Getting fortified in India

The European dairy industry may be able to increase its sales in India’s dairy market, as central Indian government’s plans to fortify milk and other dairy products with vitamins could boost demand for high quality products from abroad.

“The ongoing debate over the issue has increased awareness about fortified food,” Naresh Kumar Bhanot, secretary of the Indian Dairy Association (IDA) told Dairy Industries International. “Foreign dairy companies with appropriate products could exploit the market.”

The Food Safety and Standards Authority of India (FSSAI) has drafted new fortification standards to eradicate a vitamin deficiency found in the large part of India’s 1.2 billion population, and the government is considering making these standards mandatory. Kuldeep Sharma, founder of Suruchi Consultants in New Delhi, who has been working with the FSSAI on dairy projects, says the move could affect the pricing of premium range products sold by major processed food manufacturers. The FSSAI is drafting new regulations that would insisting that primary food products “are fortified with Vitamin A and D,” he notes.

Room for imports

India’s dairy producers are considering how to respond, but given its domestic industry does not currently meet local demand, a role for European and other foreign exporters may emerge.

Alexander Anton, secretary general of the European Dairy Association, notes India’s high and still increasing consumption of dairy products, especially of butterfat, may not be satisfied by local production, especially of higher value lines.

And while Indian imports of dairy products are just 0.1% of national consumption, significant sales are already being made by European Union exporters to India, he says. For instance, in 2014, the EU exported $8.29 million’s (€7.8m) worth of cheese and curd to India, up 24% on the previous year, according to international trade data. Also, European exports of butter, butter oil, lactose and lactose syrup to India has increased in last few years. The EU in 2014 exported $565,222 (€530,000) worth of butter and $28.13 million (€26.4m) of lactose syrup to India. According to Anton, in 2015 European Union’s export of lactose syrup to India rose by 36%, year-on-year.

Barriers to trade

Of course, even if mandatory fortification is introduced and opens doors for foreign exporters, securing sales in India will not be plain sailing.

“There is a strong political will in India to keep the Indian dairy markets rather closed,” Anton notes. High tariffs along with additional duties above the basic duty are used to limit imports, he says, citing the widespread use of countervailing duty, excise duty, education fees (for funding schooling), clearing charges paid to clearing and forwarding agents, special additional duty and landing charges. European manufacturers might also encounter difficulties in formulation given that India’s food and food additive standards differ from the global standards recommended by world food standards body Codex Alimentarius.

Moreover, major dairy players in India are preparing for fortification. During a National Summit on Fortification of Food, held in New Delhi in October 2016, a joint declaration issued by the FSSAI, food industry bodies and research institutions said that they all “commit to utilise efficient technologies for promoting safe and nutritious fortified foods and generate awareness regarding its benefits amongst consumers.”

Furthermore, during the summit, the main milk supplier in the capital New Delhi, Mother Dairy, announced that it had already started fortifying all the liquid milk it sells through its 800 dispensing machines.

Promoting fortification

Anita Makhijani, deputy director at the FSSAI, stresses to DII that her agency wants to promote fortification within a wide range of staple foods, including milk, oil, salt, rice and wheat flour, which can easily deliver the required amount of nutrition. “They would be fortified with either of the vitamins A or D, or with combinations,” she says.

Makhijani explains that FSSAI standards, which have already been released for companies choosing to fortify their foods, were practical for Indian companies. “The [fortification] levels have been fixed to provide [only] one third of the recommended dietary allowances of Vitamin A and D and it doesn’t cause any kind of toxicity,” she says. “Milk fortification provisions are already present in 27 different countries.”

But the agency is facing some push back from manufacturers, especially over mandatory fortification, with Gujarat-based Amul, the world’s largest producer of liquid milk with total sales of $3.38 billion in the financial year ending March 2016, opposing even the voluntary guidance, arguing that synthetic vitamins are not absorbed by the body.

“Synthetic vitamins’ physiological functions in the body are questionable,” Rupinder Singh Sodhi, managing director of Gujarat Cooperative Milk Marketing Federation, which owns the Amul brand, says. “They may get accumulated in the body and may lead to toxicity.”

Amul has found support from India’s fastest growing food and cosmetics firm  Patanjali Ayurveda, which also manufactures ghee (clarified butter) and milk power. “We should avoid synthetic materials,” says its managing director Acharya Balkrishna. “In the short term they might be beneficial but eventually it would be harmful in some respect.”

Moreover, sources close to the FSSAI have told DII that its scientific panel is now examining Amul’s claims on dairy fortification benefits.

Premium price

However, Amul and its allies do seem to be in a minority on fortification, and if the government agreed to make them mandatory, the pricing of premium range products sold by major companies in India could be depressed, as it would be more difficult to justify a higher price because of their fortification.

“Several companies were trying to use fortification as a differentiating tool and charge a premium price for them,” says Sharma, citing a recently launched ‘a+’ range of products by Nestlé. A general insistence on fortification would undercut such premium food marketing, he says.

Too bad, because fortification costs are negligible, says Ashwani Kumar Aggarwal, executive director at Haryana-based Modern Dairies, which supplies 200,000 litres of unfortified milk in plastic pouches for Mother Dairy every day. Furthermore, “Vitamins come as a powered form and does not impart any taste or flavour to the products,” he notes.


Irrespective of the adoption or rejection of mandatory fortification, in the next five years total packaged milk sold in India should double and more manufacturing capacity for low volume and high value products will be needed, Sharma says.

Cheese, milk drinks and yogurt have good potential in the Indian market, says Aggarwal, who supports the fortification initiative. “Consumers are maturing and if they get products they’re interested in with added value, then the price is not the constraint,” he states.

So how can European and other foreign producers benefit? One way would be establishing local production hubs, able to tap India’s huge milk supplies. According to India’s ministry of agriculture and farmers’ welfare, in the financial year ending March 2016, India produced 155.5 million tonnes of milk, with the US Department of Agriculture estimating production will increase to 160 million tonnes in 2017.

And the quickest way to do this would be making equity investments in established Indian companies, Sharma says, who cites difficulties in creating milk collection systems from small farmers and engaging third party collectors, while establishing an in-house “5,000-animal farm might take five to seven years of down the line planning.”

The IDA’s Bhanot names Mumbai-based Parag Milk Foods as the kind of company that could be attractive to foreign players. Sharma predicts that $1-1.5 billion in overseas money could easily be invested in the Indian dairy industry, predicting foreign companies would only be interested in dairies worth more than $150 million (€141m).

Some smaller Indian companies wooing foreign capital have already started expanding their product range to boost their net worth, Sharma notes.

Investments may also become more practical this year, with the planned adoption of a national Goods and Services Tax (GST) regime in April rationalising trading, replacing a hotchpotch of local sales taxes. Sharma concludes, “It would bring higher levels of transparency in the business and make the whole dairy sector more attractive to the new investors.”

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