UHT milk in India Essay Example

UHT and aseptic packaging industry, altering my perspective: the cherished concept that packaging ought to conserve more than it expends. For the first time, I apprehended the large-scale merits of this technology. Back then, there was scant attention paid to global warming and environmental issues in our society, however, today those benefits simply supplement the other advantages it offers throughout the supply chain. It's solely the UHT milk technology that possesses the ability to accommodate any volume of raw milk during peak production season, thereby encouraging farmers to enhance their yield.

In the year 2006, I carried out a market survey in London and its nearby regions. The focus of my research was on pasteurized milk which is usually heated to approximately 72.6 degrees Celsius. I found that it had a shelf life of nine days but necessitated refrigeration. Moving forward to 2007, while working as an Institutional development professional for the Dutch government, I began to understand the importance of environmentally friendly approaches throughout every stage of the supply chain - from production all the way to consumption. In this position, I came across critical information that identified cold storage processes as being significant contributors towards high-temperature gas emissions and subsequently global warming.

In spite of my best attempts, I found it challenging to understand how this technology could be utilized in small dairy farms and by farmers. The adoption of UHT technology - with capabilities from 1klpd to 20klpd - left me perplexed, particularly in relation to mini dairies in India and other developing nations until my visit to China at the beginning of 2011. It was astounding that as per

a prominent market player, China might have the most number of UHT facilities — estimated around 2600. These establishments operate UHT systems with capacities starting from 1000 lph(batch type), expanding up to any size based on specific orders.

Many small dairy operators are processing milk from miniature UHT facilities and selling it as pasteurized milk, thereby benefitting from a prolonged shelf life. China appears to manage with a segmented ecosystem, akin to India's. Having toured several UHT production facilities, I realized that my aspiration to introduce this cutting-edge technology to small dairy processors in India is now within reach. Our current aim is promoting these technologies by providing affordable solutions in India.

Certain restrictions exists concerning milk quality and packaging availability (initially starting with poly pack), however, potential solutions are now available to address these issues. While conducting a research case study titled Changing Consumer Behavior in China, I observed the evolution of UHT milk in Chinese markets and discovered intriguing consumer trends that significantly influenced the sales growth of UHT dairy products in major outlets. Four primary factors were found to contribute to this surge and fascinatingly, these factors hold high relevance in the Indian setting too.

The ensuing observations are derived from Kantar World panel's study on consumer behavior, focused specifically on China. The team can be reached at [email protected]. 1. The growth of the market is fueled by premiumisation. Kantar World panel states that the market for UHT milk in China, accounting for 87% of all liquid milk, was primarily propelled by price inflation and increased consumer demand in 2010, when household penetration remained steady. Concurrently, growing wealth and

evolving consumer preferences contributed to the market's transformation.

The study observed that the significant expansion of the market in 2010 was predominantly driven by premium and children's milk, two crucial sectors. Items of luxury and specificity appear to command a wider margin, which will continue to bolster the strong growth of the industry. 2. In view of market mergers, regional brands witnessed a deceleration. The merger trend in the UHT milk market continues to be apparent. Despite some local brands maintaining notable advantages in their domestic markets, they suffered a decline in market share as compared to 2009.

Across the country, both Yili and Mengniu experienced combined growth from 64.5% in 2009 to 65.6% in 2010. Conversely, Sanyuan, a significant competitor in the North, saw its market share decrease from 9.2% to 8.5%. Bright Dairy also experienced a decline in its stake from 16.7% to 14.1%. The continuous success of Mengniu and Yili in different regional markets can be credited to their extensive distribution network, strong nationwide marketing strategies, and steady brand development efforts.

3. In addition to Modern trade, the Gift channel continues to expand its relevance. The Gift channel, along with Modern trade, Hypermarkets and Supermarkets, makes up approximately 50% of market spend in many FMCG categories. However, the milk market has a unique aspect where the Gift channel holds significant value for customers. In the year 2010, the Gift channel accounted for 25.3% of market spend, an increase of almost two percentage points from 2009. The channel became even more vital during seasonal periods, particularly during Chinese New Year where its share rose to 36%. This surge was primarily

due to consumers purchasing premium milk gift packs along with chocolates and confectionery to present to family and friends while visiting them. Understanding how to capitalize on the trend of gifting milk is crucial to successful marketing. The aim is to ensure an effective festive season that will amplify profits throughout the year. 4. Enhancing Lower Tier Cities Similar to various other FMCG categories, there remains significant potential for growth in the UHT milk market within lower-tier cities.

