CHAPTER – IV

DAIRY MARKETING
Marketing aspects of dairy sector: Indian Dairy Industry:

Dairy marketing is a key constraint to dairy development. The marketing

problems must be addressed if dairying is to realize its full potential to provide food and

stimulate broad-based agricultural and economic development. Dairy is a place where

handling of milk and milk products is done and technology refers to the application of

scientific knowledge for practical purpose. Dairy technology has been defined as that

branch of dairy science, which deals with the processing of milk and the manufacture of

milk products on an industrial scale, in developed dairying countries such as the USA.

The year 1850 is seen as the dividing line between from and factory–scale production.

Various factors contributed to this change in these countries viz., concentration of

population in cities where jobs were plentiful, rapid industrialization, improvement of

transportation facilities, development of machines etc., where the rural areas were

identified for milk production, the urban centers were selected for the location of milk

processing plants and product manufacturing factories. These plants and factories were

rapidly expanded and modernized with improved machinery and equipment to secure the

various advantages of large-scale production. Nearly all the milk in the USA before

1900 was delivered as raw (natural) milk. Once pasteurization was introduced, it

developed rapidly, mechanical refrigeration helped in the rapid development of the

factory system of market milk distribution.

In India, dairying has been practiced as a rural cottage industry over several past

years. Semi-commercial dairying started with the establishment of military dairy farms

and co-operative milk unions throughout the country towards the end of the nineteenth

century.

142
 The Indian Dairy Industry has made rapid progress since Independence. A large

number of modern milk plants and product factories have since been established. These

organized dairies have been successfully engaged in the routine commercial production

of pasteurized bottled milk and various Western and Indian dairy products. With modern

knowledge of the protection of milk during transportation, it become possible to locate

dairies where land was less expensive and crops could be grown more economically.

Milk marketing system in India is fairly complex. A number of different

marketing agents interact at various levels in carrying the milk and milk products from

producer to consumer. A comparative analysis of the producer‟s share in consumer‟s

rupee across different marketing channels shows that the producer gets maximum share

(82-100 per cent) when they directly sell to the consumer. However, direct sales are not

always feasible for small farmers as some of them are locked by the middlemen who

offer them credit for the purchase of inputs and animals. Sales to a marketing agents/

middleman are one of the common disposal mechanisms. At an aggregate, the producers

get lowest remuneration when they sell the milk to the cooperatives (50-75 per cent).

The price realized by farmers from informal sector was Rs 9.5 to Rs 10 per litre, where

as cooperatives paid between Rs 8.00 and 8.50. Further, the middlemen who bought

from them made instant cash payments whereas it took 12–15 days to realize payments

from the cooperative system.

India‟s dairy market is multi-layered, it‟s shaped like a pyramid with the base

made up of a vast market for low–cost milk. The bulk of the demand for milk is among

the poor in urban areas whose individual requirement is small, maybe a glassful for use

as whitener for their tea and coffee. Nevertheless, it adds up to sizable volume–millions

of liters per day. In the major cities there lies an immense growth potential for the

143
modern sector. According to one estimate, the packed milk segment would double in the

next five years, giving both strength and volume to the modern sector. The narrow tip at

the top is a small but affluent market for western type milk products. The effective milk

market is largely confined to urban areas, inhabited by over 25 per cent of the country‟s

population. Presently, the organized sector both cooperative and private and the

traditional sector cater to this market. The key elements of marketing strategy for 2000

AD are: Focus on strong brands and product mix expansion to include UHT milk,

cheese, ice creams and spreads. The changing marketing trends will see the shift from

generic products to the packaged quasi, regular and premium brands. The national

brands will gradually edge out the regional brands or reduce their presence.

Milk and Milk Products Marketing Channels–Pros and Cons

There are different pros and cons of Various Milk Marketing Channels which are

mentioned below.

