The Indian Cheese Industry: Outlook, 2007 - 2010

Like what you are reading? Buy the complete report in PDF format.

Consolidation of Cheese Plants
The explosion of retailing in India will probably have a significant inpact on the cheese industry.

Large chains of supermarkets that have entered the country, like Tesco, would follow their global policies of tightening supplier margins that could put small cheese prodcers out of business. The supplier end will likely be dominated by huge national producers who can achieve sufficient economies of scale to be able to afford low margins. There will be a few such national cheese factories, supplying to various cheese marketers and retail chains, who in turn brand cheese under their own labels.

There is also a high probability that cheese importers like Kraft and Bel Fromageries begin domestic production to lower prices and increase availablility of their products.

Increasing and Widespread Demand
Based on a multi-year study of dairy consumption patterns in China, Mckinsey predicts a growth in the demand for Cheese by 40% by 2011. With India having similar consumer trends- namely, growing incomes, westernization and urbanization - Indian demand is likely to mirror Chinese patterns. Two conspicuous outcomes are: i) There is likely to be a 25%-30% increase in demand in the metros and ii) There is likely to be a 5%-10% growth in demand in tier 2 cities as urbanization and modern consumption patterns extend to these cities.

Food Technology Improvements
Many regional cheese brands are currently not able to retail nationwide because of the limited shelf life of their cheese products. For example, Mother Dairy, a subsidiary of the National Dairy Develepment Board and a hugeley successful retailer has confined most of its sales to the northern belt. Its reason- the shelf like of most of its dairy prodcuts including cheese is only about 10 days. . India being the second largest country in the world and a land of distances, most regional producers do not have the advanced packaging, processing and distribution technology for geographical expansion. Despite this hindrance, Mother Dairy's sales for cheese is increasing at about 30-40% a year. In the next 3 years, regional players will be forced to adopt new technologies that enable them to go national to survive.

Intense Competition Among Sellers
The two pronged strategy that sellers will follow in the next few years is i) to increase the size of the market through greater awareness, and ii) to increase availability of cheese products to the expanded market.

The Amul and Britannia brands have the strongest national dairy brand identity. To compete with these established brands and gain national presence, other cheese retailers will resort to heavy marketing. Cheese advertising budgets alone are likely to be around 2%-4% of total revenues. Advertising strategies could include, for e.g. cross selling with compementary food prodcuts and offering free cheese tasting sessions.

In the past couple of years, for example, Mother Dairy has already been pursuing aggressive advertising strategies. One successful promotion in Delhi and Mumbai was the "Cheese khao superhero ban jao" (Eat Cheese to become a Superhero) event, where kids buying cheese at retail outlets were invited for a photo- op - dressed as superheros with a framed photograph presented to them. Another, helped the company bond better with its retailers. In November 2005, retailers in Delhi displayed banners proclaiming, "Cheese ke saath bees ki cheez" (Buy Cheese and get Rs. 20 worth of freebies), a proposal where, if a consumer bought Mother Dairy cheese, the retailer would offer her free purchases worth Rs 20 from the store. Both these innovative campaigns were hugely successful in brand awareness and sales.

'Indianization' of processed cheese
Dabon, in acknowledgement of customer preferences for indegenous cheese, has customized their portfolio to include paneer.

The next three years will see new Indian flavours of cheese being introduced in the processed cheese and cheese spread market. The Indian consumer has unique tastes with variations even across regions. Both Indian and International brands are likely to 'Indianize' their cheese products with Indian flavours to attract a larger customer base.

Consumption Patterns
The product mix and consumption pattern is unlikely to change drastically in the next few years. The largest demand will continue to be for processed cheese and cheese spreads. Children will continue to be the largest consumers of cheese.

Of the predicted increase in demand, children will contribute to the largest proportion in tier 2 cities while it will be adults in the metros. To cater to this increase, it is also likely that cheese producers introduce new varieties of specialty cheese in the metros.

Click to read more