Outlook For 2020: Emerging Opportunities In The Indian Dairy Industry The year 2019 witnessed a revolution in the industry as alternative products

The Indian dairy industry is projected to grow at a CAGR of 15 per cent year-on-year to reach INR 9.4 trillion by 2020. With India already being the largest dairy producer in the world, its considerable growth can be attributed to the value creation and addition that has been characteristic of this industry. The year 2019 witnessed a revolution in the industry as alternative products such as camel milk, goat milk and even donkey milk became a common part of the dairy dialect.

Further disrupting the industry, we saw large-scale technological integration as new-age start-ups began to flourish in the country. These start-ups redefined access to milk by delivering it straight to the consumer's doorstep. Being dubbed as 'milktech' start-ups, these companies are not only stoking consumer interest but also attracting global investors. According to a 2018 study by Crisil, the Indian dairy industry is likely to see INR 13,000-14,000 crore investments by 2021. With these developments, to say that the dairy industry is flourishing would be an understatement.

But, is the future just as exciting for the industry? Here's looking at certain trends that will shape the dairy sector and create more opportunities in 2020.

Also Read: 5 Entrepreneurs Who are Changing Milk Drinking in India

Growth of niche dairy products

For years, the dairy industry was focused only on cow and buffalo milk and milk-based products. Rising Internet penetration and increasing consumer awareness have, however, upended this long-standing norm. Today, consumers are increasingly inclined towards better, healthier alternatives such as camel milk, goat milk or donkey milk.

For instance, it has become common knowledge that camel milk does not contain A1 casein and beta-lacto globulin, which makes it fit to be consumed by those suffering from milk allergies and people who are lactose intolerant. Camel milk is also gaining popularity since it aids digestion, improves gut health, may prevent high blood pressure and may even help ease the symptoms of autism in children. Further, goat and donkey milk are also gaining favor among health enthusiasts as they are light on the stomach and packed with essential nutrients.

Niche dairy products such as flavored camel milk powder, camel milk-based skin care products or goat milk ghee will definitely attract more consumers in 2020.

Changing customer sentiments

Indians are quite accustomed to having their packet of milk being delivered at their doorstep early in the morning. However, new-age consumers are more quality-sensitive and tech-savvy than ever before. Hyper local delivery companies are identifying the changing consumer demands and offering tailored, tech-backed services to them. Such companies are offering pure, premium milk and milk products that can be ordered online in a matter of seconds. The options of pre-payment and long-term subscription further add to the value proposition being created by these start-ups. All consumers need to do is place an order at night and fresh milk—or other essentials—can be delivered to their home as early as 6am.

Further, with increasing disposable incomes and a renewed focus on healthy living, customer spending habits are also changing. Consumers are willing to spend more on a product that promises undeniable health benefits. Thus, the demand for premium products such as camel milk is slated to increase in 2020 and beyond.

Product expansion by dairy platforms

Tech-backed milk and milk-product delivery platforms are likely to expand their ambit over the next few years. Leading players will look at branching out and offering a holistic grocery shopping experience through one consolidated app. Since customer acquisition costs are quite high in this segment, companies will largely benefit from strengthening their product portfolio and improving customer stickiness. Thus, an increased number of start-ups can be expected to stock and deliver milk, milk products, vegetables, groceries and other everyday essentials.

Several challenges still exist in the hyper local milk delivery segment. While the market size is considerably vast, consumers are quite fragmented. Further, although leading VCs such a Sequoia Capital and Matrix Partners have funded start-ups in this sector, there still exists a gap in investments. Increasing competition is another major challenge for these companies.

However, defragmenting the market, improving the supply chain and furthering innovation can help start-ups address these challenges in an effective and efficient manner. Carving a niche and offering diverse products is already allowing several companies to increase margins and move towards profitability.

It is truly an exciting time to be operating in India's fast-growing dairy segment. Evidently, the market is set to expand on the back of the aforementioned trends. As a result, consumers will benefit greatly with easier access to high-quality products—delivered fresh, daily.