The Strengths and Weakness of Various Marketing Channels

Channels Strengths Weaknesses

Co operative offer an assured permanent Relatively lower prices
market …Sometimes there are delays in
offer inputs, AI, feed, and payment.
extension advise farmers end up bearing the cost of
No limit to amount farmer any mismanagement in the
can supply cooperative societies
Farmers know their cash is
safe
Exert quality control over
milk
Farmer have sense of
ownership
Allow farmers to invest in
crop assets
Collection centers are
usually not too far from the
producers
Do not place any limits on

144
 the amount farmers can
supply
Bonus payment
Vendors / pay somewhat higher prices May disappear with farmers money
Hawkers / where competition exits. Not a reliable market
Middlemen prompt payment in cash No supply of inputs and services or
payment can be negotiated credit on inputs and services
as daily or monthly Arbitrary changes of prices without
Advance loans (but very prior knowledge
short-term) Collect milk No quality control of milk
form farmers doorstep
Provide only market outlet
in regions not well serviced
by the formal procurement
system

Hotels and slightly higher prices than
restaurants cooperatives Payment can
be negotiated as daily or
weekly a reliable market
cannot disappear
Neighbors Collect form farm
Flexible times for collection
Price is usually higher and
negotiable
Private Dairies prompt monthly payments
Give true weight
Bears cost of spoilage once
milk is received
Relatively better prices
where competition exists
No security the business can close
No input or service support
Cannot take all the milk
Not a reliable market
Cannot take payment or refuse to
pay
Not always reliable
Arbitrary changes in amounts they
buy and the price fixed with prior
warning to farmer
May place limits on the amounts
framers can supply thereby
excluding certain sections of milk
products.

The Indian marketing scenario has best been described as an engine of growth. It

is not easy to profile the consumer in India because of apparent confusions and

contradictions. The fact is that the richest segment of the country‟s population controls

46 per cent of the income, being 200 million in number. In urban India, over 90 per cent

of sales are still through the traditional trade. The poorest 200 million people, accounting

for 8 per cent of India‟s income, live on less than Rs 45 (US$1) per day.

145
Areas of Concern in the Dairy Industry:

a) Competitiveness cost of production, productivity of animals etc: The demand

of quality dairy products is rising and production is also increasing in many

developing countries. The countries which are expected to benefit most from any

increase in world demand for dairy products are those which have low cost of

production. Therefore, in order to increase the competitiveness of Indian dairy

industry, efforts should be made to reduce cost of production. Increasing

productivity of animals, better health care and breeding facilities and

management of dairy animals can reduce the cost of milk production. The

Government and dairy industry can play a vital role in this direction.

b) Production, processing and marketing infrastructure: If India has to emerge

as an exporting country, it is imperative that we should develop proper

production, processing and marketing infrastructure, which is capable of meeting

international quality requirements. As comprehensive strategy for producing

quality and safe dairy products should be formulated with suitable legal backup.

c) Focus on buffalo milk specialty: Dairy industry in India is also unique with

regard to availability of large proportion of buffalo milk. This, India can focus on

buffalo milk based specialty products, like Mozzarella cheese, tailored to meet

the needs of the target consumers.

d) Import of value–added products and export of lower value products: With

the trade liberalizations despite the attempts of Indian companies to develop their

product range , it could well be that in the future, more value-added products

will be imported and lower value products will be exported. The industry has to

prepare themselves to meet the challenges.

146
 e) Provisions of SPS and TBT: At the international level, we have to ensure that

provisions of SPS and TBT are based on application of sound scientific

principals and should become de-facto barriers to trade.

Dairy marketing in the developing countries:

In the traditional milk producing areas of Asia and Africa, dairy is an essential

component of small-scale mixed crop-livestock farming. Both small and large-scale

dairy farms have emerged, often with public sector initiative and investment. Although

dairy production is widespread throughout the developing world, productivity and

growth of output are low. Poor marketing linkages inefficient marketing system might

have accelerated imports. Hammond (1990) has shown that marketing inefficiencies for

a net importer of a finished or semi-finished consumer product such as dairy (powdered

milk, butter, cheese, etc.) may lead to an increase in import. Domestic consumers,

particularly in the urban areas, are unaffected by marketing inefficiencies because

increase in imports keep retail prices low or unaffected. All the costs of marketing

inefficiency are borne by domestic producers in the form of reduced farm prices and

reduced production.

