How to Start a Milk Processing Business in India?

In the diverse tapestry of India's agricultural landscape, the dairy industry plays a pivotal role, contributing significantly to the nation's economy. If you're considering venturing into the business world and want to make a difference, starting a milk processing business in India might be the perfect opportunity. With the right knowledge, determination, and strategic planning, you can establish a successful venture that not only benefits your pocket but also the local dairy farmers and consumers. Establishing a milk processing plant in India is not only a profitable venture but also a significant contribution to the nation's economy. In this detailed guide, we will navigate through the essential steps to help you launch your own milk-processing business in India.

Opportunity in the Indian Milk Processing Industry

The dairy products market in India is growing at the rate of 12% to 13% every year. The market size is expected to increase from INR 13 Lakh Crores (2021) to INR 30 Lakh Crores by 2027 as per NDDB, providing good opportunities to new entrants and existing players. The Indian milk processing and dairy products industry is expected to grow at a CAGR of 13.2% during the 2023-2028 period, according to a report by IMARC Group. This growth will be driven by a number of factors, including:

• Increasing demand for dairy products from the growing middle class
• Rising urbanization and disposable incomes
• Changing dietary habits and a preference for healthier foods
• Government support for the dairy industry through initiatives such as the Prime Minister’s Employment Generation Programme (PMEGP).

India is already the world's largest producer of milk, and its dairy industry is a major contributor to the country's economy. The industry employs over 100 million people and contributes around 5% to India's GDP. The growth of the Indian milk processing and dairy products industry is also being driven by the increasing demand for value-added dairy products, such as cheese, yogurt, and ice cream. These products are becoming increasingly popular among Indian consumers, especially in urban areas.

Understanding the Market Demand

India, with its vast population, has an ever-growing demand for dairy products. Milk and dairy items are essential elements in the Indian diet, making the market highly lucrative. To succeed, you need to conduct thorough market research to identify the specific demands in your target region. Understanding the preferences of consumers, analyzing competitors, and evaluating market trends are crucial steps in this phase.

Here is the list of market parameters that we study for our clients at Teplu while conducting a feasibility study:

• Availability of Milk – Scaling up from 150 litres to 50000 litres
• Optimizing procurement price of milk
• Mix of milk – Buffalo Milk (BM), Cow Milk (CM) with desired Fat & SNF as per by-product required
• Logistics that will be needed to procure milk and process it timely everyday.
• Availability of staff & labour
• Market for dairy products
• Competition & their business models
• Price Vs Quality Vs demand for dairy products locally
• Existing Distribution models
• Pricing strategy adopted in the market and your unique strategy
• Consumption trends of various dairy products in your target market
• Packaging strategy employed in different segments of market
• Unique Selling Proposition

Compliance with Regulations

Before diving into the milk processing business, it's imperative to comply with the regulatory framework set by the Food Safety and Standards Authority of India (FSSAI). Obtaining the necessary licenses and adhering to quality standards is paramount. It ensures the credibility of your products and builds trust among consumers. Regular inspections and compliance with hygiene and safety standards are non-negotiable aspects of the business. Teplu helps you obtain the licence for your dairy unit.

Documents that are required for obtaining a Food Safety and Standards Authority of India (FSSAI) Licence for a dairy plant processing more than 500 litres per day:

• Proof of Identity of applicant
• Blueprint Layout Plan
• Production Unit photographs
• Name and List of Equipment and Machinery
• Electric Load of the Dairy Unit
• Water test report
• Proof of possession of premises
• Food Recall Plan
• Source of Milk Procurement Plan
• Nominations of person by a company

Selecting the Right Location

Choosing the appropriate location for your milk processing unit is vital. Proximity to dairy farms, transportation facilities, and access to utilities like water and electricity should be considered. Opting for a location near dairy farms ensures a fresh and steady supply of raw milk, reducing transportation costs and time. With the availability of cold chain transportation and government subsidies to create such infrastructure for your dairy plant, your products can be transported to distant locations by maintaining the cold chain.The ideal location for setting up a dairy product manufacturing plant should meet the following criteria:

• Proximity to raw milk supply: The plant should be located near a major dairy farming region to ensure a steady supply of high-quality raw milk. This will help to reduce transportation costs and minimize the risk of spoilage.
• Access to transportation: The plant should have easy access to major roads and highways to facilitate the transportation of raw materials and finished products.
• Adequate land and water supply: The plant should have enough land to accommodate the factory building, storage facilities, and other infrastructure. It should also have access to a reliable source of water for cleaning and processing.
• Availability of labor: The plant should be located in an area with a sufficient pool of qualified labor to operate and maintain the facility.
• Favorable regulatory environment: The plant should be located in an area with a favorable regulatory environment for the dairy industry. This includes factors such as tax incentives, environmental regulations, and food safety standards.

