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PwC - Agriculture & Natural Resources Team

FICCI Food 3600 An overview of the Dairy Sector

Presented by Sunjay V S 6 November 2012

Scope of presentation

Overview of global dairy sector


Protein consumption trends Dairy consumption Supply

Price trends

Dairy Scenario in India


Evolution Production & production systems

Market
Constraints Opportunities for investment

6 November 2012 PwC

Section 1 Overview of Global Dairy Sector

FICCI Food 360 An overview of the Dairy Sector in India PwC

6 November 2012 1

Section 1 World Overview

Globally - consumption of protein increasing faster than population growth


Global consumption of protein increased from 3.7 to 5.4 lakh tonnes per day - CAGR of 2% Global population increased from 5.4 to billion - CAGR of 1%
Global protein consumption by category: 1991 2011*
100%
90% 80% 70% 60% 47.6% 41.4% 4.2% 5.0%

7.0

Increasing proportions of this growth is from animal protein


meat - 2.9 % Dairy 0.5 % increase vegetables, soy and fruit 2% increase cereals - decreased 6.2%

50% 40% 30% 20% 10% 0% 1991 Meat Dairy F&V Cereals 22.0% 16.4% 9.8%

18.4%
10.3% 24.9% 2011 Others

*Data extrapolated based on compound annual growth rate to forecast 2030 volumes Source: FAOSTAT, PwC Analysis

Demand for animal proteins likely to continue to increase faster than other categories
FICCI Food 360 An overview of the Dairy Sector in India PwC 6 November 2012 2

Section 1 World Overview

3 regions are the key contributors to this rising consumption


Change in proportion of protein consumption:

Regional contribution to protein consumption Country Asia Asia excl China China 1991 52.2% 31.5% 20.7% 2011* 57% 33.9% 23.1% CAGR 2% 2% 2%

Asia -

increased by 4.8% increased by 2.3%

Africa -

South America - increased by 0.6%


North America - dropped by 0.8% Europe - dropped by 6.7%

Africa
South America North America Europe Oceanic

9.9%
5.4% 10.9% 20.9% 0.7%

12.1%
6.0% 10.1% 14.2% 0.7%

3%
2% 1% 0% 1%

*Data extrapolated based on compound annual growth rate to forecast 2030 volumes Source: FAOSTAT, PwC Analysis

FICCI Food 360 An overview of the Dairy Sector in India PwC

6 November 2012 3

Section 1 World Overview

These regions have driven growth in dairy consumption as well however, per capita consumption remains much lower than developed countries
Dairy consumption kg/capita/year (milk excl butter)

Consumption stagnant or declining in developed countries


Growth of
Close to 3% in Asias per capita consumption

1991 Northern America Oceania Europe South America World India Africa Asia China
100.7 75.9 51.4 36.5 32.5 6.4 253.5 219.4 202.5

2009

CAGR
250.2 - 0.1% 178.1 219.5

- 1.2% 0.4% 1.4% 0.8% 1.9 % 1.0% 2.9% 8.9 %

129.9 87.3 72.2 43.9 54.4 29.8

Growth of

Close to 9%
in Chinas per capita consumption
FICCI Food 360 An overview of the Dairy Sector in India PwC

Source: FAOSTAT, PwC Analysis

6 November 2012 4

Section 1 World Overview

Global per capita consumption estimated to be 103 Kg/year in 2011 Estimated to have grown at about 17% over the last decade
Participation in world imports (2012*) Countries China Algeria Indonesia Brazil Russia Total of main importers 44 24 6.7 6 5.3 86 * Estimates %

Milk represents % of global beverage consumption


FICCI Food 360 An overview of the Dairy Sector in India PwC
Source: USDA (2012), PwC Analysis 6 November 2012 5

17.5

Section 1 World Overview

World milk production expected to touch 750 MT in CY 2012 Estimated to have grown at about 2% over the last decade
Participation in world exports (2012*) Countries %

New Zealand
EU - 27 Argentina Australia Philippines Total of main exporters Production in million tonnes* 1st

55
21 13 7.3 1.1 97.4 * Estimates

2nd

144 EU-27 India

3rd

129 USA

91

4th

34

32 Russia

31 Brazil

China

FICCI Food 360 An overview of the Dairy Sector in India PwC

Source: USDA (2012), PwC Analysis 6 November 2012 6

Section 1 World Overview

Prices of dairy products remain high despite increased production due to increasing demand and higher cost of production
FAO Dairy Price Index (2002-2004 = 100)

Price volatility is likely to remain in the near future


thin volumes of global milk trade few players dominate global market

Index derived from a trade weighted average of a selection of representative internationally traded dairy products Source: FAO

FICCI Food 360 An overview of the Dairy Sector in India PwC

6 November 2012 7

Section 2 Indian Dairy Scenario

FICCI Food 360 An overview of the Dairy Sector in India PwC

6 November 2012 8

Section 2 Indian Dairy Scenario

Indian dairy sector has evolved from rags to riches ....