In many developing countries, over 90 per cent of livestock is managed by small

holders living in rural communities with inadequate marketing links to distant urban

markets. In some instances large-scale dairy enterprise have been established with public

sector initiative and investment to supply dairy products to urban centers and to

compensate for the lack of marketing channels from more remote production areas. In

many countries, small-scale urban and pert-urban dairy production has developed,

responding to the urban market demand and profiting from the lack of links between the

remote rural producers and the urban consumers. Weaknesses in physical and marketing

147
links between rural producers and urban processors and consumers are among the major

constraints to dairy development in the developing countries like India. It is important to

be aware of and understand how such constraints can be addressed in order to devise

mechanisms that can transfer growing urban demand into increased livestock production.

Inadequate infrastructure and inefficient marketing may lead to increased transactions

costs and / or market failure.

Specific features of dairy in relation to marketing:

The dairy industry has a number of specific features which distinguish it from the

other sectors of agriculture and have particular implications for marketing. First, milk

consists of over 85 per cent water, and produced daily. Consequently, high costs of

transportation are cured per unit of out put marketed. Also, milk being highly perishable,

it needs to be used within a short period or processed and transformed into a more stable,

longer-storable form. The quality of milk depends on farm management practices, and

milk is potentially subject to adulteration, so strict and compernchesive quality

regulations may be necessary when marketing involves more than direct delivery by

producers to consumers. Second, the vast majority of the dairy farmers are small-scale

producers, who produce milk as a source of regular cash income. Dairy production is a

labour–intensive enterprise, and dairy marketing activities often provide substantial

potential. Third, milk can be used to make a wide range of high quality palatable and

nutritious products, which often imply substantial value added over the cost of the raw

material. When production and consumption points are far apart and demand increase

rapidly, processing of diary products becomes very important. Fourth, as a consequence

of the above features of milk and the market vulnerability of its producers, cooperatives

may assume a strong position in milk processing.

148
 Market-oriented dairy is considered to have a good potential for contribution to the

process of economic development in the developing countries in several ways: through

the increased domestic production of dairy products to meet increased demand and

reduce dependence on imports; through increased employment, income generation and

food security among the poor. Dairy marketing essentially includes processing as a

function that creates form utility of products. The function involves big-physical

processes to convert rawmilk into various products, to be scrupulous, this is the domain

of dairy technology. In the CF, the processing subsystem deals with the dairy

technological aspects and options for dairy development. The existing processing

functions that create form utility and involves costs and returns, are treated as marketing

functions and are included in the marketing subsystem157.

Dairy in Andhra Pradesh:

Animal Husbandry is one of the rapidly expanding sectors playing a significant

role in the rural economy by providing gainful employment to a large number of small /

marginal farmers and agricultural labourers and raising their economic status. Andhra

Pradesh state has the distinction of much diversified livestock resources in seven agro

climate zones with different production systems. Livestock farming is one of the most

sustainable and dependable livelihoods as an alternative to their dependable resources in

rural areas, especially for small, marginal farmers and agricultural labors that hold 70 per

cent of the livestock resources and 20 per cent of land holdings158.

Two major channels for diary marketing are organized channel which has mostly

been the cooperative and the traditional channel where traders procure milk from rural

areas and sell in urban areas. Andhra Pradesh state in South India is a leader in dairy

157
. http://www.fao.org/wairdocs/ILRI/x5467E/x5467e04.html.
158
.Planning Commission, Economic survey of Andhra Pradesh- Hyderabad,2005-06.

149
activity and has experimented with various new models for dairy. It was the first state to

introduce the MACS Act. Also, private sector in this state is very active. The Dairy is

Head Quartered in Andhra Pradesh. The company was initiated in 1992 after MMPO

permitted private diaries and is now traded on the stock exchange. Daily milk collection

is about 7 lakh liters per day. Collects milk from 1, 50,000 households, and 3500 villages

in three states, through the major operations are in AP.

