Analysis of the butter market in India
The relevance of research
Butter is a food product made by separating or churning cream obtained from cow's milk. In addition to nutrients, butter contains vitamins (A, B5, B9, B12, E, K) and minerals (calcium, phosphorus, potassium, selenium). Despite the presence of a large amount of vitamins and minerals, butter is practically not used as an independent food product, as a separate dish. Usually it is used in combination with other products (sandwiches, porridge additive)
Purpose of the study
Analysis of the state of the butter market, assessment of the market size, analysis of competitors, as well as identification of factors affecting the butter market
Content
Part 1. Overview of the Indian Butter Market
1.1. Main characteristics of the market
1.2. Dynamics of the butter market volume in 2016-2020 Market volume
1.3. Assessment of factors affecting the market
1.4. Butter Market Life Cycle Stage
1.5. Competition from substitute products
Part 2. Competitive analysis in the butter market
2.1. Major players in the market
2.2. Market shares of the largest competitors
2.3. Profiles of major players
Part 3. Analysis of butter production
3.1. Volume and dynamics of domestic butter production
3.2. Share of exports in butter production
3.3. Segmentation of butter production by regions
3.3.1. Production by Union Territories
3.3.2. Production by states of India
Part 4. Analysis of foreign trade supplies of butter
4.1. The volume and dynamics of imports of butter
4.2. Structure of imports by countries
4.3. The volume and dynamics of exports of butter
4.4. Structure of exports by countries
Part 5. Analysis of butter consumption
5.1. Butter consumption dynamics
5.2. Analysis of the results of tenders for the purchase of butter
Part 6. Price Analysis
6.1. Average producer prices by union territories
6.2. Average consumer prices by states in India
Part 7. Evaluation of factors of investment attractiveness of the butter market
Part 8. Forecast for the development of the butter market until 2025
Part 9. Recommendations and conclusions
Research excerpt
Part 1. Overview of the Indian Butter Market
1.1. Main characteristics of the market
Butter is a food product made by separating or churning cream obtained from cow's milk, less often from other cattle and small cattle. It has a high content of milk fat - 72,5 - 82,5% (more often - 78 - 82,5%).
Nutritional composition of 100 grams of ""Traditional"" butter:
carbohydrates - 0,1 g;
fats - 81,1 g;
proteins - 0,9 g;
water - 17,9 g.
In addition to nutrients, butter contains vitamins (A, B5, B9, B12, E, K) and minerals (calcium, phosphorus, potassium, selenium). Despite the presence of a large amount of vitamins and minerals, butter is practically not used as an independent food product, as a separate dish. Usually it is used in combination with other products (sandwiches, porridge additive) or as an integral part in the manufacture of more complex dishes (in dough, creams, soups). Butter can serve as a medium for frying other foods.
Butter, depending on the characteristics of the manufacturing technology, is divided into:
sweet cream - made from pasteurized fresh cream;
sour-cream - made from pasteurized cream, fermented with lactic acid starters.
Sweet cream and sour butter are divided into:
unsalted;
salty.
According to GOST 32261-2013 “Butter. Specifications” oil is produced in the range presented in table 1.
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For the manufacture of oil, the following main raw materials, functionally necessary components and food additives are used:
cow's milk;
cream;
skim milk;
buttermilk;
whole milk powder;
skimmed milk powder;
bacterial preparations and concentrates of lactic acid microorganisms;
edible salt;
food coloring - carotene (E160a).
Oil is produced in two ways:
cream churning method (mechanical churning of cream with a fat content of 35-40%);
conversion of high-fat cream with a fat content of 70-85%.
When churning cream, a higher quality butter is obtained, which has better organoleptic and structural characteristics, but this method is inefficient. That is why more than 90% of butter is produced by converting high-fat cream.
Butter is packaged:
briquettes in packaging foil or parchment;
in cups or boxes made of polystyrene;
in cans made of polymeric materials;
bars packed in film;
in gift and souvenir packing.
The Indian market of oil and fat products has a pronounced seasonality. It is in greatest demand in the autumn-winter period, and in the summer there is a traditional decline.
The seasonality of butter production is reflected in the seasonality of raw milk production. High production capacity of butter producers is observed from April to October.
Chart 1 shows the evolution of butter prices in India. Average consumer price for butter in 2020 ...Rs./kg, ...
Chart 1. Dynamics of butter prices in India, 2016-2020
The production of natural butter is expensive, so the vast majority of dairy companies are not engaged in independent processing and production of products, but are limited to packaging imported butter, margarine or spreads. However, this area of activity is of considerable interest to potential investors: despite certain problems, India has good opportunities to create a resource base, which is a clear competitive advantage.
