Ghee

Ghee is the oldest and most respected oil in the history of Indian cooking and directly correlates to the ayurvedic traditions of the country. The golden elixir has been produced, consumed and applied in India for thousands of years as a by product of milk reared from various animals including goat, cow, buffalo, camel and yak. In the below writeup, we will elaborate the Ghee sub vertical of Indian Edible Oil Industry.

History of Ghee in India

Ghee also called Ghrta in Sanskrit and clarified butter in English has been used in Indian diet as prime source of fat since time immemorial. India being a tropical country with mid-to-high average temperature and a predominant rural, agriculture & livestock dependent vegetarian population solved the problem of preserving the perishable milk & butter by a simple, convenient and affordable process of converting the excess produce into Ghee through heat desiccation and filtration. What started out as a household ritual, has over the years become an important FMCG product due to rapid urbanization and migration of customers from unpackaged to packaged ghee. Today anywhere between 25-40% of the total milk produced in India (India produces 173 million tonne annually) is converted into Ghee and distributed all across the country into various packaging like tin, glass jars, pet bottles, and aluminum foil laminate embedded into tetra packs. Estimates tell that the market demand of Ghee is around 1 million tonne which keeps attracting milk producers to build ghee making plants of varied capacities and package them for General trade and modern trade channels.

In terms of chemical composition, ghee (essentially 99 to 99.5% milk fat) is a complex lipid of glycerides, free fatty acids, phospholipids, sterols, fat soluble vitamins, carbonyls, hydrocarbons and carotenoids (only in cow derived ghee). Ghee made from buffalo milk is white with greenish tinge, and that made from cow is golden yellow. When stored at room temperature, ghee typically crystalizes into three different fractions or layers i.e. oily, granular semi solid at the bottom, hard flakes floating on the surface. To enable customers to judge the quality/grade of ghee on their own, AGMARK seal is applicable to all ghee products (AGMARK is a certification mark of Government of India to ensure the purity and quality of Agricultural and allied products).

Health benefits

Scientifically speaking Ghee is an excellent therapeutic vehicle for transporting nutrients to deeper tissues of the body by way of easy digestion, absorption, and delivery to target organs due to ghee’s lipophilic action. Biggest USP of ghee is that it is free of potentially unhealthy additives, preservatives and trans fats. Owning to its pure form and minimal moisture content, ghee is shelf-stable and can be stored for years (there have been few accounts in India where families have stored ghee for over 100 years).

Another advantage of ghee is its high smoking point nearly 500°F, that allows it to retain its structural integrity under the high heat used for frying and other preparation methods. Most oils break down at high temperature into unstable elements known as free radicals (a major culprit for cell damage, including the development of cancer). Ghee also has Vitamin E antioxidant that act as “scavengers” in the body, seeking out and neutralizing free radicals to prevent cell and tissue damage that can lead to disease. Indian Ayurveda has used ghee (especially cow ghee) to treat burns and swelling as it contains large quantities of butyrate, a fatty acid that has been linked to an immune system response that soothes inflammation. Ghee is full of anti-viral properties and contributes to a healthy digestive system by helping heal and repair the stomach lining. Ghee contains plentiful amounts of fat-soluble vitamins A, D, E and K. These nutrients are essential to a wide range of body functions from the brain to the immune system.

Indian Ghee industry depends on milk produced from livestock which is the higest in the world, estimated to be around 180 thousand tonne annually, or 9 Billion Indian Rupees as per National Dairy Development Board (2018). Of the total milk produced, around 50% or 82 million tonne comes from Buffalos, 47% or 78 million metric tons comes from Cows and remaining 3% or 6 million tonne comes from Goats. Milk from other animals like Sheep, Camel, and Yak is negligible. In terms of geography, Uttar Pradesh is the largest milk producer in the country contributing around 18% of the total milk production, followed by Rajasthan (14%), Madhya Pradesh (9%), Andhra Pradesh (8%) and Gujarat (8%). Punjab being a state with a high perceived milk consumption contributes only 7% to the country’s kitty. Below is the market snapshot for Ghee:

National Players: India has more than a dozen national Ghee brands (both public and private) including few which started out regionally but  started distributing country wide due to market demand and popularity. These include Mother Dairy, Amul, Goverdhan, Patanjali, Britannia and more.

Regional Players: Every Indian state has a cooperative company to consolidate milk from farmers and distributor milk & its derivates including Ghee like Verka (Punjab), Nandani (Karnataka), Saras (Rajasthan), Aavin (Tamil Nadu), Milma (Kerala) and similar.

Niche Players: Those who produce special varieties of ghee (like A2 cow ghee) include but not limited to Kapiva, Vedic, Farm Naturelle, Nandini Dairy Farm, GirOrganic, Divya Kamdhenu and Gaia.

Production of ghee (a derivative of milk) is estimated to be around 30% of milk production or 54 thousand tonne annually or, at a retail price index varying from 328 to 384 Indian Rupees results in a market size of 3 billion Indian Rupees. At commercial scale, Ghee is manufactured using two broad methods – traditional (by making makkhan from milk) which accounts for 90% of the market share and industrial (creamery-butter method, direct cream method, pre-stratification method, and continuous method) which accounts for the remaining 10% and is incorporated by large, established brands with fully automated manufacturing units.

In terms of secondary sales, Packaged Ghee is estimated to be sold at 6.7 million retail counters across the country, in addition to the dairy farms and ration shops. Ghee is available in various pack sizes starting from smaller, daily-consumption packs like 10ml, 50ml, 100ml; to the more common and periodic packs like 250ml, 500ml; to the family packs of 1kg, 2kg; going till institutional packs like 5kg, 10kg and 15kg.

Ghee sales has been growing consistently at a CAGR of 11% and is poised to accelerate due to the increasing awareness of health benefits of Ghee over other edible oils.

Ghee is getting more mainstream by the day and the prevalent myths of the modern world like “its a weight gainer”, “it has a peculiar smell”, “its not meant for regular cooking” etc are getting shattered. Non-dairy FMCG brands have started taking keen interest in the category and are launching products with a degree of differentiation or alternative positioning. There has been a revived focus on the quality, type and source of ghee correlating them with the health benefits. For example Ghee produced from Indian A2 cow milk (from five high-yielding milk breeds — Red Sindhi, Gir, Rathi, Shahiwal and Tharparkar) via traditional processes as prescribed in Ayurveda is in vogue and priced upwards of 700 Rupees.

A recent trend which is worrying the Indian dairy industry is the increasing penetration of dairy analogues in both off-the-shelf as well as B2B products. These analogues (essentially vegetable fats instead of milk fats) are cost-effective due to automated manufacturing and use of inferior non-milk ingredients. When portrayed as dairy products makes them difficult to spot by consumers especially in food preparations such as cheese.

*Brands seen above showcase the industry construct, only Vastu Ghee brand is a customer of Peri CRM*

*result of informal interviews, field observations and non-statistical surveys*

Peri CRM is looking to partner with regional Indian Ghee manufacturers, especially those with presence in tier-2, tier-3 cities and rural clusters of the country. Since the industry is traditionally run with low degree of automation, Peri is engaging with them in a unique way, to bring them up the automation curve, clean up their master data, and automate basic FMCG business processes in the sales function. We have mapped the automation needs of these companies very closely by working with their frontliners, field force representatives, managers, senior managers till the leadership. We have created a product which is best-suited to the evolving needs of such organisation and our consultants have gained sufficient expertise through a unique high-involvement implementation methodology. Below are the key differentiators of Peri CRM vis-a-vis the dozen other SFA’s (sales force automation) available in the Indian market: