- The decades-old practice of getting milk delivered to the doorstep is a big reason.
- Dairy companies spend between 1-2% of sales in advertisements, which is far less compared to other consumer staples companies.
- This is a huge advantage for branded milk sellers at a time when consumers are moving away from unorganised local vendors.
Do you get your milk delivered to your doorstep every morning? There is a good chance that you do not have up-to-date information on other brands of milk, competing prices and offers, if any, which may be available.
Consumers are less likely to frequently shift from one dairy brand to another because of this decades-old practice. This has also meant that dairy companies in India have had to spend very little on advertisements and promotions.
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An urban consumer in India spends 20.3% of the monthly spend on milk and milk products, according to a survey by the National Sample Survey Organisation released in 2012. Milk is a staple and there is big money to be made in the segment.
And yet, dairy companies spend only 1-2% of sales on advertisements, compared to online marketplace Flipkart, which
reportedly spends over 30% of its revenue. While Hindustan Unilever spends about 10% of its sales.
“An effective advertisement of soap can win new consumers and additional revenues of ₹20 per new consumer per month whereas an advertisement of dairy brand can win revenues of ₹1,000 per new consumer per month,” an
ICICI Securities report explained.
This would also explain why dairy companies do not offer any freebies to consumers and any discounts to distributors are negligible.
However, on the down side, the same stickiness in consumer preference also makes it difficult for new entrants to capture customers from established players. The good news is a lot of people are yet to move from buying milk from unorganised neighborhood vendors to picking up branded milk and related products off the shelves.
The Indian dairy sector is expected to grow at about 15% compounded annual growth rate, according to ICICI Securities, and there is possibility of steady shift of consumers from unorganised sector to organised sector.
The fact that this growth does not need high promotional expenses is an added advantage for newer companies.
