Dairies, aerated drink companies eye high-margin milk-based beverages
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.
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 dairies, aerated drinks and fast moving consumer goods entering the highly attractive and rapidly growing new segment of the market.
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, said a report by the Tata Strategic Management Group.
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. For instance, while a litre of milk is sold at . 40-45, a 200ml pack of flavoured milk ` costs Rs 20.
As against traditional milk-based beverages like lassi, butter milk and plain flavoured milk, dairies and aerated beverage makers have of late come up with products like oats milk, coffee milk and juices mixed with milk, registering quicker acceptance.
Parag Milk Foods, which already has milk-based energy drink Topp Up, has recently launched Slurp, a combination of mango juice and milk, while PepsiCo has come up with oats milk. Amul has been claiming encouraging volumes for its Kool Coffee drink.
Pankaj Gupta, senior practise head, consumer and retail practise at the Tata Strategic Management Group, said: “As dairies enjoy higher margins, they are focussing more on easy-to-consume form of beverages and are launching various products for every category of age.“
Elaborating on the shift in consumer tastes and demands, Rabobank analyst Shiva Mudgil 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.
“Dairies' next phase of growth would witness market expansion driven by newer consumption occasions or recruiting newer consumers through products and packaging,“ said Gupta.