Indian dairies & aerated drink firms enter into milk-based beverages

Indian dairies and aerated drink firms are increasingly entering into novel and Western-influenced milk-based beverages that offer significantly higher margins than traditional milk drinks.

Leading Indian dairies Amul and Parag Milk Foods are among the frontrunners in launching nutritional and fruit-based milk beverages, an area where global aerated drink giants PepsiCo and CocaCola also made their entry over the past few months.

Industry representatives and sector analysts estimate more players from diaries, aerated drinks and fast moving consumer goods entering the highly attractive and rapidly growing new segment of the market.

A report by the Tata Strategic Management Group said, dairy beverages as a segment is estimated to post sales of $1 billion (Rs 6,400 crore) in India by fiscal 2021, compared with Rs 1,280 crore in fiscal 2015.

According to Bharat Kedia, chief financial officer at Parag Milk Foods, the milk-based beverages segment has the second highest margin -from 25% to as much as 45% -among the value-added segments after powdered nutrition products like whey and infant food.

Pankaj Gupta, Senior Practice Head, consumer and retail practice at the Tata Strategic Management Group, said, "As dairies enjoy higher margins, they are focusing more on easy-to-consume form of beverages and are launching various products for every category of age."

Shiva Mudgil, Analyst, Rabobank, said, "The growing demand for milk-based beverages indicates a shift in consumer demand with rising purchasing power ... The market is still at a nascent stage in India, but is growing rapidly with newer players entering the fold and expanding rapidly."

Beverages are fast emerging as a big revenue generator for dairies, said Kedia of Parag Milk Foods. According to him, the share of the beverages segment to overall revenue at his company could reach double digits in the next five years from a low single digit now.

While innovations in new flavours are taking place, Gupta of the Tata Strategic Management Group believes that development of newer pack options for consumers will also result in attractive opportunities for packaging providers.

Currently, milk-based beverages are being sold in tetrapaks, metal cans, glass bottles, pet bottles and pouches.

Gupta said, "Dairies' next phase of growth would witness market expansion driven by newer consumption occasions or recruiting newer consumers through products and packaging."