challenge from all sorts of players. Groupe Lactalis SA, the world’s largest dairy products company, picked up Hyderabad-based Tirumala Milk from private equity player Carlyle. A few months ago, ITC had jumped into the fray with its Aashirvaad brand of ghee and a promise to add a lot more products. Last week, Parag Milk Foods, a Maharashtra-based milk company, raised about Rs 750 crore in an initial public offering (IPO) to beef up its operation. A year ago, Mahara-shtra-based Prabhat Dairy had raised Rs 473.89 crore in an IPO for the same reason. Godrej Agrovet raised its stake from 10 per cent to 25 per cent in Creamline Dairy for Rs 150 crore. Private equity players have pumped in Rs 900 crore already in the past couple of years. Meanwhile, Danone, Nestle and other existing private sector players are adding to their product line-ups and pushing in big money into the market while home-grown dairy cooperatives such as Mother Dairy and Nandini, among others, are also expanding their operations rapidly. And other big global dairy companies are all eyeing the market. Crisil Ratings estimates that investments worth Rs 15,000 crore will flow into the milk business in India in the next two years.

It is an extremely attractive market, both because of its size and its potential. It is also, however, a marketplace fraught with danger that can sink even big players because of its sheer complexity. Over the next few years, the dairy market will see the mother of all market battles as the newcomers try to take away share from Amul, Mother Dairy and the other cooperatives, which have largely ruled the roost so far. But it could also prove a graveyard for many a player, Indian and global.