With India being the largest producer of milk in the world and dairy products being an intrinsic part of consumer diet, the dairy segment in India is poised to register double-digit value growth (10% FY21-FY25).

Due to the Cooperative driven model of the dairy industry in India, an increase in raw material prices cannot always be passed on to the customer. Compensating the farmers and supporting them using inputs like feeds and veterinary support not just fosters loyalty but also supports the cooperative ethos. However, it has a negative impact on margins. Constrained on both sides, there are three key techniques to protect margins:

• Increasing scale of operations: Low margins and low growth can be fixed by increasing the procurement volume and improving asset utilization. This includes:
  1. Procurement Scale: Procuring in scale by working with farmers for cattle well-being, benchmarking and determining the right procurement prices, and cultivating long-term relationships with farmers
  2. Production and Distribution: The impact of higher procurement volume will directly translate to better utilisation of inbound logistics trucks, chilling centres, processing units, outbound logistics, and downstream sales outlets.
  3. Sales Growth: Qwixpert has worked with a leading dairy player to identify sales growth potential. Through micro-market segmentation and customer behaviour profiling, we identified a growth potential of 30%. This included better penetration rates, increasing coverage and scope of new product developments
  4. New Product Development: With the market for modern value-added products growing at a strong 17% CAGR, companies can explore new categories such as Organic products (milk and VAP growing at 30%), Whey drinks (11% growth), Yogurt (24% growth). Qwixpert has experience in working on feasibility evaluation for new product development. By identifying all potential products in the industry through market benchmarking and shortlisting based on operational feasibility, market lucrativeness, and growth potential, we have helped select top products for GTM with strategies to achieve a 10% share and Rs. 150 Cr. topline.

• Improving the efficiency of unit economics
  1. Procurement Cost Reduction: Cost drivers for procurement include inbound logistics and the efficiency of the chilling centre. Through our in-house route optimisation tool, we can help devise the right route for inbound and determine the right fleet composition.
  2. Improving production efficiency: The major cost-head in manufacturing is utilities; by using our network of experts, we can help reduce manufacturing cost per unit by reducing wastages, improving yield by upstream quality management, and optimising the utilisation of the bottleneck processes.
  3. Optimising the product mix: The cost of servicing a market involves channel cost (margins), outbound supply chain, and ATL marketing spend; with a wide range of products with different shelf life, optimising the right product for the market becomes critical. This involves strategies such as increasing penetration (density) for milk while focusing on coverage enhancement for long shelf-life products.

With a strong growth outlook and consumer shift towards premium-high margin products, Qwixpert believes that understanding the nuances in customer preferences and taste profiles that vary by demography and region is key to cracking the market. We have experience in helping dairy companies understand and cater to the customer’s taste cost–effectively.