India's Rs 100,000 crore Indian dairy industry is buzzing with action. Just a few days ago, the country's largest FMCG company, Hindustan Unilever, acquired Karnataka-based ice-cream manufacturer Adityaa Milk. The bigger news, however, is the world's largest dairy company, New Zealand-headquartered Fonterra, joining hands with Indian retail king Kishore Biyani's Future Group. Biyani has been aggressively building his FMCG business in the last few years and aspires to scale it up to a Rs 21,000 crore entity by 2020. This joint venture will certainly play a huge role in scaling up its dairy products business under the Nilgiris brand.
This is Fonterra's second entry in the Indian market. It had earlier partnered with Britannia Industries way back in 2002, and by 2009 it divested its stake to Britannia and exited the country. The complex milk procurement model (perfected by Amul and other cooperatives such as Nandhini) had psyched most multinationals, who are used to corporate farming. But the 1.3 billion consumption opportunity in India is hard to ignore. In 2014, Groupe Lactalis SA bought out Hyderabad-based dairy company, Tirumala.
Britannia has gone back to the drawing board and has launched its own milk procurement system near Pune. The company is getting ready for an aggressive dairy roll out.
ITC Foods on the other hand, has launched pouch milk in Bihar. It entered the dairy business with the launch of Ashirvad Ghee, and is soon going to enter the premium value added milk-based beverages segment.
Will these corporate biggies shake the supremacy of co-operatives such as Amul? Only time will tell as the dairy business in India is a tough nut to crack.