Andhra Pradesh occupies 4th position in milk production in India in the year

2001-02 and second position in the year 2010-11 with an annual milk production level

of 69.6 lacks MT. The growth rate of milk production is 6.4 per cent per annum as

against the national average of 4.5 per cent. Out of the total number of dairy farmers in

the state, the number of farmers affiliated to Dairy Cooperatives is only 10 lakh. The

total numbers of poor engaged in dairy activities are around 30 lakh. Of the total milk

produced in the state, 83 per cent is procured by unorganized sector (larger proportion by

Dud hawalas) and rest 17 per cent procured by organized sector. Among organized

sector, cooperatives procure around 8 per cent and private dairies procure around 9 per

cent of the milk produced. Andhra Pradesh Dairy Development Cooperative Federation

(APDDCF) an enterprise of farmers for dairy development, was established in 1981 on

AMUL pattern, with the objective of procuring milk from producers at remunerative

price, providing technical input to increase milk production, creating infrastructure, price

for processing milk, manufacturing of dairy products, market wholesale and quality milk

and milk products to consumers at affordable price.

The state of Andhra Pradesh has an excellent potential for milk production with

progressive formers who are more receptive to the new technology and scientific

practices prior to 1960. Dairy development was not given importance until 1960, it was

150
only in 1961, a separate milk commissioner was appointed to formulate dairy

development programme in the state. Planning for organized dairy industry in Andhra

Pradesh was conceived in 1959 and a pilot milk project. The animal husbandry expended

steadily in 1964, the department, UNICEF gifted dairy equipment of value Rs. 1 crore to

Hyderabad and Vijayawada with the main objective of linking and supply surplus milk

producing area to the consuming area.

The dairy development activities were carried out by the Government through

dairy development department. Though, the dairy industry started as a service

organization and recognized as development organization, in view of the nature of the

business it was converted in the commercial organization. Thus, Andhra Pradesh Dairy

Development cooperation was formed on April/2, 1974 as state government undertaking.

Efforts to commission the milk product factory, Vijayawada and the chilling

centers in Krishna District were taken up. The work regarding co-operative dairies at

Nellore, Chittoor, and Kurnool were also completed. These measures are needed for

considerable technical man-power that was not available. In our state, we did not name

dairy technology center and for relevant training naturally we have to look for

institutions like National Dairy Research Institute of Kurmool, Bangalore and

Allahabad. While these dairies came in to operation one after another, the need for

technical and administrative men was keenly felt. All efforts were made to secure

experienced people on deputation from other departments for various posts.

As per the policy of the Government of Andhra Pradesh development of

dairying on co-operative lines on Anand pattern, as being done throughout the country

the “Andhra Pradesh Dairy Development Cooperative Federation (APDDCF) limited

151
was registered on 05-05-1981 to implement the operation flood II programme in the

state159.

Table – 4.1: Production of Milk, Eggs, and Meat in Andhra Pradesh during 1980-
81 to 2009-10.

Sl.No Year Milk(„000 Eggs (Million Meat

m.TS) Nos.) („000M.Ts.)
1 1980-81 2010 1741 70
2 1981-82 2127 2036 81
3 1982-83 2303 2168 78
4 1983-84 2375 2370 79
5 1984-85 2668 3072 86
6 1985-86 2781 3136 90
7 1986-87 2783 3144 96
8 1987-88 2807 3241 90
9 1988-89 2814 3427 90
10 1989-90 3030 3710 92
11 1990-91 3010 3829 90
12 1991-92 2943 3812 99
13 1992-93 3103 3775 96
14 1993-94 3766 4435 99
15 1994-95 4221 5430 102
16 1995-96 4261 6027 98
17 1996-97 4470 5660 102
18 1997-98 4474 5752 106
19 1998-99 4860 5931 117
20 1999-2K 5122 11200* 268**
21 2000-01 5521 11800* 291**
22 2001-02 5814 13310* 333**
23 2002-03 6583 14862* 398**
24 2003-04 6959 14993* 447**
25 2004-05 7257 15804* 451**
26 2005-06 7624 __ ___
27 2006-07 8259 __ __
28 2007-08 8574 __ __
29 2008-09 9314 __ __
30 2009-10 E 9436 __ __
*Eggs of both commercial and birds **including chicken meat

Source: Animal Husbandry Department, Government of Andhra Pradesh.