In addition to the above criteria, the ideal location for a dairy product manufacturing plant should also be considered in terms of the following factors:

• Market access: The plant should be located in a region with a large and growing market for dairy products. This will help to reduce marketing costs and ensure that the plant's products are easily accessible to consumers.
• Cost of land and labor: The cost of land and labor should be relatively low in the area where the plant is located. This will help to keep the plant's operating costs down.
• Quality of life: The area where the plant is located should have a good quality of life for employees and their families. This includes factors such as access to schools, hospitals, and other amenities.

By considering all of these factors, businesses can choose the ideal location for their dairy product manufacturing plant. This will help to ensure the success of the business and the production of high-quality dairy products for consumers.

Layout and flow of plant: The layout of your plant should be designed to minimize the risk of cross-contamination. This means that raw milk should be processed and stored separately from finished products. The layout should also be efficient, with the flow of milk moving from one step of the processing process to the next without any backtracking. Teplu provides you the design layout by considering the latest in dairy technology.

Sample layout of a dairy products and milk processing plant with 5000 litres per hour capacity

Investing in Quality Equipment

Types of Dairy Equipment:

The types of dairy processing equipment needed in a dairy plant will vary depending on the specific products being produced. However, some of the most common types of equipment include:

Raw milk receiving and storage tanks: These tanks are used to receive and store raw milk from the farm before it is processed.

• Pasteurizers: Pasteurizers are used to heat milk to a temperature that kills harmful bacteria.
• Homogenizers: Homogenizers break down fat globules in milk to create a more uniform product.
• Separators: Separators are used to separate cream from milk.
• Fillers and packaging machines: Fillers and packaging machines are used to fill and package finished milk products into containers such as bottles, cartons, and bags.
• Cheese vats: Cheese vats are used to produce cheese curds.
• Butter churners: Butter churners are used to produce butter.
• Ice cream makers: Ice cream makers are used to produce ice cream
• Yogurt incubators: Yogurt incubators are used to incubate yogurt cultures.

In addition to these basic pieces of equipment, dairy plants may also need specialized equipment for producing specific products, such as:

Dairy plants also need a variety of support equipment, such as:

• Cleaning-in-place (CIP) systems: CIP systems are used to clean and sanitize equipment without having to disassemble it.
• Refrigeration and cooling systems: Refrigeration and cooling systems are used to keep milk and milk products at safe temperatures.
• Laboratory equipment: Laboratory equipment is used to test milk and mlk products for quality and safety.

Teplu has tie-ups with the best quality dairy equipment manufacturers who provide service and equipments to our clients at the lowest cost.

Typical List of equipments for a Milk Processing Plant manufacturing 3000 litres of milk per day and dairy products (pouch milk, paneer, ghee, curd)

Developing Strong Supply Chain Relationships :

Building strong relationships with dairy farmers and suppliers is a cornerstone of a successful milk processing business. Establish fair and transparent pricing mechanisms, provide necessary training to farmers regarding milk quality and collection, and ensure timely payments. A reliable supply chain guarantees a steady flow of raw milk, which is essential for uninterrupted production.

The following are some of the most important supply chain relationships required in the dairy chain for the success of a milk processing business:

• Raw milk suppliers: Raw milk is the key ingredient in all dairy products, so it is essential to have strong relationships with suppliers of raw milk. This means building relationships with dairy farmers who can provide a consistent supply of high-quality milk.
• Ingredient suppliers: In addition to raw milk, milk processing businesses also need to source other ingredients, such as sugar, flavorings, and stabilizers. It is important to have strong relationships with suppliers of these ingredients in order to ensure a consistent supply of high-quality materials at a competitive price.
• Packaging suppliers: Milk processing businesses also need to source packaging for their products. This could include bottles, cartons, bags, and other types of packaging. It is important to have strong relationships with packaging suppliers in order to ensure a consistent supply of high-quality packaging at a competitive price.
• Distributors and retailers: Once milk products have been processed and packaged, they need to be distributed to retailers and other customers. It is important to have strong relationships with distributors and retailers in order to ensure that products are available to consumers in a timely and efficient manner.

