Thursday, December 1, 2016

Dairy Pulse ( 16th to 30th November 2016) : A Snapshot of Indian and Global dairy industry) 26th Dairy pulse.


Dear friends,
Last one and a half fortnight has been a roller coaster ride for every one. Demonetisation can surely be quoted as a major paradigm shift in Indian dairy industry. We have already shared our views on demonetisation earlier with you and the same can be downloaded from the following link:

Demonetisation and Future of Indian Dairy Industry : https://t.co/8qdGyJU6vv
Other interesting news was about launch of the website http://epashuhaat.gov.in/

This website is going to be another game changer for Indian dairy industry as it brings the concept of recording , tracking and transaction of livestock gem plasm as well as livestock itself. In due course of time this website would integrate all the information about semen, embryos and animals available with their details at different parts of the country including the imported stock. It will break the information assymetry and thus take Indian dairy farmers to not only improve their breeds at local level but harness the high potential of  breeding collaterals available at different parts of the country.
Last fortnight finished with regional workshop organized by IFCN at Anand in collaboration with Amul, Elanco and Danone. It was attended by who's who from Indian dairy industry.
On 28th November a report on Global Dairy developments and Perspectives for Sustainable Dairy Farming in India (A joint publication of  IFCN, Germany and Suruchi Consultants , Noida) was launched in the presence of Mr R S Sodhi (Amul), MrShraman (Elanco), MrTorsten and Mr Anders (IFCN) and MrKuldeep Sharma (Suruchi Consultants) . On Nov 29th a workshop was held to present the future perspective of Indian dairy industry viz a viz the global scenario. The key findings of the workshop have been summarized in the first news of our newsletter in the press note.
The complete report could be downloaded from the following link 
Download report on Global Dairy Developments and Perspectives for Sustainable Dairy Farming in India : 


( You may also request for a hardcopy of the report by sending a mail at info@suruchiconsultants.com by giving your complete correspondence address).
Next 4 months are very critical for the dairy industry and there is a great dilemma in the  minds of the stakeholders. Looking at current scenario the fall in milk price in most part of the country is inevitable and in certain states it is becoming visible also. The Rupee devaluation is also continuing leading to better exports realization. Now under this circumstance the questions which might be coming in the minds of dairy stakeholders might be  :

a. Shall we  create stocks for next summer in India to leverage low milk price in this winter in the wake of currency shortage ? or
b. Shall we focus on exports of dairy commodities and leverage the low price in India and increasing prices of International markets ?

In both the cases Banks will have to come in a big way to support the dairy industry by making cash available to them or enroll their farmers in the banking net. The banks will also have to reduce rates for meeting working capital requirements as well as packing credit requirements for protecting the industry as well as farmer's interest.
We are planning to organize a round table on Impact of Demonetisation on Indian dairy industry and seeking partnerships with like minded organizations and stakeholders. This event will be organized sometime early next year and we will keep you posted on the same.
What I can see clearly is a seamless low of money from consumer to farmer through banks in very near future.
I could also see the middle men turning into responsible traders by making payments to the farmers through bank and creating a more transparent dairy eco system ( if they really want to survive).

Comments and suggestions from the dairy fraternity is welcome.
Wishing you a happy e reading.
with best regards
Kuldeep Sharma
Chief Thinking Officer

Wednesday, November 16, 2016

Demonetisation and Future of Indian dairy industry (25TH DP) (1 to 15 Nov 2016)


Dear friends,

What a fortnight it was for all the Indians ! This must have been the largest cleaning drive of bad intentions so far in the history of the world. I would like to share a line from a great book "The Alchemist " which got its true meaning today in the context of demonetisation.

"Loss of fortunes is a common occurrence at the beginning of most quests." 

Since the beginning of the last week we have been hearing a lot of news related to problems being faced by various stakeholders in dairy industry due to changed scenarios. While organized sector have to close sales in some part of the country to avoid receiving old notes on one side and farmers are not getting paid by private sector as well as cooperative in certain areas due to the almost stalled banking operations for businesses in the country. In this issue of dairy pulse ( thoughits too early) but I would like to share a quick reflection of demonetisation on Indian dairy sector.

a. It is a great opportunities for cooperatives and now for private sector also to make use of digital eco system for farmer's payment. Most of the key cooperatives have welcome this idea. With Jan DhanYojana giving direct access to nearly 15.67 Crores rural customers ( as on Nov 9 2016) and 25 crores account in total, there is hardly going to be any trouble even for enrolling 7.2 crores dairy farmers in the country.Such initiative would instantly change the foot print of Indian non cash transaction from a paltry 9% to surpass the BCG projected number of 59% before 2025.