159
.Five Year plan 1978-83, Andhra Pradesh, Draft on Livestock, Agriculture Department of
A.P,Hyderabad,p.88,1978-83.

152
 Andhra Pradesh state in south India is a leader in dairy activity and has

experimented with various new marketing models for dairy. It was the first state to

introduce the MACS Act, besides, the private sector in this state is also very active. Of

the three chains chosen for analysis, two are in Andhra Pradesh and the third is a state

co-operative from which is lagging in the region. First is large private sector dairy and

the second is MACS society in AP, instituted in 1998.

The above table shows that the milk production has increased from 2010 million

tones in 1980-81 to 9436 million tones in 2009-10. The eggs production has increased

from 1741 million in 1980-81 to 5931 million in 1998-99 and from 11,200 million in

1999-2000 to 15,804 million in 2004-05 in a rapid phase. As compared to milk and eggs

production the meat production wrested at a show pase up to 1998-99 later it packed up

rapidly.

Marketing Model of Private Dairy:

The private dairy company procures milk through agents in the villages. Thus,

how much milk an agent can procure depends on the personal relations of the agents

with the villagers. Also, several villages have more than one agent, depending on the

social structure as well. The company is not directly involved with the farmers. The

price that he pays to the farmers is slightly above co-operative price in the state. Agent

quite often provides loans to farmers to maintain loyality. Many times, the agent in the

village is competing with agents of other private companies for milk procurement.

Collection areas depend on milk density and areas in which district co-operative is less

active and access to markets to make the logistics efficient 160.

160
.Improved Market Access and small holder Dairy Farmer Participation for Sustainable Dairy
Development, Session Paper: Emerging Changes in the Indian Dairy Industry,Meeta

153
MACS Society Model in Andhra Pradesh:

Dairy activities started in the district in 1971. This district union has now

delinkeded with State Federation and started MACS society in 1998, following the

inception of MACS Act, 1995. The union is currently collecting milk from 650 villages

in the districts. Milk collection is 60,000 liters per day, likely to go up to 1, 00,000 in the

ensuring 2-3 years.

As per MACS norms, this is a 2 tier operation at the village level and district

level. Village level is managed by village society, district level by BOD. Both of these

societies are run by members elected every year. The village level society itself is

registered as separate MACS society and has the freedom to use its own profits 10 per

cent of sales allowed at the village level to earn higher profits.

State co-operative:

The state co-operative is an apex level Dairy Co-operative Society registered

under Cooperative Society Act–1962. Currently, milk procurement is from 12 district

unions. About 3, 22,000 liters per day is collected from 3,800 village societies and from

2, 24,000 farmers. Currently, there is not much competition with private sector in the

area.

Comparative Analysis of the three Chains–Input Supply:

In Private Dairy, three is no provision for input supply except for loans given to

farmers sometimes. MACS Society provides breeding and health services through tie up

with NGO / state dept. They manufacture quality feed and supply to farmers at

subsidized rates. They are also involved in organizing thrift and credit co-operative for

credit for animal purchase. Finally, medicines available at cost / farmer meeting for

Punjabi,UNFAO,New Delhi, Asia-pacific Small holder Dairy strategy Workshop,chaing Mai, Thaland,25-
29 February 2008.

154
extension. In the State Co-operatives, feed available at subsidized rate through village

society while breeding and health services through state dept. There is no facility for

loans, however, medicines are available at cost, though adequate supply is a problem.