1940s
Per capita milk

2012
Per capita milk

availability 132 g/day


Milk rationing and scarcity Dependent on import High intermediation

White Revolution
Cooperative dairying

availability 276 g/day (> WHO recom.dtion)


17% of global output Net exporter Increased share of producers share in consumer price (<40% in Europe, USA)

countrywide milk grid linking producers to consumers


Cutting out middle men Strengthening production, procurement, infrastructure & technology transfer

Made dairy farming Indias largest self-sustainable rural employment generator


FICCI Food 360 An overview of the Dairy Sector in India PwC

6 November 2012 9

Section 2 Indian Dairy Scenario

... making the country #1 in milk production


Production 123 million tonnes in CY2011 (USDA)
Top 7 milk producing states contribute more than 65% of milk production

Estimated to reach 170 million tonnes by 2020


Grew at CAGR of 3.7 % in the last decade* Milk is Indias largest agricultural commodity

UP contribute to about 18% of milk production


Milk production trends (million tonnes) 116.2
80.6 92.5 100.9

FY FY FY FY FY FY FY FY '01 '02 '03 '04 '05 '06 '07 '08 * DAHD Estimates, Source: GoI, PwC analysis

FY '09

FY '10

FY '11 (E)

Commodity wise production in million tonnes**


123 103 91 22 Milk
** Estimates, Source: GoI, USDA, Industry, PwC analysis

31 Oilseeds

17
Pulses

Source: GoI, PwC analysis

UP 18% AP & Rajashtan 9% each Punjab & Gujarat 8% each Maharashtra 7% MP 6 %


6 November 2012 10

Rice

Wheat

Maize

FICCI Food 360 An overview of the Dairy Sector in India * 2000 to 2011 decadal CAGR estimate PwC

Section 2 Indian Dairy Scenario

Bovine production system dominated by buffalos with 1 to 2 animal households contributing major share
Bovine population about 115

million

Species wise contribution to production system 120% 100% 80% 60% 40% 20% 0% Milch Population Indigenous cow Milk production Buffalo Crossbred 14% 21% 40% 24%

Indigenous cows account for 40% of in-milk population but only 24% production Buffalo milk -

55% of production

Average daily milk yield/ animal 4.4 ltrs / animal Wet animals 69.3% (increased by about 12% over the last decade)

Percentage contribution

46%

55%

Bovine type Indigenous cow

Average daily yield/ animal (2009-10) 2.1

Crossbred
Buffalo
Source: DAHD, ICAR, PwC analysis

6.9
4.6

Source: DAHD, ICAR, PwC analysis

FICCI Food 360 An overview of the Dairy Sector in India PwC

6 November 2012 11

Section 2 Indian Dairy Scenario

Indian dairy market estimated to have grown by 6.8% over the last decade*
Consumer spend on food
6.0% 8.1% 12.8% 15.8% 6.6% 6.9% 27.5%

Milk consumption pattern 8% 17% 30% Others Curd Liquid Milk 45% Tea & Coffee

16.2%

Cereals Edible oil

Milk & products Pulses & products

F&V Egg, Fish, Meat

Beverages Others
*Source: CSO- 2008 census, CII Dairy Industry Report, PwC analysis

Dairy contributes to 16% of consumer spend on food 18% in Urban, 15% in rural Estimated value of market - INR 3.6 lakh crores. Driven by increasing population, life expectancy and preference for dairy products High value processed products estimated to be growing at 15 to 25% Market dominated by unorganised sector (80%)
*CSO- 1997 and 2008 census, value terms, PwC analysis

FICCI Food 360 An overview of the Dairy Sector in India PwC

6 November 2012 12

Section 2 Indian Dairy Scenario

Milk procurement price has grown by about 2.5 times in the last decade ... trend expected to continue in the near future
Average milk procurement rate (farmgate) INR/Kg fat 500 450 400 350 300 250 200 150 100 50 0 FY 02 FY 03 FY 04 FY 05 FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12
*Source: GCMMFL-Gujarat Agri-convention

470 401 337

239 184

FICCI Food 360 An overview of the Dairy Sector in India PwC

6 November 2012 13

Section 2 Indian Dairy Scenario

Key sector constraints across the value chain


Breeding and Genetics resources Availability of fodder Labour shortage for increased herd sizes
Low productivity Low adoption of technology (such as milking equipments) Animal health & sanitation Finance Seasonality of production Availability of homogenous quality milk /highly fragmented supply Logistics infrastructure Manpower

Inputs

Productn Processing

Market / Consumer

Unorganised market Heterogeneous consumer requirements Lack of robust food safety standards

FICCI Food 360 An overview of the Dairy Sector in India PwC

6 November 2012 14

Section 2 Indian Dairy Scenario

Increasing demand and high inefficiencies across supply chain open up diverse business opportunities
Supply Demand

Intensive dairy farming / increasing herd size Technology and management of dairy farms Opportunities to standardise Buffalo rearing unique to India

Opportunities to address milkman at the doorstep preference of Indian households Growing convenience market (packaged milk) Niche market for high value products high quality ice creams, cheese etc Increasing preference of hygiene and food safety Addressing ethnic milk savouries market Proximity to China leading milk importer

Fodder cultivation
Feed & Nutrition Breeding

FICCI Food 360 An overview of the Dairy Sector in India PwC

6 November 2012 15

Section 2 Indian Dairy Scenario

In addition to market drivers, policy interventions could play a key role in shaping the future dairy scenario
Large scale

Small scale

Herd size

Low Policy interventions


FICCI Food 360 An overview of the Dairy Sector in India PwC

High
6 November 2012 16

Section 2 Indian Dairy Scenario

To conclude ...
On the production side Slow growth in productivity likely to increase demand- supply gap There is a need to promote interventions that would increase production efficiencies - Need to secure availability of fodder and high quality breeds - Promoting entrepreneurship in large herd dairy farming through PPP There is increasing interest in Intensive dairy farming increasing demand & farm gate price On the demand side Indian dairy market offers diverse opportunities to tap into

Unique nature of the market requires entrepreneurs to study it carefully before entry

FICCI Food 360 An overview of the Dairy Sector in India PwC

6 November 2012 17

Thank you.

This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers Private Limited, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. 2012 PricewaterhouseCoopers Private Limited. All rights reserved. In this document, PwC refers to PricewaterhouseCoopers Private Limited, India which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.

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