May 22, 2021
India’s cheese market is a young business if compared by international standards but it’s developing well. And International dairy companies can find an investable market in India that offers solid growth in sales of cheese market – nonetheless domestic players are building substantial businesses and may benefit from certain advantages.
According to India-based market researcher IMARC, the cheese retail sales are predicted to reach US$1.7bn by 2024. The market shows an increase 25% annually from a base of $430m in 2018.
This is still an immature market, with sales lacking diversity in terms of products and with a the significant proportion being commanded by processed cheddar-style cheese and mozzarella-style options.
There is plenty of room for growth. The overall penetration of cheese among the Indian public is only about 5%, whereas in bigger cities it may be 15-20%.
Dairy giant Amul’s share of retail sales of packaged cheese in India is 40-45%, while 34%, is held by publicly-listed Parag Milk Foods’ Go Cheese brand of processed cheese in blocks, slices and spreads is the second-largest player by market share. Strong sales OF Parag is seeing of its Go Cheese Green Chutney Slices, a spice-imbued cheese blend popular for making sandwiches, and also its Go Pizza Cheese, mozzarella and cheddar cheese offered as a pizza topping. As well as selling these cheeses in a solid block packing of 200g, 400g, and 1 kg directly to consumers, Parag also supplies pizza cheese to Pizza Hut and Dominoes’ and cheese slices to McDonald’s.
The potential for growth in India is helped by the fact that cheese making is not new to India as there is a tradition of adding cheese to traditional Indian foods such as dosa, uttapam and parathas and this has encouraged the growing popularity of consuming cheese in international products such as pizzas, burgers, sandwiches and tacos.
Manufacturers are introducing a number of flavoured cheese products, including pepper, garlic, red chili flakes, and oregano pickle. One area where sales are still low, however, is the consumption of cheese as a stand-alone product, which is regarded as unusual and an elite choice. While In western cultures, people sometimes eat cheese for health reasons.
A cultural factor at play is cooked food is generally part of every meal in India, so selling cheese as an ingredient for home-cooked dishes rather than as a standalone chilled product is easier. One positive cultural facet for cheese producers, however, is the proportion of Indians who are vegetarian. Various surveys, including the last census, see the proportion of the population that is vegetarian at 30%. International players eyeing the market must remember Indian cheese is usually made of mixed sources of milk, including buffalos as well as cows.
The proportion of buffalo used in locally-produced cheese stands at around 58%, on average. Such an ingredient make-up gives Indian cheese a different taste, colour, and texture to cheese made in other countries.
Another difference, which could be a further potential hurdle for international produce, Indian producers use vegetarian rennet whereas all over the world they are using rennet out of the calf intestine.Another smaller Indian company offering cheese with significant buffalo milk content is Vallombrosa Cheese. The Bengaluru-based business has been in operation for the last 60 years and makes ten varieties of cheese, including Feta- and Parmesan-style products, with major hotels a key market until now. Vallombrosa runs a WhatsApp group where the company shares new recipes for cheese dishes to promote sales.
Innovation is important given profit margins can be tight in India’s cheese sector: usually the distribution, branding and advertising cost for cheese sales is about 30% of the selling price in India.
Rajorhia, president of the Indian Dairy Association explains. “Due to this and the high ripening cost, international cheese is much costlier than paneer and another problem is the cost of production. India is the largest manufacturer of milk, has the largest population of cattle, but depleted efficiency.
Productivity is low, economies of scale are not there and therefore our milk and other products are costly. This is especially true for cheese, with the higher cost of production in comparison to other dairy products (such as milk and ghee) and this presents a major headwind in expanding the market.
One drawback is that cheese has an entry barrier as it requires a much bigger investment than other dairy products. “Setting up a dairy to make curd and paneer with daily 300,000 litres milk processing capacity might cost $5m, but a cheese plant of this capacity won’t cost less than $28m.
Various elements add to the cost of cheese production in India, like a slicing-cum-packing machine for a 500 kg per hour line would cost about $4m and to get the fractionates out of milk [to control cheese texture] is ever costlier. However, with sales growing, investments in cheese manufacturing plants are expected to increase.
India’s government is also helping mozzarella has been added to a list of seven food products where manufacturers can apply for central government grants to boost production investment from INR 109bn (US$1.48bn) budget allocated over the next five years.
The support comes under the PLI-Production Linked Incentive Scheme for Food Processing Industry to “make Indian manufacturers globally competitive, attract investment…ensure efficiencies; create economies of scale.
Amul announced an INR2bn investment plan to manufacture mozzarella cheese from buffalo milk for exports, though the details have not yet been made public. For domestic manufacturers, it may be a good time to build a local brand in India. The share of the market captured by imports has been limited by high 30% import duties. This has been a longstanding contentious issue in the European Union-India trade negotiations, for instance, and this protection may be dropped for concessions enabling access to EU market.