In the previous edition of our magazine, we brought to you detailed coverage of first & second session of Feed conference, in this edition we bring to you detailed report in continuance with session two.
The second half of session two of the feed conference started with a detailed presentation on ‘Indian Dairy-Opportunities and Trends’ by Mr. Shiva Moudgil (an Industry researcher with Robobank). He started his presentation with an insight about Indian dairy in global context. Detailing on the share of Indian market with regards to global milk production, He mentioned, as Global Milk Production is growing at a CAGR of ~2%, India contributes ~18% of the total milk production; and observed that the milk production growing at ~4%;Hence India plays a pivotal role in the global scenario.
Talking about demand of dairy products, Mr. Moudgil illustrated the absolute and CAGR demand change for the years 2016 and future prospects till 2022 with Graph 1.
He mentioned that Looking at different global markets, in future India shall standout, as it continues to grow in population with rising per capita consumption, but remains nearly 100% self-sufficient. He added that other global regions are split between faster-growth emerging markets i.e. normally from a low base but with consumption and population growth (slow-growth mature markets, with slow or no population growth and more stable higher consumption).
Coming to an inside perspective, Mr. Moudgil said that, Dairy products form a significant part of daily food expenditure (as a source of protein). He used the Graph 2 to detail the estimated milk demand for year 2020-2021.
As per this data, demand is estimated to be ~200 mn tons by 2020-21,and looking at the last decade, Milk production has been growing at the rate of 4% to 5% CAGR .However he mentioned it is also important to note that ~85% of the milk produced in India is coming from small & marginal farmers and In order to meet the future demands it’s imperative to have a Large scale dairy farming model (>500 cattle) which has not developed in India so far.
In order to meet the above-mentioned demand, Mr. Moudgil emphasized the importance of value-added dairy products (i.e. Cheese, Ice cream, UHT, Milk etc). As per Robobank data, value-added products are expected to grow at 15% to 20% with expected growth in cheese, UHT milk, ice cream, baby food segments.
He also shared the considerable growth potential for Organised Industry (comprising cooperatives and private players that account for 24 percent of total milk produced in India) with the Graph 3.
In order to ensure a successful Upstream link, Mr. Moudgil discussed the three essential factors that include Long term focus on procurement, Access to dairy farmers, and Increasing use of services & Technology.
Mr. Moudgil then elaborated on the various trends in the Indian Dairy farming. He delved into this section with some focus on Medium and Large sale Industry, application of artificial insemination, Nutrition and role of Mechanisation. Additionally, incorporation of IT shall be the key driver of efficiency and other aspects such as Improvement in yield/ disease control/segregation/balanced rationing.
Shedding some light on the challenges that Medium-scale dairy farming in India shall face, Mr. Moudgil detailed that lack of education, trained manpower and systems to manage the dairy farms will be a great concern. Apart from that limited access to market, limited supply chain integration and meagre resources (like land, fodder, availability of labour) will require a lot of efforts to deal with.
Coming to the contribution and prospects for Small Agri landholders, Mr. Moudgil stated that they will be the key stakeholders for medium scale dairy Industry since it has been seen that their share in the total agriculture area has been increasing since the past couple of years.
Mr. Moudgil concluded his presentation by highlighting the major outcomes of the research done by Robobank as i.e Emergence of medium scale dairy farming shall ensure procurement from small farmers, Liquid milk and perishables shall remain the largest driver of growth, Value added products are gaining acceptance thereby changing the nature of the industry from bulk food to consumer food and this will increase focus on innovation, Newer players are looking to enter the Indian dairy market (International, Domestic Food-FMCG companies), and overall Consolidation in the organised segment will gain momentum.
Dr. T.K Walli appreciated Mr. Moudgil for his insightful and terse presentation and gave his concluding remarks by highlighting the positive aspects of Indian diary sector along with the many challenges it has to face, its very essential that the cattle feed manufacturers convince and educate the importance of balance feed to the dairy farmers in order to meet the growing milk demands.
The third session of the conference focused on the Technology Innovations. In this spectrum, an insightful presentation was given by Mr. Gulrez Alam from the IB group about ‘The pros and cons of adopting Backward Integration’.
He initiated by citing the global scenario pertaining to Automobile industry and Technology companies where the most stabilised companies are those who have adopted Backward Integration. These included giants like Ford who went on to create their own infrastructure by not depending on the raw material suppliers and having their own production of steel, rubber, glass etc like components that go into manufacturing of cars. Similarly, Mr. Alam mentioned renowned company Tesla that made a big mark in automobile sector while making their battery-operated cars and this is how they started to innovate the technology of batteries and with that they integrated the technology in automobiles making them the pioneers in this field.
Coming to the Food sector Mr. Aalm pointed out how MacDonald’s & Starbucks have incorporated Backward Integration Module. He explained that while MacDonald’s has its own potato farms, corn fields etc., Starbucks uses its own produce of coffee beans throughout its chains around the globe. These companies are running mass products for the globe today and they work with Backward Integration module.
Explaining how even the poultry and livestock Industry has its own big players who have adopted this module, Mr. Alam mentioned companies like JBS, Tyson, BRF, Perdue and Ingham’s etc. have their own core production units, make their own feed, have their own marketing. He further mentioned his own company IB group couldn’t have reached the success that they have today had it not been for backward integration.
Mr. Alam shared his insights about the scenario in US where there has been a major consolidation taking place i.e. those companies who do not follow Backward Integration, have been absorbed by companies that follow this module.
