India offers significant opportunities for the Australian dairy industry but it will take time and patience to unlock these, according to a young Australian agri-food development specialist.
Karensa Menzies, who has worked in numerous roles within the Australian dairy industry, was selected to attend the 2018 Australia India Youth Dialogue (AIYD) in India earlier this year. The AIYD is the leading bilateral young leaders' dialogue between Australia and India. Each year it brings together 15 Indians and 15 Australian's under the age of 40, all demonstrated leaders in their fields, to engage in a four-day dialogue about matters that affect the bilateral relations between the two countries.
Ms Menzies, who was selected to represent agriculture at the dialogue, which this year had a theme around digital disruption, said the dialogue aimed to foster connections between emerging leaders from the two countries. These connections would be critical in helping unlock future opportunities for both countries.
India's dairy industry faced huge challenges, she said. Although it was the largest producer of dairy in the world, it had a growing gap in meeting demand. Production growth had stagnated at about 3-4 per cent a year, while the expanding middle class was driving an increase in demand of about 8 per cent a year, particularly for higher quality products. With an emphasis on healthy lifestyle, the middle class was similar to that in Australia in that it was seeking clean, green, safe and ethically-produced food.
Ms Menzies said rising disposable income, education and 'globalisation' of the expanding middle and upper class was driving an increased awareness and focus on food quality and health as well as ethical values and considerations of the food supply chain, particularly social and environmental.
India was now the world's fastest-growing major economy, averaging more than 7 per cent growth during the past five years. Its population sits at 1.311 billion people, and is expected to overtake China's to become the largest in the world by 2022. It is also expected to have become the second largest global middle-class market by 2022, overtaking the US but falling shy of China.
"The ongoing challenge with competing urbanisation and available arable land, agricultural resources and particularly (quality) water will place great pressure on India's capacity to meet the escalating, and increasingly sophisticated, food demands of its people," Ms Menzies said.
Although India aspired to significantly increase domestic dairy production toward self-sufficiency, it would appear that the demand for premium quality dairy products was growing more rapidly than local capability and capacity.
"They have a huge gap in capability," Ms Menzies said. "This might be best illustrated by the fact that the shelf life of their fresh pasteurised milk is one day. Here it's 18 days. So although quantity is obviously one side, quality is another critical side."
Ms Menzies said there were still a lot of sensitivities around trade. India's agri-food policies were skewed to supporting domestic self-sufficiency and the country applied significant technical and non-technical barriers, including tariffs, to many agricultural imports.
The challenges with what happened to a product once it was in the country could be another hurdle for Australian dairy companies exporting there. "Say camembert cheese or other perishable dairy products - you actually don't have confidence about what happens when it hits the tarmac because of their cold supply chain practices and there's no education (about how to handle the product). So there's significant risk involved," she said.
Ms Menzies said this meant there was an opportunity in helping India build its skill and capability in the dairy sector, right across the supply chain - from animal husbandry to processing and food safety. The AIYD and the connections created out of it could play a role in that.
"Because they just don't have the capability or the capacity to produce in the quantities that are required - their high-end niche market is growing at 10 to 14 per cent a year, cheese at 15-30 per cent - and you need those personal connections for that to happen," she said. "What you are building is cultural and practical understanding and trusted networks.
"Eventually as you build that capability, if you've developed understanding, that trust and the personal connections, you're in a much better position to mitigate risk and navigate exporting our high-value products."
The dialogue was an opportunity to discuss the challenges of increasing urbanisation and the effect on the rural workforce and capacity in both Australia and India. The opportunities and challenges that digital technology would bring to productivity and the shape of future workforces were discussed.
"Perhaps not surprisingly, India and Australia have many similarities as well as complementary gaps (such as market size and diversity) that we can draw strength from," Ms Menzies said.
The key was understanding where the differences were and how to work with these. "Cultural understanding is a big one, and the appreciation that means to the effective implementation of knowledge, practice change, or technology requires nuanced local or regional understanding," she said. "For example, farm sizes in India range from 2-25 hectares, and the presence of formal (organised) and informal (unorganised) market channels."
It also had an impact on how distribution channels were developed. "Over here if you have a distribution channel running around Melbourne or anywhere, labour costs are a big consideration," Ms Menzies said. "So you want a truck as big as you can get to put as many crates of milk or cream or cheese or whatever in it to optimise labour. Over there, efficiencies are more about time. So you are going to have multiple channels on the back of a scooter or motorbike.
"It makes you think outside the box a bit more - it is more about disruption of processes rather than evolution."
The key to helping break down trade barriers was developing trust. "One thing is that widening gap that you need to humanise," she said. "This is what a lot of discussion was around with us young leaders.
"When you hit barriers, it is really about navigating and knowing where you have a credible source, and that this country (India) basically isn't trying to take advantage of you.
"So if you build that foundation, you kick off the platform to start building those relationships and connections at all different levels.
"Agriculture is such a sensitive issue when you are talking about the free trade agreement or equivalent ... and we need to be really respectful of the needs and drivers of both countries. To constantly be considering and aiming at mutually beneficially exchange."
Ms Menzies said the recent decision by the Indian Government to increase tariffs on pulses had shocked Australian growers. "It was a shock because our product was on the water and you can't do anything about that," she said.
But she said if time had been spent in developing relationships with people in their supply chain and understanding the drivers of policy decisions there, the increase might not have been such a shock.
Ms Menzies, who is now an independent consultant and contractor, has been working on projects in India for the past two years. Many of her initial contacts there had come about as a result of her previous involvement with the Nuffield scholarship program.
These have grown to expand not only a comprehensive understanding of India's contemporary dairy value chain and sector, but also broader agriculture sectors such as grains and pulses, as well as the skill development and social enterprise sectors.
"The AIYD is an experience that informs not only your ongoing (critical) thinking and your capacity to contribute meaningfully to local and global initiatives and conversations, but also a platform of tight-knit, top-notch alumni that are accessible at any time," Ms Menzies said. "This will assist me with my ongoing work between the two countries."
She also plans to share her knowledge through industry forums.
"From my personal point of view, I've been invested in and supported to participate and contribute to AIYD, so I want to be able to give back and strengthen those relationships for the broader benefit of our rural communities across Australia and India," she said.D