Comparative Analysis of the three Chain–Productions:

At the farmer level, there is not much difference between the three models,

because there is not much extension activities carried out by any of the three agencies to

significantly affect production practices. It is possible that in the MACS society because

of extension and availability of feed many one using higher feed as compared to crop

residue which is not very nutritious.

Comparative Analysis of the three Chain- Milk Purchase from Farmer:

In the Private Dairy, milk purchase is done through the agent, who decides what

price he will give to the farmer. This is usually decided based on competition with

agents of other companies and declare co-operative price. Testing is done in very few

cases that are also not transparent. This has implications for farmer confidence in the

prices received. The MACS society, which is democratic functioning one has the

freedom to decide the price and does not have to follow the co-operative price. The

prices received declared by the Union which is higher than co-operative pricing. Testing

of milk is done through electronic milk-testers. In the State co-operatives, collection is

done through village society. The society is run by the president who wields a lot of

power. Farmer prices are fixed for cow and buffalo milk. Strong influential people in

community get better prices.

Comparative Analysis of the three Chains–Marketing:

The Private Dairy processing plant is an ISO certified unit meeting all quality

requirements. They have a variety of quality products catering to children as well as

155
younger generation (yoghurt, flavored milk). The company is catering mostly to the

urban metro market. The MACS society has good quality products, but no certification

as yet and the products are largely traditional. They are selling milk to urban

consumption areas and tapping the rural markets as well, through village societies (small

packets, 250 ml). At the co-operatives, quality of milk was an issue, through has

improved in the recent years. The co-operatives are also largely selling traditional

products, mostly in the urban market.

Comparative Analysis of three Value Chain–Growths:

The Private Dairy is not involved in dairy development activity and is only

focusing on procurement. Faced with increasing competition, they will have newer areas

for expansion. In future MACS becomes strong in these areas, procurement will be

affected. The MACS society involvement in dairy development activity will help them

to grow and increase milk procurement in this area. They are geared to face competition

from private sector because of community tie up at the village level. Finally, the Co-

operative, because of low involvement of community will make it an easy target for

private sector entry. Further, lack of variety and quality of products will make it difficult

for them to compete with private sector161.

Government Policy towards Dairy Development and Marketing in India:

Despite, the importance that dairying has in the Indian economy, especially for

the livelihoods of resource-poor farmers and landless laborers, government policy

towards this sector has suffered from the lack of a clear and strong focus. Agriculture

including animal husbandry is a state subject under the Indian Constitution, and

responsibility for development of the sector lies with the state government, with the

161
.Idbi

156
exception of specific tasks assigned to the central government. The first attempt to

conceive a set of polices for livestock development in India was the Royal Commission

on Agriculture (1928). The commission recognized the role of draft animals, the

problem of excessive numbers of cattle, and the scarcity of feed and fodder in the Indian

agriculture. In the post independence period, the shaping of government policy was

greatly influenced by the colonial legacy. Government policies can be divided into three

distinct phases (pre-Operation Flood, post-Operation Flood, and post-reform) and areas

(animal husbandry policy, policy on dairy processing and marketing and policy towards

cooperatives).

The main thrust areas of the Department of Animal Husbandry and Dairying are:

Development of requisite infrastructure in States / UTs improving productivity;

Preservation and protection of livestock through provision of health care and

nutrition;

Strengthening of Central livestock farms (cattle, sheep and poultry) for

development of superior germ plasm for distribution to states and;

Seven Cattle Breeding Farms in India under the Government of India.

The Govt. of India had also promulgated the Milk and Milk Product Order

(MMPO) 1992 on June 9, 1992 under the provision of Essential commodity Act, 1955,

consequent to de-licensing of the Dairy sector in 1991. As per the provisions of this

order, any person / dairy plant handling more than 10,000 liters per day of milk or 500

MT of milk solids per annum needs to be registered with the registering authority

appointed by the Central Government. The main objective of the order is to maintain and

increase in supply of liquid milk of desired quality in the interests of the general public

157
and also for regulating the production, processing and distribution of milk and milk

products.