In addition to these primary relationships, milk processing businesses may also need to develop relationships with other members of the dairy supply chain, such as:

• Transportation providers: Transportation providers are responsible for transporting raw milk, ingredients, packaging, and finished products throughout the supply chain. It is important to have strong relationships with transportation providers in order to ensure that products are transported safely and efficiently.
• Warehouse and storage providers: Warehouse and storage providers are responsible for storing raw materials, ingredients, packaging, and finished products until they are needed. It is important to have strong relationships with warehouse and storage providers in order to ensure that products are properly stored and that they are available when needed.
• Technology providers: Technology providers provide milk processing businesses with the software and hardware systems they need to manage their supply chains. It is important to have strong relationships with technology providers in order to ensure that these systems are reliable and that they meet the specific needs of the business.

By developing strong supply chain relationships with all of these different stakeholders, milk processing businesses can improve the efficiency and effectiveness of their operations, reduce costs, and improve the quality and safety of their products. This can lead to increased profitability and long-term success.

Implementing Effective Marketing Strategies:

Create a robust marketing strategy to promote your dairy products. Utilize digital platforms, social media, and local advertising channels to reach your target audience. Highlight the quality and freshness of your products, along with any unique selling points. Engaging in promotional activities and collaborating with local retailers can boost your brand visibility and attract more customers.

Diversifying Product Offerings

While milk is the primary product, diversifying your offerings can enhance your revenue streams. Consider producing value-added products such as yogurt, cheese, butter, and flavored milk. These products cater to different consumer preferences and can significantly contribute to your overall sales. Experimenting with new flavors and packaging designs can create a buzz in the market. Teplu helps you with product development and curating them to the taste of the customers. Our product range includes paneer, ice-cream, kulfi, yoghurt, mozzarella cheese, artisan cheese, curd, lassi, khoya, basundi, rabdi, buttermilk, Indian sweets and others.

Ensuring Quality Control and Hygiene:

Maintaining high standards of quality control and hygiene is non-negotiable in the dairy industry. Implement stringent quality control measures at every stage of production, from milk collection to packaging. Regular testing for pathogens and contaminants is essential to ensure the safety of your products. Hygiene protocols should be followed diligently to prevent any contamination during processing.

Business Plan Preparation:

Initial Investment and Operating Costs

Calculate the initial investment required for setting up the processing plant, purchasing equipment, obtaining licenses, and other operational expenses. Prepare a detailed budget and financial forecast for the first few years, considering both fixed and variable costs.

Revenue Generation

Estimate the revenue generation based on the projected sales volume and pricing strategy. Analyze the breakeven point and set realistic sales targets to achieve profitability. Explore opportunities for export, if feasible, to expand revenue streams.

At Teplu we help create your business plan through a detailed study of your area and target market. Business Plan includes:

• Suggestion for best suited product mix considering availability of milk, market conditions and profitability.
• Suggestion for distribution channels and business model recommendation
• Expected profit & Loss product wise and for overall business for 3 years
• Projection of Sales and Scale up plan for 3 years
• List of equipments for phases of project implementation
• Plant location & Design
• Proposal for bank loan and project implementation

Teplu also helps you through end to end solutions. Right from sourcing of milk, testing of milk, providing plant design, licence, equipment, ingredients, training to upto marketing your dairy products, Teplu helps you all the way.

Starting a milk processing business in India requires meticulous planning, dedication, and adherence to quality standards. By understanding the market demand, complying with regulations, selecting the right location, investing in quality equipment, developing strong supply chain relationships, implementing effective marketing strategies, diversifying product offerings, and ensuring quality control and hygiene, you can establish a successful venture that stands out in the competitive landscape.

Embarking on this entrepreneurial journey not only offers financial prospects but also contributes to the overall development of the dairy sector in India. With determination and the right approach, you can create a thriving milk processing business that not only meets consumer demands but also sets new benchmarks for quality and innovation in the industry.

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