With regards to household adoption rates, the segment has achieved over 80% coverage in capital cities, whereas in counties, there's still a significant 28% families who haven't purchased UHT milk in the most recent quarter. If the presence of UHT milk can replicate the same prevalence as in capital cities within lower-tier cities, an additional RMB 1 billion expansion in market size could be effortlessly realised. In the end, it is essential for domestic Chinese dairy firms to formulate affordable products and unique strategies for the economically challenged lower-tier cities where the per capita milk consumption is notably lower.

Several hindrances such as product quality-related controversies and defamation lawsuits had a significant impact on the growth of China's dairy industry in 2010. The general consensus suggests that the success of a brand is largely dependent on its product quality. This belief can be contextualized to India, emphasizing that implementing strategies like Ultra-High Temperature (UHT) milk gift packs, adopting premiumization tactics, and expanding market visibility in Tier 2 and Tier 3 cities will pave the way for UHT growth nationwide. Currently, UHT Milk accounts for less than 1% of the total liquid milk market in

India.

The product's strength and ease of use have significantly fueled market expansion in the past few years. The IMARC Group, a globally recognized research and consulting organization, anticipates substantial growth in the Indian UHT Milk Market, predicting it to triple its size from 2010-11 by 2016-17. The report highlights that UHT milk has an exceptional shelf life, with unopened packages staying fresh for several months. This feature makes it highly popular in areas dealing with a shortage of milk and ineffective cold chain systems.

Research suggests that an increase in urbanization and the rising number of working women may lead to a surge in demand for safe, convenient, ready-to-drink milk in India. Ultra-High Temperature (UHT) milk, which can be consumed without prior boiling, is anticipated to gain notable interest from urban households in the near future. There has been a noticeable transition from traditional "doodhwala" (milkman) delivered milk to packaged pasteurised milk in bottles and plastic bags since the city development during the early 1980s.

The situation seemingly revealed a heightened value by merging tidiness and convenience. According to the CEO of a prominent brand, the combined UHT milk market in 2006 was estimated at about 2,44,000 liters per day. Produced yearly at around 96 million MT of milk in 2006, it represented nearly 0.1% of all milk produced. Considering a growth rate of 20% annually, the current projected scope is approximately six lac liters of milk daily. If we assess this based on the existing level of milk production, it makes up roughly . % of total produced milk or about 0.6%of all processed milk (assuming today's percentage to be

around 35%). The industry appears to have more established capacity than this and is experiencing substantial expansions.

A client based in the North East has recently informed me of an unanticipated surge in demand for Ultra-High Temperature (UHT) milk, outpacing that of conventional liquid milk. This trend was corroborated by a notable Indian firm, observing its proliferation even to minor roadside eateries, though it's yet to exploit its maximum market potential. Standard packet milk still holds a high price margin. A local business has lately introduced their UHT milk in affluent urban regions throughout India at approximately Rs 90 per liter. Looking forward, a prominent worldwide entity in the UHT sector stated in their 2011 Tetra Pak Dairy Index that India and China are poised to drive global consumption of liquid dairy products (LDP). This is projected to increase by 30%, reaching 350 billion liters by 2020.

The latest journal index report indicates a potential 30% surge in the worldwide use of liquid dairy products. This surge is primarily due to rising prosperity and urbanization in regions like Asia, Africa, and Latin America. A growing focus on quality and convenience among the younger population for their dietary needs, including dairy items, has been observed. Their 'purchase it, keep it, disregard it' mentality along with an ongoing increase in disposable income creates a favorable context for expansion within India's dairy sector.

Recognizing the profound influence of media on consumer perspectives about dietary habits, particularly with regards to dairy products, is crucial. Recent press coverage has raised substantial worries regarding the existence of bacteria in pasteurized milk, including those from leading brands. However, hurdles

such as access and quality of raw milk, separating treatment processes and dairy farming as individual units, along with the required knowledge for handling this advanced technology can hinder progress.

The advent of this technology can create numerous avenues for farmers to garner higher earnings from their crops, and simultaneously offers marketers a valid rationale for demanding an increased price. The emergence of department stores, coupled with improvements in logistics and supply chain mechanisms in tier two and three cities, could promote the spread of this technology on a smaller scale. The societal hierarchy in India is transitioning from a pyramid-like structure to more of a diamond shape due to the expanding middle class. Consequently, it becomes imperative to provide sound justification for the escalated prices of UHT milk in carton packs within minor towns and cities.

The critical question we must confront is this: Should the consumer be held liable for cost inefficiencies born from expensive technology? There are limits to how much can be premiumized, and all parties need to accept responsibility for their actions within this framework. At Suruchi Consultants, our strategy adheres to Buddha's teachings of pursuing a balanced approach. We strive to strike equilibrium between farmers and consumers by offering mini UHT facilities at reasonable prices.