Structural Changes in Milk Production, Procurement and Marketing:

With the growth in demand for production, the protectionist polices of the 1970s

and 1980s, followed by the economic policies of trade liberalization during the 1990s,

the Indian dairy sector witnessed some marginal structural changes in milk production,

processing and marketing.

Among milk cattle, the population of low-yielding nondescript milk cattle

showed a considerable decline, which the population of crossbreed milk cattle exhibited

a sharp increase, indicating farmers performance for crossbreds for milk production. The

marked shift in the sex composition of both the breeds of cattle in favour of females

highlighted the declining importance of animals and the increased importance given to

milk production. By and large, buffaloes continued to the predominant milk animals

contributing to milk production in India. The northern and western and southern parts

are predominantly cow-milk-producing regions. In the southern region and parts of

northern India, the crossbreed population is on steady rise, contributing to milk

production.

With regard to management practices, owing to diminishing common property

resources and pastures, the grazing of animals is on the decline and stall-feeding is on

the rise. With regard to reproductive management, natural services are declining and

artificial insemination is becoming popular in cattle and buffaloes. Along with rural

dairy farming, urban and semi-urban dairy farming is being taken up to cater to urban

milk demand through the informal market. The urban and semi-urban dairy farming

involves rearing of crossbred cows and high-yielding buffaloes maintained on purchased

158
feeds and fodders install-fed conditions, and following most of the modern dairy farming

practices. This sub-sector has been controlling milk production in selected areas of the

country. But growing environmental concerns and consciousness might impose checks

on their extension and intensification and need to be investigated thoroughly.

In the formal sector, the industrial structure that emerged as a result of Operation

Flood involved and organized sector consisting of dairy cooperatives, government milk

schemes, and formal private processors. The informal sector, largely untouched,

continued to be composed of small traders (dudhias, local halwais), urban milk

producers, and intra-village trade directly from producers to consumers. Although dairy

cooperatives comprise the single largest formal organization in terms of market share,

they are engaged in active competition with the informal sector in small towns and semi-

urban villages and with some private companies in urban milk centers.

The share of the organized sector in total milk procurement has increased over a

period of time and is further expected to rise in the new economic environment of

liberalization and globalization. The repeal of industrial licensing under new economic

policy provided opportunities for private entrepreneurs and multinational companies to

invest in new processing capacities. The share of organized sector in total milk

procurement has increased from 3.68 per cent in 1961 to about 10-12 per cent in the

mid- 1990s and further to 30 per cent by 2000. These estimates are not very reliable, due

to poor information for the unorganized sector and those plants below 10,000 liters per

day capacity. Within the organized sector, the share of cooperative is higher than private

companies.

The Anand pattern multi-tier cooperatives have strong backward linkages with

the farmers and collect milk from rural producers through village dairy cooperative

159
societies. The majority of private processors depend on contractors (through informal or

formal contracts) and traders to procure milk from farmers the private sector has the

advantage of flexibility in pricing and in business policy decisions.

160
161
Marketing of Milk and Milk Products:

Marketing of milk is done by the dahlias or middlemen who usually sell milk at

the customer‟s doorsteps. The total milk output is consumed partly as flowed milk and

the rest for the preparation of cream. The price of milk is Rs 12 per litre, while the price

of cream is Rs. 80.00 per kg. Both these prices are producers‟ prices but due to the milk

manship price go higher when it reaches the customers. Due to the middle man, the

economy of milk market is hampered from both the producer‟s and customer‟s points of

view. Those at present 15 cooperative societies have registered under old traditional

method, the problem of proper distribution of milk and milk products are nonetheless

quite in the planning area162.

Traditional Milk Foods in India:

From the dawn of civilization, man has been using milk as a single food and in

the form of various processed products as an integral part of his daily diet. India

produces about 78 million tonnes of milk foods such as ghee, curd, butter, khoa, milk

powder, cheese 2 per cent were other milk based dairy products. There are more than

146 traditional milk base products produced. The productions of all the traditional

products fall in one of the basic steps of heat coagulation, acid coagulation, condensing

or fermentation163.

