Coca-Cola and PepsiCo have already announced plans to enter the milk-based beverages segment in the country. Reliance Retail, which has entered the diary segment with Dairy Pure, its milk brand, may also expand into niche categories. Industry observers believe that Bharti Retail may also be working its way towards marking an entry into the dairy space.
"Going by the changing preference of consumers for healthier options, this category is likely to grow bigger in the coming years," says Anand Shah, the retail and FMCG analyst at Angel Broking. According Dairy India 2007 estimates, the current size of the Indian dairy sector is Rs 250,000 crore and has been growing at a rate of 5 per cent a year.
At present, the Rs 500 crore ready-to-drink flavoured milk category makes up for the largest chunk of the milk beverages market. The main players in the category include Indian dairy majors Gujarat Cooperative Milk Marketing Federation (GCMMF) and Mother Dairy, along with Hershey, Nestle India and Amrit Food.
GCMMF has a wide range of flavoured milk options under the Amul brand, which includes Amul Cool, Kool Koko and Cool Cafe, while Mother Dairy has Chillz on the shelf in the category. Nestle also introduced Milkmaid Funshakes last year.
While Amul, with its health drink Stamina, is the only player in the whey-based drink category, lassi has caught the fancy of many, leading to innovations like probiotic lassi. "Lassi is a very important category in our overall dairy portfolio. We have been growing at a rate of 40 per cent in this category over the last few years," Paul Thachil, CEO, Mother Dairy Fruits & Vegetable, said.
When sales of carbonated soft drinks began to lose their fizz around the world, soft drink companies entered the milk-based drink domain. Pepsi launched chocolate milk under the SoBe brand and Pepsi's joint venture with Starbucks rolled out Frapuccino, a refrigerated milk coffee beverage. Coca-Cola, on the other hand, partnered Nestle USA's beverages division to develop Choglit, a skim milk-based chocolate-flavoured drink.
However, starting the milk beverage business may not be simple. "For a new dairy set-up, backward integration would be the biggest challenge. Setting up procurement, processing and production lines are time-consuming activities and a new company would need to invest significantly to achieve these ends. A stable set-up can only be achieved over a period of 10 to 20 years," Sodhi adds.