He mentioned that the situation in China, 20 years back was just like as it was in India in terms of feed mills, However China which has seen a transformation and has displayed consolidation of 4000 feed plants to less than 400 plants in the last two decades.
Coming to his view about India, Mr. Alam stressed that in the next 5-10 years Indian companies will become the most efficient poultry companies by following the mechanism of Backward Integration.
He further went on to explain the general methodology of Backward Integration with the Image 1.
Mr. Alam laid special impetus on the fact that right storage solutions play a pivotal role in Backward Integration mechanisms. He continued by explaining how right storage technology is responsible in maintaining quality parameters such as keeping the right moisture intact for the raw material grains.
Explaining how the quality standards are maintained whilst adopting the Backward Integration method, Mr. Alam mentioned stringent framework that needs to be in place. He gave examples of pest and microbial control along with sensory and physical tests like smell and particle size that are done to qualify the International standards.
Mr. Alam then shifted the focus on the many advantages of adopting Backward Integration. This included Quality control of raw materials & finished goods, Overall cost control leading to better profitability, Control on overall formulation and necessary nutrition, Empowering farmers, Generation of employment, and Food security etc.
After elaborating the numerous merits of Backward Integration, Mr. Alam detailed a few aspects which people might consider as pressing concerns while implementing Backward Integration in their own business. This includes the perception that when you are the epicentre of all supply chain & material management, any disturbance can disrupt the whole process. Additionally, many think high demand can result in dependencies from outside suppliers and in such cases the Backward Integration is not of much benefit. Mr. Alam further mentioned that demand uncertainty creates problems and may lead to underutilization of plant capacity regardless of having Backward Mechanism in place. In addition to the above, meticulous planning & immense management proficiency with 24*7 sensitivity towards both forward and backward trading sides makes people slightly skeptical towards its long run benefits.
Mr. Alam illustrated that despite the many reservations that people may have towards adopting backward integration method, we need to emphasize on producing the right nutrition for the birds and the animals which can be better ensured by adopting Backward Integration method.
The conference moved forward with a presentation on ‘Feeding the world within the limits of our planet’ given by Dr Vijay Makhija (Regional Marketing & Communication Manager, DSM Nutritional Products).
At the very outset Dr. Makhija asserted that feeding the world is an ever increasing challenge since the world population is expected to grow at an alarming rate which is inevitable. The terse digramatical representation in Image 2 says it all i.e. by 2100 we shall be no less than 11.2 billions in human population on the same land that we have today.
This shall result in increased environmental adversaries such as emissions and pollution which will further lead to resource depletion. Dr. Makhija highlighted if the current conditions prevail and we continue the stress on the environment as the way we are, We need to have no less than 1.7 Earths and its resources to sustain the demand of planet’s ecosystem. Shedding more light upon it, Dr. Makhija imparted that In 2015, a UN charter was introduced to set goals to end poverty, protect the planet and ensure prosperity for all as part of a new sustainable development agenda. For the goals to be reached, everyone needs to do their part -Governments, the private sector, civil society and people like us.
He then focused how livestock production is facing increasing scrutiny on impact on environment, on human health, animal welfare. Increasing focus on reducing today’s animal protein footprint and how to produce animal protein within planetary boundaries for a growing population.
Before coming to the counter measures in order to deal with the above issue, Dr. Makhija illustrated that agriculture and livestock production has achieved tremendous improvements over the past decades to continues being able to provide food to the growing population. He emphasised that feeding the growing population has been made possible by strong growth in global food production along with the efficiency of livestock to be converted to food resources that cannot be used otherwise.
Shifting his focus on the aspect of dealing with the population rise and sustainability, Dr. Makhija briefed how natural food resources need to be worked upon in order to improve the protein and calorie. The need is to stop the declining nutritional value of crops, improving digestibility of feed materials, upgrading lower digestible feed raw materials & reduce nitrogen and phosphate pollution. By doing so the scrutiny that the feed and livestock sector faces w.r.t. being a contributor in environmental stress can be tackled well.
As per Dr. Makhija Biotechnology shall reduce the pressure on Soy land use and biodiversity loss, The reduction in use of phosphate fertilizers will decrease dependence of mineral resources, reduced feed competition shall thus result in increased sustainable use of local feed raw materials, above all the Feed enzymes made with the aid of biotech shall deliver solutions to extract more nutritional value out of today’s feed ingredients. Focusing more on the importance of biotechnology, He expounded that developing next generation enzymes to unlock more protein and energy from key feed raw materials can have potential impact on resource use, land use and manure handling. Additionally, enzymes improving feed efficiency of local raw materials have added value of reducing transport footprint and supporting local economy.
Dr. Makhija also mentioned that another sustainability issue for livestock industry is the food loss and waste and by giving an example as to how increase in eggshell strength is related to nutrition and how this can help in reducing wastage and losses.
The final phase of the presentation detailed the significance of greenhouse gases in triggering climate change with the Image 3.
Dr. Makhija then continued by asserting that as industry stake holders, its time for us to innovate new ideas and make a powerful difference in fighting climate change.
Based on points shared by Mr. Shiva Moudgil, Indian Dairy Industry is bound to play a pivotal role in serving the needs of future population specially as far has protein demands are concerned. The points asserted by Mr. Gulrez Alam indicate that the concept of Backward Integration might be the next big thing incorporated by the organised and large-scale industry very soon. The facts and figures shared by Dr. Makhija clearly substantiate the increasing burden our eco-system bears with the growing population and Innovation should be the priority of every Industry stakeholder.
Note: In the next edition of Think Grain Think Feed, we shall bring to you excerpts of the interactive session that saw the participation of Industry expert panelists and audience members.