b. The companies will have to formulate strategy to be more responsible towards tax paid billing ( particularly at unorganised sector level for products like panir, cheese,  ghee and SMP)  thereby creating a level playing field for responsible dairy operators as well as ensuring supply of pure and safe products at the consumer end. This would bring higher levels of transparency in the business and dairy would surely be moving up on the Integrity Index for doing business.

c. The companies have a massive opportunity to explore or cross benchmark the  Newspaper selling model for milk and milk products by enrolling a part of the consumers online for week/fortnight/month/quarter/half year/yearly subscription through online payments and later directing their supply chain to make delivery directly at the door step or at a convenient location near to their home. The cash transaction pressure both at the retail point as well as at the consumer level would thus be reduced to a minimal level. The customer is also getting ready for such opportunities at least for the essential products like milk. Thanks to Mother dairy booth near my house which till date has been supportive for supplies of milk, fruits and vegetables and other standard groceries to me and my neighbour by receiving old notes.

d. Such booking in advance would strengthen the working capital structure of most of the dairies ( look at the article where dairy industry is shown under stress with high working capital requirements).

e. Dairy has been a favorite investment hub for Private equity and Venture capitalist but due to propensity of higher cash transactions raises their eyebrows and they become selective and extremely precautious while evaluating dairy sector. Shifting of majority of business to non cashtransaction  would make these funds to invest in dairy more aggressively and thus I could see a great time ahead for expansion , product innovation and new models of business along with foreign brands flowing in India along with huge FDI in dairy soon.

These are just a few of the reflections but I hope the group may have lots of lots of other things to share. Please do share to help us build a New Dairy Model for Indian dairy industry of future.

Happy reading.

with best regards
Kuldeep Sharma
Chief Thinking Officer
Suruchi Consultants (ISO 9001:2008 Company)
C-49 Sector-65
Noida 201307

Tuesday, November 1, 2016

Happy Diwali (24th Dairy Pulse) 16 to 30 Oct,2016


Dear Friends,

Firstly Team Dairy Pulse wishes you a purposeful, prosperous, healthy and peaceful festival times.

Last fortnight witnessed a lot of action in dairy sector but I would like to focus on two news items which were hidden somewhere in our over communicated media but holds a lot of promises for Indian dairy sector in times to come.

The first news is on yet another meaningful initiative of Government of India to apply science to boost rural economy. The Indian government last week announced the launch of two new programs — Biotech-KISAN (Krishi Innovation Science Application Network) and  Cattle Genomics.       

These programs are going to bridge the gap between farmers and the Scientists and research Institute. We have large number of dairy research institutions in the country and have patronage from the government as well as funding from Foreign institutions. I do not know whether any study exist which has evaluated the commercialization index of the research and technology developed by these institutions. There are hardly any technologies which these institutions could proudly showcase as the one being disruptive. The industry is depending solely on the R&D capabilities of similar firms outside India for both in milk processing technology and animal production arenas. All commercial farms or scaled up dairy processing plants uses technology from abroad and hardly depends upon the immense knowledge pools of Indian scientists.  

The initiative of connecting this pool of knowledge to the farmers of the country would bring a paradigm shift in the overall productivity and health of the animals. Our farmers seek awareness and  knowledge . Knowledge is the best tool for empowerment. Though we have initiatives like ITK ( Indigeneous technological Knowledge) with ICAR wherein a diadic communication makes the mutual learning of farmer and scientist but the new initiative will further augment the efforts by converting Research knowledge of Institution into applied knowledge for farmers.

The second good news must be a nice music for the ears of Dairy Start ups with whom we have been working since last 26 years now.
As per RBI ( Reserve Bank of India) Foreign Venture Capital Investors (FVCIs) can now invest in Indian startups without prior permission of the  the central bank. Sebi-registered FVCIs have also been permitted to invest in unlisted firms in sectors like biotechnology, nanotechnology and dairy without prior permission of the RBI. 

There is a large number of dairy aspirants in the guise of IT professionals, Bankers, Engineers, Technocrats, Retired executives, Ex service man, Real estate and marketing professionals who are just looking around for investment to convert their one time dream into reality. A large number of them have got very good networking abroad and are capable of bringing such investors to India for their projects. Now with opening up of a sector like dairy for the start up we may look forward to more of Fresh cow milk delivered at our homes with high tech IT intervention for delivery, promotion and traceability for quality and hygiene.

