Who is interested in paying premium for Good quality milk in India ?

Everyone is talking about Quality of their dairy products today. Few of them are linking quality with the origin of milk, while others with the number of tests performed in the lab. The number of tests conducted on milk are  increasing day by day in the company’s promotion . Charging premium is the simplest and surest way to make your consumers perceive your product as high quality. Quality has different meanings to different stakeholders. Let us try to understand the three aspects of quality first.

Philip Crosby known for his seminal work in Quality management in his best seller Quality is Free; first published in 1979.

a. What is Quality ?

b. Is quality really free ? and

c. What is the economic side of quality ?

Someone asked him in a recently held interview , ” What is Quality ?”Philip Crosby, the Quality Guru explained quality as below .

Quality is not gold plating, It is gold in itself

“Conventionally, quality is always looked at as goodness, as gold-plating. Quality is viewed as an expense, a trade-off, something that you have to spend money on. But you can’t manage with goodness as your definition of quality. Quality is conformance to carefully thought-out requirements. So quality is free because it is already built-in. The expense of quality is nonconformance.“

So it is always important to define the requirements for quality first at various levels. In the case of milk all quality traits of the products are either linked to mythology (Krishna times) or Lab reports but no one is explaining about how the conformance is assured. Most of the websites ( particularly of app based delivery Cos) are not updated and showing old reports of dairy products .

Let us look at the economic side of Quality also. Quality Economics is a new field of study which is focussing on commercial viability of introducing a quality paradigm. Quality economics analysis emphasizes the rules that quality must follow from the perspective of economics, to seek the best combination of quality and economy and get the most economic benefits.The quality spent must not make the sales unviable.

Quality Economics

As per Quality economics, “Quality is not only an important reflection of enterprise core competitiveness of, but also the basic elements of enterprise economy. Quality economics analysis combines the disciplines of economics and quality management, which analyses the quality problems from the perspective of economics.“

Let us understand the economic side of quality with this simple example. Suppose your Quality team considers MBRT of procured milk as a most important parameter to produce high quality dairy products.

What will be the economic impact of the cost of milk procurement for a 30 Minute MBRT versus 120 Minutes MBRT MIlk? Apparently the process of milk collection looks similar and so would the costs. However a lot more is needed in capacity building of farmers on Clean milk production, Cleaning and sanitation, types of utensils, faster chilling, faster collection with additional logistics, more manpower, upgraded testing facilities, etc for producing 120 minute MBRT milk.

So you are left with two options: To procure it on your own or to get it from some already existing set up with a guarantee to match your quality and quantities requirements with complete traceability.

Which one will you be opting for ?

Under today’s scenario when cost plays an important role , then how many companies including large players can afford to pay a premium for high quality milk? All of us know the benefits of high quality milk, apart from a great pitch to consumers. It helps in extending shelf life which in turn increases the outreach of the brand. Still the companies are more interested in getting milk from Bulk suppliers rather than from technology driven milk procurement companies ensuring high quality with traceability.

The quality narrative of most of the companies is different at two terminal points of procurement and marketing in a dairy value chain. While the narrative is full of tall claims while selling to the end consumer, the same narrative is highly distressed while purchasing from the farmers.

Taking the economic approach, the quality of milk needs a major overhauling. Milk quality must be customised as per the value chain requirements of the respective companies. One may not look at all the possible goodness of milk but be sure of providing minimum Nutritional and health claims with safety to the consumers. Same is applicable to milk products also. It is only because of economics that the integrity of various dairy products is compromised. Cheese, Paneer, Khoa , ice cream, and Ghee are amongst a few products wherein the use of alternative fat has made the economics work very well by using pure dairy ingredients.

Quality Inclusion

There is a need for all the companies to find opportunities for value addition. All the companies which are charging high premiums from the consumers must also ensure quality by paying premium back to the farmers and other agencies involved.

Inclusion is the only mantra for making dairying sustainable so let quality also be made fully inclusive.

How does your company ensure quality to the end consumers ? Do share with us.

Source : A Blog by Kuldeep Sharma Chief editor Dairynews7x7 June 18th 2022