THE MILK war in Uttar Pradesh is expected to reach a boiling point with New Delhi's Mother Dairy planning to aggressively expand operations in the state.
While Mother Dairy officials chose to be tightlipped over expansion plans for the UP market, official sources here said the State Government recently allowed Mother Dairy to directly procure milk from farmers in 14 districts of UP. The milk procurement is expected to commence by January 1, 2007.
"A total of 100 to 150 field supervisors were provided by the State Government to Mother Dairy officials in the state for carrying out a preliminary survey of the market," sources said.
Meanwhile, two major dairying brands Amul and Parag have already started taking steps to counter Mother Dairy's expansion plans, starting with Lucknow and Kanpur markets, before deciding to strengthen distribution channels in other UP towns and cities.
For example, Amul recently started working on a comprehensive restructuring strategy which involves strengthening of its entire distribution model in the Lucknow market during the coming months.
Parag, the market leader in the UP region, announced a cut in the price of its one-litre milk packet by Re 1 to counter Amul, which is currently selling a similar capacity packet for Rs 21 in the Lucknow market.
Amul's spokesman in Kanpur told Hindustan Times that the total milk output of the Lucknow and Kanpur region taken together was estimated at 15 lakh litres per day.
Only 2 lakh litres of the total milk output of 15 lakhs was being sold in branded form in Lucknow market, where Amul had been selling close to 35,000 litres of milk per day compared to Parag's 1 lakh litres per day. The rest of the milk output in the branded form is being sold by large private dairies", he said.
"Amul has an installed capacity to process 2 lakh litres of milk per day for the Lucknow and Kanpur markets, out of which a majority of the current output is being sold in Kanpur. There are plans to take the level of milk sold in the Lucknow market from 35,000 litres per day to a lakh litres per day in the next few months," the spokesman said.
Dairy products retailers in Lucknow selling both Parag and Amul milk brands expect a fierce competition in the dairying space by the end of 2007 when they expect Mother Dairy to be consolidating its position in the Uttar Pradesh market.
The other serious player Reliance Retail, which has plans of entering the UP market, would change the entire dynamics of the dairying business in the country's most populous state within the next one-and-a-half years, they believe.