If international dairy companies wanted to look for a national market segment growing rapidly and offering solid growth in sales, they might be attracted to India’s cheese market – but domestic players are building sizeable businesses and may benefit from certain advantages.
Retail sales are projected to reach US$1.7bn by 2024, according to India-based market researcher IMARC, being predicted to increase 25% annually from a base of $430m in 2018.
India’s cheese market is still immature, with sales lacking diversity in terms of products and with a significant proportion being commanded by processed cheddar-style cheese and mozzarella-style options, Rupinder Singh Sodhi, managing director of Indian dairy giant Gujarat Cooperative Milk Marketing Federation (GCMMF) – the owner of dairy brand Amul. There is, Sodhi suggests, 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%.” Amul’s share of retail sales of packaged cheese in India is 40-45%, he says.
With a self-proclaimed 34%, publicly-listed Parag Milk Foods’ Go Cheese brand of processed cheese in blocks, slices and spreads, is the second-largest player by market share. Akshali Shah, senior vice president of the company, highlights the strong sales 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 Domino’s and cheese slices to McDonald’s.
Other notable cheese brands in India’s fledgling but fast-growing cheese market include Britannia, Milky Mist and Verka.
The potential for growth in India is helped by the fact the country is not virgin territory for cheese – there is a tradition of adding cheese to traditional Indian foods such as dosa, uttapam and parathas. IMARC stresses that 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,” the researchers say.
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By GlobalDataOne 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, Kuldeep Sharma, founder of Suruchi Consultants, in New Delhi, explains. “In western cultures, people sometimes eat cheese for health reasons,” he says. “Here we put butter, cheese and even mayonnaise into a pizza and are eating it with fun and indulgence.”
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, Parag’s Shah argues. 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. Sharma suggests 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, says Amul’s Sodhi. He offers up another difference, which could be a further potential hurdle for international produces.
“We 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.
However, “since [last year’s Covid-19 related] lockdown, we have also started selling directly to customers through home deliveries within a 50km radius [of our production unit]”, Jins Alexander, Vallombrosa’s managing director tells just-food.
Vallombrosa runs a WhatsApp group where the company shares new recipes for cheese dishes to promote sales. “The Bangalore market is very good and every day we are getting 20 to 25 calls from new customers,” Alexander says.
The challenge of cost
Such 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, Ghanshiam Singh Rajorhia, president of the Indian Dairy Association explains. “Due to this and the high ripening cost, [international] cheese is much costlier than paneer [Indian cottage cheese used in many local dishes],” he says.
Another problem is the cost of production. “We [India] are the largest manufacturer of milk, have the largest population of cattle, we have everything, but we are not efficient,” Sharma says. “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, Sodhi reflects. “We are exploring how the lower middle class can afford cheese in their daily diet and that is only possible if we make it more affordable.”
Sharma suggests 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. “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,” Sharma adds.
However, with sales growing, investments in cheese manufacturing plants are expected to increase, Sharma says. India’s government is also helping – in November, mozzarella was added to a list of seven food products where manufacturers can apply for central government grants to boost production investment from a INR109bn (US$1.48bn) budget allocated over the next five years. The support comes under the Production Linked Incentive Scheme for Food Processing Industry to “make Indian manufacturers globally competitive, attract investment…ensure efficiencies; create economies of scale; enhance exports,” said a government communiqué issued in November. The other eligible food products are ready-to-cook/ready-to-eat products, processed fruits and vegetables and marine products.
The response has been swift. In March, Amul announced a 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, Parag’s Shah says. This has been a long-standing contentious issue in the European Union-India trade negotiations, for instance, and this protection may be dropped for concessions enabling access to EU markets.
“Currently the Indian dairy industry needs protection,” Sharma says. “But we will not be able to keep the market closed for long.”