Other significant news been there about Heritage acquiring Reliance dairy business. I along with a large number of dairy learners were unable to understand the legitimacy of Reliance in dairy business ( Just because there was no thrust for scaling up or backward integration which is most unlikely for any of Reliance businesses).

Skimmed milk powder price at Global Dairy Trade is staying strong at USD2329.00 on November 1 and trend is showing up north... A real good news for Indian dairy industry and a strong reason for making powder this season. I feel next 32 months would be good for dairy.

Happy reading to you all.

with best regards

-- 
Kuldeep Sharma
Chief Thinking Officer
Suruchi Consultants (ISO 9001:2008 Company)
C-49 Sector-65
Noida 201307
+91-98 10 31 58 31
+91-120-4320845

Sunday, October 16, 2016

Can we build a large market capital with dairy portfolio only ? (23rd DP) 1 to 15 Oct,2016


Dear Friends,
Research is a continuous process at Suruchi. While analyzing some current numbers for the Registered companies in food sector we found an interesting  insight. Against a total Market cap of around  Rs 219527.00 Crores for the food processing sector, the share of listed companies in dairy segment accounts for around 55% at Rs 122756.00 Crores. However the moment we remove Nestle and Britannia then this market capitalization drops down to around 7.24 % at 15,912.00 Crores.
Following four questions came to my mind with these figures :
a. Is dairy not the right industry from market capitalization perspective in India?
b. Can't we have higher market capitalization without having other non dairy component in the portfolio like Nestle and Britannia ?
c. Is it mandatory to have a multinational backend to get higher market capitalization ? Or
d. Are listed Indian dairy companies unable to perform or leverage higher market capitalization due to their financial strategies or practices ?
I leave the stalwarts from the industry to look deep into it. I am not sure on what kind of market capitalization could be foreseen with Amul and Mother dairy getting listed and traded. I do not know why at least Mother Dairy is shying away from the same. I do not find anything bad in Amul also entering into market with its share by changing the structure and acting as a true corporate ( which they are indeed). I won't be surprised if Patanjali under the aegis of Baba Ramdev may create history by becoming largest food cum dairy conglomerate in times to come by surpassing all existing players.
Let us talk about the last fortnight in Indian and global dairy sector. Most of the news were around Cow milk launches and even Verka joined the bandwagon after Mother dairy, Saras and Vita. 
Earlier this month, the Food regulator FSSAI released draft standards for fortification of staples that includes milk, edible oil, vansapati, atta and maida, rice and salt, and plans to make them operational soon.
Fortification means increasing content of essential mico-nutrient in a food product to improve its nutritional quality to provide public health.
ShriPawanAgarwal, CEO, FSSAI, said that several states such as Karnataka are keen to include fortified food in their public schemes such as mid-day meal programs, and therefore, the regulator will operationalize these draft standards soon to facilitate the same. At a two days National summit on fortification Mr Siva Nagarjuna from Mother dairy committed to fortify their milk with Vitamin A and D as per FSSAI guidelines.
This news will prove to be a milestone in the history of health and child welfare for a country like India where over 46 % children under the age of 5 years are malnourished irrespective of their social class.
Somewhere we will have to pay penalties for paying premium for taste rather than health in all of our food purchases.
I am observing a large number of small time players/farmers/middleman selling desi cow milk or A2 milk or organic cow milk anywhere from Rs 50-150 per liter and ghee in the name of desi cow ghee from Rs 600-Rs 2000.00 per Kgs. It is hight time for regulator to establish some norms of conformity through testing for the milk sold as A2 or organic. This initiative of market linkage direct to home is not bad provided the farmers are directly getting benefitted out of the whole process. The regulator may introduce some separate scheme for farmer registration to sell their milk along with farm registration. Such initiative would be able to churn out intermediaries with vested interest to be out of the game and it would protect customers against false claims by such people.
Last but not the least Economic times published an insightful story on feed and fodder status in India and highlighting the key challenges. A dairy vision report which we published in 2014 on Indian dairy industry vision 2030 has been quoted in the same.
Wishing you a purposeful reading of our enclosed 23rd Dairy Pulse edition. Please share your suggestion and views to make this newsletter more meaningful.
with warm regards

-- 
Kuldeep Sharma
Chief Thinking Officer
Suruchi Consultants (ISO 9001:2008 Company)
C-49 Sector-65
Noida 201307
+91-98 10 31 58 31
+91-120-4320845