“India simply cannot be ignored” - Kevin Bellamy, dairy industry expert
Kevin, this year you became one of our main speakers at the Dairy Olympics , where you will talk about trends and innovations in the Indian dairy industry. Why did this particular country become the object of your attention for investment?
“India simply cannot be ignored. In 2023, India became the most populous country in the world with a population of 1.43 billion people (a sixth of the world's total population lives there). It is currently the world's fifth largest economy, but is predicted to rise to third place by 2029, with average annual GDP growth of 7% since 1980. Its young and increasingly affluent population, with an average age of 28, is highly ambitious, and by the end of the decade India is projected to overtake the US to become the world's second-largest middle-class economy.
How did you get involved in the dairy industry in this country? How did this country become a key factor in your investment decisions?
— I worked in the dairy industry for many years, but despite several “global” roles, I had little exposure to the Indian industry. In 2021, I was invited to become a shareholder in a private milk processing plant in Karnataka, southern India. Akshayakalpa is an organic dairy enterprise that helps farmers set up 20-cow farms with simple, well-designed, low-cost livestock management. India is the largest milk producer in the world and this sector is too important to be neglected. According to the Hindu religion, approximately half the population is vegetarian, making milk an important source of protein in the country. India produces a quarter of the world's milk. However, it is different from other major milk producers in the world.
What are the differences? What are the advantages and disadvantages of the dairy industry in India?
“Firstly, the sector is more fragmented: there are about 70 million dairy farmers and 330 million cows and buffaloes, meaning the average farm ranges from 2 to 5 cows. Milk is used at home, and 70% of the market remains informal: only the surplus milk needed by the family is sold at the village collection center. And often several hours pass from the moment the milk is milked until it is delivered to the mass cooling center. Although most cows are carefully cared for, housing, breeding and feeding conditions are often not optimal. Cows are primarily milked by hand and milk yields are often low, averaging just 2.4 kg per day. Low milk yields from large numbers of animals mean that India's dairy sector is by far the largest source of methane from dairy cows in the world and emits 4 times more greenhouse gases per kilogram of milk compared to Western production.
Are any actions being taken in the country to solve these problems?
— The Indian dairy sector is experiencing a boom. As a result, there is a stable "professionalization" of cattle breeding. As farmers continue to strive to improve production, they will increase milk yield from cows. This not only increases income, but also has a beneficial effect on reducing methane emissions per kilogram of milk. More milk per cow means fewer cows will be needed to meet demand. This is also positive given that India already has a 50-60% shortage of green fodder and climate change means heat and water stress will be a key issue in many current milk producing regions. India must adapt to make better use of its vast resources.
Tell us, by whom and how is the dairy sector regulated in India?
— The sector is controlled by cooperatives, the largest of which is Amul. They operate on low margins and successfully serve the mass market. India has a law banning pre-contracts for milk to protect small farmers. For the farmer, this means milk can be sold at the highest price possible each day, limiting processors' ability to manipulate prices. This has led to processors relying on milk middlemen to operate collection centers in villages and then sell the milk to processors. But long supply chains, a lack of refrigeration and poor communication between supply chain participants mean that by the time milk is processed, the quality of the milk is often poor. Not many consumers in India would want to drink this kind of milk.
What trends and prospects are expected in the coming years in this industry of the country?
— India needs to increase its milk production annually by approximately the same amount as the annual milk production of the Netherlands due to population growth. The Indian dairy market is expected to reach US$314 billion by 2026, accounting for 5% of the country's total GDP. But because of their size, contribution to GDP and connection to so many farmers and consumers, co-ops are often subject to political influence and can be slow to innovate. India's huge dairy industry is changing rapidly. With increasing prosperity, the next generation of Indians are no longer willing to milk cows by hand at home or boil milk for safety. Like everyone else, they prefer convenience and comfort. About 35% of Indians now live in cities, moving there in search of jobs and higher incomes, leading to a surge in demand for higher quality and "value-added" dairy products.
What changes are you seeing in the Indian dairy industry today and how might they impact investment opportunities?
“Entrepreneurs have taken the initiative, and now more milk in the formal market is processed by private enterprises than by cooperatives. These private dairies have the opportunity to develop higher value and higher margin products, catering to a small but growing premium segment. New investments make them more efficient and innovative. Providing support services such as breeding, veterinary medicine, feed supply and in some cases financial guarantees to farmers not only strengthens supply loyalty but also improves milk quality.
What significant changes have occurred in the development of the Indian dairy industry over the past decade?
“In less than a decade, India has become the largest consumer of digital payments in the world. Providing access to mobile phone-based financial services means that for the first time, milk payments can go directly to the farmer rather than through a village dealer. Daily transparent payments go a long way in building trust between buyer and seller, and supply chain relationships grow. As a result, the livelihoods of small Indian livestock farmers are also improving. It is important to note that many livestock farmers are women and their role in caring for cows is now being recognised, promoting greater gender equality.
What factors do you think will play an important role in the development of the dairy sector in the next decade?
— Despite the fact that India is the largest consumer of dairy products in the world, its market is carefully protected by high customs barriers that prevent the supply of most dairy products. Despite active efforts by New Zealand, the US and Europe towards a trade agreement, India is unlikely to sign anything that would open it up to the global market. Instead, India will continue to pursue growth in the dairy industry. However, India is not China. The dominant religion in India is Hinduism and the cow is considered a sacred animal. Cow slaughter cannot take place “openly”. Buying land is difficult and expensive. Although large farms exist, they are rare rather than the norm. As a result, India will likely not create mega-farms like those seen in China. Instead, the peasant will remain dominant - herd sizes will gradually increase - from 2-5 cows to 15-20 cows, which will make machine milking and mass cooling possible, leading to further improvements in milk quality and yield. In India, the path to saving the planet and successfully feeding a growing population is to strive for increased milk production, yields and efficiency while adapting to a changing climate. There are many challenges, but the industry is full of passion and energy from entrepreneurs and problem solvers. The next decade will be a decade of growth for India and the Indian dairy sector will play a leading and important role.
Thank you, Kevin. We look forward to your appearance at the 2024 Dairy Olympics in Ankara and hope to hear more about innovations and trends in the Indian dairy industry.
- Thank you for invitation. Yes, at the Dairy Olympics I will talk about how changes in India are creating new opportunities in the dairy industry. It will be interesting!
About the event:
The Dairy Olympics is one of the world's largest events, annually bringing together hundreds of representatives of the global dairy industry.
The main goal of the Dairy Olympics is to determine the prospects for the global dairy market, assess existing industry problems, forecast trends that will have the greatest impact on the industry, and search for new opportunities.
Turkey, one of the most dynamically developing dairy countries in the world, has been chosen as the venue for the 2024 Dairy Olympics. The 2024 Olympics expects about 500 delegates from 30 countries.
You can register to participate in the 2024 Dairy Olympics using this link .