factors contributing to the dominance of regional players. Consequently, numerous companies have opted to concentrate on their local regions initially and then expand into other markets once they have established a solid foundation. The Department of Animal Husbandry & Dairying (DAHD) predicted that the organized sector’s share will grow to 54% by 2026. The rise in consumerism, urbanization, and the preference for branded packaged products is driving a noticeable shift towards the organized sector. Moreover, the increasing demand for packaged products is attributed to their superior hygiene, convenient storage, consistent quality, and widespread availability. Additionally, the influx of capital investments from cooperatives and private players will enable them to establish a strong presence and capture market share from the unorganized sector. Co-ops dominant, private players gaining ground. India’s dairy sector has historically been dominated by state co-operatives However, since the implementation of industrial licensing reforms in 1991, private players have experienced impressive growth by investing in procurement, storage, and distribution networks. These private companies have made significant investments in the dairy industry, surpassing the combined capacity of both cooperative dairies and government-owned dairies over the past two decades. To stay competitive with cooperatives, private players offer attractive pricing, prompt payments, and work closely with farmers to boost cattle productivity. Their ability to swiftly adjust to industry trends, consistent investment in technology and infrastructure, and introduction of innovative products based on consumer preferences will likely ensure their outperformance over cooperatives in the future. Share of organized segment Organized sector - Cooperatives vs Private players Consolidation is the way forward The Indian dairy industry is characterized by a high level of fragmentation, with numerous regional players dominating most markets due to the limited shelf life of dairy products. Only a handful of companies have succeeded in creating a nationwide brand and procurement network. Building a robust milk procurement network and establishing a brand in a new region is a gradual process and takes time organically. Consequently, many regional players have opted for inorganic growth strategies to expand beyond their traditional markets. It is anticipated that this trend will continue to gain momentum in the future, as dairy companies looking to expand nationally seek to acquire smaller regional players to leverage their procurement and distribution networks. As consumption increases and consumer awareness increases and consumers start demanding for better quality products suiting their specific nutritional needs, this will change rapidly, leading to consolidation in the industry. We are witnessing this across markets, where marginal small players are disappearing to the benefit of high-quality players like your company. Beyond milk to value-added products The evolving dietary patterns and changing consumer lifestyles have resulted in a rise in demand for value-added dairy products like curd, ghee, cheese, paneer, etc., surpassing the demand for liquid milk. Consumers are now more inclined towards purchasing these products rather than making them at home, which is driving the growth of value-added dairy products. Indian dairy companies are also adapting to this trend by introducing innovative products across different price ranges to cater to the diverse tastes and preferences of consumers. With improved packaging, longer shelf-life, and higher product quality, the penetration of value-added dairy products is expected to increase, supporting long-term growth. This trend is likely to continue in the future, with value-added dairy products expected to outpace the growth of the liquid milk category. Board's Report STRATEGIC REVIEW STATUTORY REPORT FINANCIAL STATEMENTS 59 HERITAGE FOODS LTD | 32ND ANNUAL REPORT 2023-24
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