Marketing and Sales Promotions:

Dairy marketing organization can give adequate importance on reduction of

wastages, costs reduction and give reasonable, higher prices to producers of milk and

milk products while marketing their milk and milk products. Dairy co-operatives can

162
.Chattopadhyay,B.C., “Animal Husbandry, Dairy Development and Fishery” Rural Development
Planning in India , S.Chand & company Ltd. Ramnagar, New Delhi – 110055, first Published 1985,p.141.
163
. Dr. R. Sarvanakumar and Dr. G. Manimegalai., “Traditional Milk foods in India”, Kisan world,
July ‟03 vol. 30. No.7 p.20.

162
strengthen linking operatives of marketing process of milk and milk products with

customer cooperatives, marketing agencies and even syndronize their operations with

credit co-operatives. In this way, they can ensure success in the timely supply of milk

and milk products to customers164.

The Milk Marketing Channel:

A study of the milk marketing systems in vague have shown that there are at least 8

different marketing channels as shown below:

Milk Marketing Channels Number of intermediaries

Producer-customer 0
Producer-milk hawker-customer 1
Producer-processor-customer 1
Producer-processor- retailer-customer 2
Producer-dairy co-operative -processor- retailer 3
customer
Producer-milk transporter-processor - retailer-customer 3
Producer-milk trader-processor-retailer-customer 3
Producer-dairy coop - milk transporter-processor- 4
retailer-customer
The number of intermediaries involved will have a bearing on both producer and

customer milk prices. The shorter the channel the more likely that the customer prices

will be low and the producer will get a higher return.

From the customer point of view, the shorter the marketing chain, the more likely

is the retail price going to be low and affordable. Following the liberalization of the

dairy industry, direct sales of raw milk from producers to customers (channel 1) or

164
. Dr. Samwel Kakuko lopoyetum and Mr. P. Selvamani “Dairying co-operative Marketing in new
Economic Environment” Kisan world, p: 29-30, vol.32.No.7.

163
through hawkers (channel 2) has been on the increase despite the public health risks

associated with the consumption of untreated milk and milk products. Milk producers

may not necessarily benefit from a short marketing chain i.e. milk processors in channels

5-6 may be paying farmers the same price as hawkers. However, farmers sometimes

prefer selling milk to hawkers because other factors such as prompt payments and

inaccessibility to formal market outlets such as producer co-operatives or lack of near by

milk processing factory. The biggest disadvantage of direct milk sales to customers by

hawkers is the total lack of quality control and more frequency rate of adulteration of

milk with (dirty) water, which is illegal. An efficient milk marketing chain is one which

enables farmers to receive at least 50per cent of the retail price of milk.

Marketing and Pricing of Milk and Milk Products:

The price of a product in the market is an important factor influencing customer

demand. Hence to be marketable, a dairy product must be competitively priced. This

implies that the costs involved in raw material procurement, processing, packaging,

storage, marketing and distribution must be kept as low as possible. Generally the price

of a dairy product will involve the following costs:

a. Cost of raw milk

b. Cost of raw milk collection and transportation

c. Cost of processing

d. Cost of packaging

e. Cost of marketing and distribution

f. Taxes and tariffs

164
 g. Profit margins at each stage of the marketing channel (Collection, Processing and

marketing margins)

In order to arrive at a realistic costing of a product, all those elements involved at each

stage must be carefully calculated on a unit basis165.

Conclusion:

In dairy industry in Andhra, modern private sector diary units have come in

existence besides the co-operatives and the government runs dairy plants. The milk and

dairy marketing system India is fairly complex. A number of different marketing agents

interact at various levels in carrying the milk and milk products from producer to

consumers. Thus India dairy market is much layered which includes the co-operatives

the Anand models the hotels and restaurant, the vendors and middle man and also the

private dairy units. Inspire of the importance of the dairying in the Indian economy, the

government policy towards dairy development and marketing in India and also state of

Andhra Pradesh is not clear and objective oriented.

165
. www.fao.org/ag/AGA/publication/mpguide/mpguide6.htm

165