128 32ND ANNUAL REPORT 2023-24 | HERITAGE FOODS LTD MDA STRATEGIC REVIEW STATUTORY REPORT FINANCIAL STATEMENTS Constituting nearly one-fourth of global milk production, milk production in India has grown at a CAGR of 5.85% over the past nine years from 146.31 million tonnes during 2014-15 to 230.58 million tonnes during 2022-23, whereas per capita availability of milk stood at 459 grams per day during 2022-23, vs. 322 grams per day in 2014-15, thus registering a growth of around 42.5% over the period. Buffaloes as a species and as a key asset for farmers are mostly of milch breed in the country. A growing number of farmers are engaged in buffalo rearing, which has resulted in the share of buffaloes in the bovine population steadily going up over the years, with almost 56% of the milk consumed in India being derived from buffaloes. For the farmers too, buffalo milk fetches a higher price as it contains 7% - 7.5% fat, almost twice that from cows. India’s per capita milk consumption compared to other major global players (Source: Investec India, Research report on India Dairy Sector Milking the Rising Consumption Trend) Indian dairy companies, especially in the private sector, have been instrumental in reshaping the nation’s dairy industry, which today holds a profound significance across multiple facets. Engaging over 80 million rural households, predominantly consisting of small-scale and marginal farmers, the players, including cooperatives, have catalysed self-reliance among farmers, providing them with a dependable means of livelihood. Promoting equality and equivalence, they have transcended barriers of gender, caste, religion and community, fostering an inclusive environment for shared prosperity. Women, who constitute the backbone of the dairy workforce, have found not just employment but also empowerment through this sector, underscoring its pivotal role in promoting gender equality. Key trends shaping the Indian dairy industry I. Buffalo rearing gaining popularity amongst milk farmers In light of the substantial surge in milk prices in 2023, especially for milk fat, farmers are accelerating the rearing of buffaloes instead of traditional dairy cows. As mentioned earlier, the richer fat content of buffalo milk renders it more lucrative for sale compared to that of cow milk. Furthermore, the economic advantage is enhanced by the sale of spent buffaloes for meat and leather, thus making buffalo farming more financially rewarding than raising dairy cows. II. Rising input costs lead to value- for-money options In 2022 and 2023, inflationary pressures disrupted the dairy industry, farmers’ income and raising consumer prices. Dairy producers have been developing pricing strategies that reflect the balance between meeting competitive market dynamics and dairy products as necessary consumer staple items. The focus has shifted to creating value-added products like cheese, curd, yogurt and probiotic drinks, which offer better margins and meet consumer demands for health and convenience too. This shift is fuelled by greater health consciousness, a growing middle class with disposable income and new dietary preferences, prompting dairy companies to innovate and market these profitable alternatives. III. Rising demand for next-generation products In the ever-evolving landscape of the dairy industry, the year 2023 witnessed a pronounced emphasis on health benefits. This has been achieved through fortification of dairy offerings with high-quality proteins, probiotics and prebiotics. Such advancements have transformed dairy products into food items offering distinct health advantages. Notably, the integration of probiotics and prebiotics long recognized for their positive effects on digestive (gut) and immune health into dairy products is becoming more prevalent. This strategic inclusion aims to cultivate a harmonious gut microbiome, which is increasingly understood to exert influence over stress, mental alertness, etc. IV. Technological advancements in dairy processing Technological innovation is transforming the dairy industry by enhancing farm management, milk processing, packaging and logistics. Automation, IoT, etc., are key to improving efficiency, quality and safety, while cold chain technologies maintain product freshness and nutrition during transport and storage, thus extending shelf life and helping build consumer trust. V. Changing distribution channels and emergence of B2C startups B2C startups are revolutionizing the Indian dairy industry by leveraging digital platforms for direct delivery to consumers, focusing on premium products and even offering subscription services with benefits. The latter represents a key innovation considering the high-frequency consumption nature of the products. This shift towards e-commerce is enhancing convenience, freshness and quality, leading to a shift in consumer behaviour and inducing evolution of the traditional way of doing business.
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