Evolving trends in emerging markets are not always driven by macro-economic policies or demographics. Sometimes, something as simple as a fridge can change millions of people’s lives and re-define an entire industry.
This is exactly what’s happening in India’s milk market. The world’s second most-populous nation is also the world’s largest market for milk, yet less than 20 per cent of households own a fridge. The popularity of the white stuff in India, combined with the proliferation of refrigerators from a very low base, are perfect conditions for a milk boom, driving by the unique consumer situation in this market.
These trends are not always easy to spot by doing desk research or just analysing other markets. But based on our field research, we forecast huge changes for the dairy industry, suppliers and even economic efficiency, as new consumer trends in India accelerate.
Today, the Indian market for milk and dairy production is dominated by small farmers, who typically own just two or three cows. Yields are low by international standards, distribution is limited and milk products are unsophisticated. But India loves milk. The country already consumes more than the US or China – in absolute terms. Per capita consumption is less than a third of that in the US, though more than double that in China – and the appetite continues to grow as the population gets richer. While the consumption of rice and wheat hardly increases with wealth, demand for dairy products could grow by 10 or 20 times, according to our analysis.
Field research shows that the key desirable household product for increasingly wealthy consumers is a fridge. In India’s warm climate, low ownership of refrigerators has curbed demand for perishable dairy products. But not for long. Our research suggests that within five years, half of all Indian households may have a fridge, on a par with the Philippines.
The impact on lifestyles would be dramatic. With a fridge, a working Indian mother who wakes up at four o’clock to feed her family before heading to her job could shop and cook much more efficiently. In developed countries, where people haven’t lived without refrigeration for decades, we can’t even begin to fathom how life-changing this simple household appliance would be. It would allow a typical woman to save two or three hours a day having to prepare a fresh meal for her family, which would give her the employment flexibility to work more hours in a higher paying industry. So the proliferation of refrigerators can lead to efficiency savings and help to further improve standards of living for large number of people. It will also improve production and distribution processes, as it will become much easier to transport and store dairy products, so they don’t have to be sold only locally any more.
Local research shows that as India gets richer a fridge is at the top of household shopping lists. This would also lead to a sea change in the labour intensive and inefficient dairy market – as well as consumer spending habits – opening up compelling opportunities for dairy companies, especially of premium products, and for investors who are thirsty to tap into the prevailing consumer trends in this country.
Tassos Stassopoulos is consumer sector head at AllianceBernstein
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