The Impenetrable Dairy Business in India?

Dairy is a holy grail for all FMCG companies. It is the second largest segment in India’s packaged food category valued at 1.2 Trillion INR (Edible Oil is the first).

For years multiple pvt companies has tried to foray into this market but all failed. It’s the place where co-operatives dominate (Amul, Mother Dairy and others)

In the past top FMCG players like Coca-cola, Nestle, Danone and Britannia all tried. And all failed. Few like Danone tried multiple times.

Let's answer why they fail?

These companies mostly depended on third party manufacturers to procure milk and manufacture products. Only the branding, distribution and marketing are done by the company.

The issue lies in the supply side. Hundreds of villages, thousands of farmers and their lakhs of Cows/Buffalos are aligned to cooperatives. It’s impossible to dislodge them with money or incentives. Loyalty has become a social norm. Over generations it has become a process .

Now the million-dollar question arises, how would Ramdev and his Patanjali plan to dislodge this value chain?

My verdict, Patanjali’s dairy business would die a slow death after seeing a demand-supply issue. As prices are made the lowest, people would come looking for it, but as supply chain is not strong, supply would be a constrain. Its’ almost impossible to penetrate the Amul-MotherDairy supply chain.