The Indian Dairy Industry
An inefficient industry which was turned efficient and made worth billions of dollars after The White Revolution in the 1970s. The Industry is currently valued at somewhere around $30Bn and accounts for roughly 20% of the market share in the world.
Everyone reading this knows how big the dairy industry is and the scale brands like Amul & Nandini have reached by tapping into the market early and creating a sense of structuring to what is still largely an unorganized market. The Dairy Industry comprises of a variety of products including Milk, Butter, Ghee, Paneer, Cheese, Whey, Curd, UHT Milk etc. with further segregations amongst them based on which animal is the source (Cow, Buffalo or Goat). However, the top 4 products driving majority of the revenue and growth are Milk, Paneer, Curd & Ghee.
Alternative Dairy/ Plant based dairy
“Alternative-Dairy”, the words which no one around the world cared about 15 years ago is now making its way to shelves, homes and people’s hearts and is also roughly a $20Bn Global Industry. As recently as 2008, plant-based milk was brought to the limelight in USA with Soy based milk. At that time veganism and outrageous diet plans were not as large as they are now and conversations around the healthiness of milk was never looked at deeply, purely because everyone has been brought up with the idea that milk is in all forms healthy for you, the only ones who purchased the soy alternative were people who were lactose intolerant or vegan.
But post 2008, America led the conversation on alternative dairy and in the next few years plant based milk was at the fore front with people experimenting both for home and for commercial use. In the last 12 years, the refrigerated shelf has not only increased its options but also reduced the share of basic milk on it, with alternative milk products made from Almond, Coconut, Hazelnut, Peanut, Walnut, Tiger Nut, Cashew, Pea, Hemp etc. being made available to the general public.
Why the sudden increase in importance for plant-based dairy?
The change that has taken place over 12 years is due to what is being termed as a “demographic time bomb”. There are a handful of factors that form part of this time bomb which have largely come from increased consumer knowledge on the following matters -
a) Bovine antibiotics given to animals.
b) Animal cruelty.
c) Environmental Impact.
d) Increased diagnosis of lactose intolerance and
e) Health impact of dairy.
Now, we can either deep dive into the above stated factors and weigh out which of the two have the least problems or we can just cover the competing industries from a business and customer acquisition angle. Let’s stick to the latter.
Once companies started innovating with plant-based milk, other dairy products like cheese and yogurt were not far away and rightly so the items mentioned above were experimented with to provide the next best alternative to various kinds of cheeses and yogurts.
This shift or the “plant milk boom” took place largely in the States and in certain countries in Europe with majority of the world still sticking to the age old method of milking farm animals, heating the milk and drinking it. (Fun fact – Even plant-based milk is age old, with soy-based milk dating back to as early as the 14th century in certain parts of China).
Since I started the article with the Indian Dairy Industry, it is only fitting to circle back to what Alternative Dairy in India looks like, since the above mentioned facts and changes largely applies to the western counterparts.
Alternative Dairy in India
As you would have noticed, plant-based milk in India is not really a mainstream conversation and it is only very recently that the alternatives have made their way in to the subcontinent. Yes, we all have been hearing about almond milk for quite some time now, but till a couple of years back you would have heard about it from just a couple of your friends. This is largely cause veganism and alternative diet plans are at a very early stage in India, kind of like America in 2008, where largely the early adopters of veganism have heard about it from Western trends and as western trends have a way of becoming Eastern Trends, Alternative-Dairy also seems to be on a similar path.
The opportunity to become one of the early providers for plant-based dairy products is huge and as expected there are already several players in the market with their foot in the door -
Now most of the above companies are either very new to the market or their plant based portfolio (Raw Pressery & Epigamia) is very new to the market, so there is no way of comparing them or pitting them against each other in terms of performance or market size.
But let’s pause for a bit and go to the first few paragraphs of the article which listed down the top 4 products in the Indian Dairy Industry today – Milk, Paneer, Curd & Ghee.
All the companies above have a major focus on milk or cheese, drawing a parallel with America and Europe and the rise of Alternative Dairy there. However, in the western countries, milk and cheese are the biggest contributors to the Dairy industry and the approach followed by the western players made sense and the innovation during the same stage was limited to making milk from different types of nuts and other plant based material or trying different flavor profiles.
With companies in India only focusing on milk right now, who is going to make the best alternative to paneer/curd/ghee? Yes, Tofu (soy-based alternative for Paneer) and Ghee are being done by a couple of companies mentioned in the list above but can one company emerge out to be the provider of all Plant-based dairy products similar to Amul in the traditional dairy market.
In a country like India, drawing parallel with America in terms of product might be easy but putting a pin on who is your current target market and how you can expand your consumer base, might not be that easy. For starters, majority of Indians have either a sentimental value attached to cows and the goodness of the products we get from them or are insanely stuck on the idea that milk is indeed a daily essential which can do wonders for their health.
The way forward for India
The current crowd for Plant-based milk in India is largely driven by millennials who are exploring veganism or are willing to expand their horizon when it comes to healthy alternatives to traditional recipes or foods. Now an expansion amongst the millennial crowd is certainly one of the options for the companies to grow but how do they accelerate this expansion? How do they convince families to adopt the alternatives and forget about cow milk or the texture of paneer?
One answer cannot obviously solve this problem but a few factors will definitely play a part in widening the customer base -
a. What is the narrative behind plant-based milk?
Healthiness? Healthiness can play a part where the younger crowd advocates for better health for their seniors with ailments.
Harmful to cows? Due to the sentimental value attached to cows within a significant demographic, this will be a very interesting play.
Harmful to the environment? This is already a popular reason amongst the younger generations, but how will this play out on the not so young crowd?
b. Price Point
India is largely a price sensitive market where up to the upper-middle class families, price is one of the major drivers for decision making. If the alternative is 3x or 4x the current market price of traditional products, then it will be harder to convince consumers.
c. First timer conversion
A buzz around plant-based milk will lead to a rise in first timers but it is going to be crucial to convert them into regulars. This depends on two factors – effective replication and availability. The alternative needs to not only provide similar texture and taste but also be readily available across marketplaces (offline and online) to enable consumers to make it a part of their daily diet.
d. Product Expansion
An expansion into products such as Paneer, Curd & Ghee can be a potential deal maker for the brands and will complement the above stated factors perfectly to give a complete package to the consumers.
The industry has a long journey ahead with only a few brands securing funding in comparison to the large burn rates generally associated with consumer brands.
The first few to capture the market will potentially keep it for a long time to come and players like Vegan Dukan and Urban Platter can definitely help in the capture with their vegan-centric platforms but hyperlocal platforms like Big Basket & Grofers will also play a huge part in capturing and retaining the market.