Hot market for cool treats

There’s more ferment in the yoghurt category! This summer saw several launches. Neo Milk Products launched packaged curd and Mother Dairy entered the frozen and set yoghurt markets. Dabur, too, is dabbling in this segment by trying to create a new category – drinking yoghurt, which is fruit juice blended with yoghurt.

Yoghurt, particularly the packaged segment, has evolved in the past four to five years with almost all dairy players focussing on this category. Considered a high-growth area among dairy products, major brands such as Amul, Mother Dairy, Nestle and even Danone are expanding their yoghurt portfolio with newer flavours and variants.

Technopak estimates the Indian yoghurt market at around Rs 1,000 crore or $182 million, made up of packaged yoghurt and its varieties including the packaged drink and frozen yoghurt service market. This is expected to grow at a compounded annual growth of around 25 per cent with the expectation that it will double in the next three years.

The Probiotic plank

So what’s driving this segment? Rapidly changing lifestyles, increasing affordability coupled with rising health consciousness among consumers who are increasingly demanding health and wellness as well as taste are considered key growth drivers for the yoghurt category. Besides, positioning yoghurt as a probiotic, and as a healthy dessert or snack, rather than just being a meal accompaniment, and the launch of newer variants in different flavours and with real fruit chunks has helped expand the category.

“The entry of newer players will only expand the market,” says R. S. Sodhi, Managing Director of Gujarat Co-operative Milk Marketing Federation Ltd (GCMMF), which owns the Amul brand and markets frozen yoghurt under the Flaavyo brand and plain curd under Masti Dahi.

Mother Dairy, owned by the National Dairy Development Board, has a presence in almost all categories – stirred fruit yoghurt with real fruit pieces, set fruit yoghurt and even the frozen variety, launched in April.

“Plain yoghurt is seeing intense competition as new players enter this category. We have created a unique space for ourselves with a differentiated product offering and are a market leader in most of the markets where we operate,” says Subhashis Basu, Business Head (Dairy products) at Mother Dairy Fruit & Vegetable Pvt Ltd.

“Flavoured yoghurt, as a category, is still at a nascent stage. The competition will only help in growing the market. With a range of offerings in different formats, we expect to exploit all these need gaps. Consumers today are health-conscious and fruit yoghurt provides them a convenient and guilt-free indulgence, a healthy alternative,” Basu adds.

Mumbai-based Parag Milk Foods, which sells yoghurt under the Go Fruit and Dahi Fusion brands, is eyeing the northern markets for its products through joint ventures or contract manufacturing, says Devendra Shah, Chairman. Shah claimed that Parag was the first to launch flavoured yoghurt with fruit pieces about four years ago and the company has been producing about nine tonnes per day.

Fizzing with health

Market analysts believe that yoghurt has a huge potential to tap into the urban market and, in fact, with players such as Dabur and Amul offering forms of drinkable yoghurt, they could well give competition to the fizzy beverages.

“The yoghurt market is growing not only because it is convenient but also because it is known to be a super food and considered healthy. While flavoured yoghurt has become a key category, even packaged drinkable forms are finding favour with consumers as they want to chose something healthy over the fizzier drinks,” says Rachna Nath, executive director, PwC.

Asked if the cold chain, logistics and transportation are going to be a big challenge as yoghurt is a highly perishable product, Nath said, “I think today the consumer goods companies are defining the logistics and transportation sectors.” She said once the companies define their target markets, they are either partnering or setting up their own units to handle logistics and transportation and fuel their growth.

In May, Dabur launched fruit juice-based drinking yoghurt under the Réal Activ brand in mango and strawberry flavours. Dabur is gauging consumer response as it is conducting large-scale sampling and focusing on distribution in the key metros.

Praveen Jaipuriar, Category Head (Foods), Dabur India, said, “We decided to launch fruit juice-based yoghurts in drinkable form as we felt it was a good fit with our juices portfolio. With the growing level of health awareness in India, there has been a spurt in demand for healthy functional foods.”

Jaipuriar believes the company is not competing with the yoghurt market but more with the functional beverages and health drinks. The company said it is offering a differentiated product, trying to create a new category, and that unlike other yoghurts does not require cold storage.

Neo Milk, owned by the private equity firm Ambit Pragma, which entered the packaged curd segment is betting on its USP of ghar jaisa dahi to push its Neo brand in the Delhi market dominated by Mother Dairy and Nestle.

“We have developed a process to manufacture set curd which does not make use of solids such as milk powder, and tastes like home-made,” says Dinkar Suri, Director and President, Neo Milk Products. The company is selling about three tonnes per day in the 100-tonne packaged curd market in Delhi and plans to expand its yoghurt with new flavours.

As per Euromonitor, yoghurt and sour milk products’ sales, which includes unpackaged yoghurt, are expected to grow at 18 per cent CAGR to touch Rs 7,890 crore by 2017. It has estimated that the value sales touched the Rs 3,440-crore mark in 2012.

In its report that Euromonitor released in March, it also said that an increasing number of consumers are expected to switch to packaged yoghurt and sour milk products to meet their convenience and nutritional needs. It added: “Manufacturers like Danone Food and Beverages are likely to introduce smaller pack sizes and yoghurt variants at lower price points to target rural consumers.”

The report stated that while companies are expected to introduce value-added yoghurt and sour milk drinks, they will also focus on introducing products at lower prices to penetrate the tier 2 and tier 3 markets.

“Local booths and milk parlours will continue to remain a significant sales channel for distribution of yoghurt and sour milk products. However, modern retail channels including hypermarket and supermarkets will become stronger with international manufacturers and strengthening their distribution through modern retail stores,” it added.

Analysts believe the yoghurt market is set to heat up further with more companies joining the yoghurt battle, which could only mean price wars, more flavours and cheaper products.

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