Indian Milk Helps Quench Thirst for Emerging-Market Growth

Evolving trends in emerging markets are not always driven by macro-economic policies or demographics. Sometimes, something as simple as a fridge can change millions of people’s lives and re-define an entire industry.

This is exactly what’s happening in India’s milk market. The world’s second most-populous nation is also the world’s largest market for milk, yet less than 20% of households own a fridge. The popularity of the white stuff in India, combined with the proliferation of refrigerators from a very low base, are perfect conditions for a milk boom, driven by the unique consumer situation in this market. These trends are not always easy to spot by doing desk research or just analyzing other markets. But based on our field research, we forecast huge changes for the dairy industry, suppliers and even economic efficiency, as new consumer trends in India accelerate.

Today, the Indian market for milk and dairy production is dominated by small farmers, who typically own just two or three cows. Yields are low by international standards, distribution is limited and milk products are unsophisticated. But India loves milk; the country already consumes more than the US or China, and the appetite continues to grow as the population gets richer. While the consumption of rice and wheat hardly increases with wealth, demand for dairy products could grow by a factor of 10 or more, according to our analysis (Display).

Field research shows that the key desirable household product for increasingly wealthy consumers is a fridge. In India’s warm climate, low ownership of refrigerators has curbed demand for perishable dairy products. But not for long. Our research suggests that within five years, 50% of Indian households may have a fridge, on par with the Philippines (Display).

The impact on lifestyles would be dramatic. With a fridge, a working Indian mother who wakes up at four o’clock to feed her family before heading to her job could shop and cook much more efficiently. In developed countries, where people haven’t lived without refrigeration for decades, we can’t even begin to fathom how life-changing this simple household appliance would be. It would allow a typical woman to save two or three hours a day having to prepare a fresh meal for her family, which would give her the employment flexibility to work more hours. The next step might be a job in a higher paying industry. So the proliferation of refrigerators can lead to efficiency savings and help to further improve standards of living for a large number of people. It will also improve production and distribution processes, as it will become much easier to transport and store dairy products, so they don’t have to be sold only locally anymore.

Local research shows that as India gets richer a fridge is at the top of household shopping lists. This would also lead to a sea change in the labor intensive and inefficient dairy market—as well as consumer spending habits—opening up compelling opportunities for dairy companies, especially on the premium end, and for investors who are thirsty to tap into the prevailing consumer trends in this country.

 The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AllianceBernstein portfolio- management teams.

Tassos Stassopoulos

Portfolio Manager—Emerging Consumer, Global Growth and Thematic
Tassos Stassopoulos is a Portfolio Manager for AB’s Emerging Consumer, Global Growth and Thematic strategies. He joined the firm in 2007 as a research analyst covering European consumer stocks, and has served as portfolio manager for the International Healthcare portfolio and as consumer sector head on the Global and International Research Growth teams. Prior to joining the firm, Stassopoulos was a managing director at Credit Suisse, where he spent seven years, six of them as a senior analyst and sector head for pan-European travel and leisure coverage. While there, he was twice ranked #1 in the Institutional Investor survey of analysts in his sector. In his last year at Credit Suisse, Stassopoulos was a portfolio manager at the firm’s internal hedge fund, Modal Capital. He also spent eight years as a management consultant at Arthur Andersen, where he specialized in lodging and gaming. Stassopoulos holds an MA in economics from Cambridge University, St. John’s College, and is a member of the Institute of Chartered Accountants. Location: London

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