1.2. Dynamics of the butter market volume in 2016-2020 Market volume
In 2016-2020 The volume of the butter market in India in monetary terms was growing, with the exception of 2018, when the market slightly decreased by ...%. At the end of 2020, the volume of the butter market amounted to ...
Diagram 3. Dynamics of butter market volume 2016 - 2020, million Rs.
The potential capacity of the butter market in monetary terms in 2020 amounted to ... billion Rs., ...
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1.3. Assessment of factors affecting the market
Let's consider the main factors influencing the market and, accordingly, demand.
Social (demographic)
During 2012-2018 India's population is on the rise. The increase in the population in 2015 was not only due to migration and natural increase, but also due to the formation of two new states of the Federation - the Republic of Crimea and the city of Sevastopol.
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General trends in macroeconomic indicators can also be traced in such a value as real incomes of the population, which determine the level of effective demand.
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The culture of consumption of butter in India has been formed. This product is traditional and most popular for a very long period of time. Butter is used in cooking and as an additive to ready meals.
Economic
GDP is a macroeconomic indicator that reflects the market value of all final goods and services (that is, intended for direct consumption) produced per year in all sectors of the economy on the territory of the state for consumption, export and accumulation, regardless of the nationality of the factors of production used. It is the main, most complete official indicator of public welfare. The absolute and relative values of GDP give an idea of the general material well-being of the nation and the dynamics of its growth / decrease, since the higher the level of production, the higher the welfare of the country.
The Minister of Economic Development noted that this year's crisis ""did not acquire a systemic character"" and the government ""managed to prevent its impact on the backbone industries and enterprises."" He noted that by the beginning of December, the volume of production in the manufacturing industry had almost reached the level of the previous year.
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Regarding India, experts predict a difficult and unpredictable period. Firstly, because the entire global economy has entered a recession triggered by the coronavirus. Secondly, there was a drop in world oil prices, which is extremely painful for the Indian economy. As a result, it is highly likely that in the medium term the butter market will also be negatively affected by negative processes in the global and Indian economies. The strength and duration of the impact will depend on: the demand for oil and gas and the level of world prices for them, the duration of the period of low prices, as well as the duration of the coronavirus pandemic in the world and India.
Let's take a look at some experts' assessments:
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Thus, experts disagree significantly about the real dynamics of India's GDP in 2020.
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The industrial production index shows the total volume of all industrial production, utilities, etc. in terms of money.
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Rate of inflation.
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technological
Milk is required to produce butter. Uneven milk production throughout the year and short shelf life of products affect price fluctuations in the market and increase dependence on processors.
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Political
Industry standardization
This standard applies to butter made from cow's milk and/or milk products and by-products of milk processing, intended for direct consumption, culinary purposes and use in other food industries.
Rosstandart signed an order on the introduction in India for voluntary use as a national standard from January 01, 2016 of the interstate standard GOST 32899–2014 “Butter with flavoring components. Specifications"".
The document applies to butter with flavoring components, made from milk and / or products of its processing with the addition of flavoring components according to the classic technology based on cream or using a technological scheme for obtaining a recombined product using the technological equipment available at the enterprise. All products are subject to general safety requirements, and general quality control methods are used in their manufacture. The range of butter with flavoring components, presented in the draft standard, includes 3 product groups - dessert, snack and delicacy.
The requirements for the quality of oil in interstate standards are regulated by organoleptic indicators, chemical - the composition of the product, the composition of the fatty phase, safety indicators - microbiological, the content of toxic elements, mycotoxins, antibiotics, pesticides, dioxins and radionuclides.
Manufacturers have a wide choice of oil packaging with flavoring components, both in terms of packaging materials, shape and packaging, as well as the mass of consumer and transport packaging. The standards set provisions for labeling; the procedure and frequency of product control, methods for monitoring oil quality and safety indicators, rules for transporting and storing finished products. The shelf life of the oil is determined depending on the properties and quality of the packaging materials used and the type of packaging.
Butter Quality Conformity Certification
Mandatory confirmation of the conformity of butter takes place in the form of a declaration in accordance with the requirements of the technical regulation of the Customs Union 033/2013 ""On the safety of milk and dairy products"" and consists in testing product samples and issuing a declaration of conformity based on the results of these tests. Thus, butter, as a dairy product, put into circulation in India, is subject to mandatory confirmation of conformity.
Import substitution policy
After India introduced special economic measures against a number of countries, butter from Finland, Australia, France and a number of other countries left the Indian market. At the same time, deliveries from New Zealand, Uruguay and Argentina continue, although the volumes of deliveries decreased significantly in 2015.
Fight against counterfeit. The Mercury system has been operational in India since July 1, 2018. Agricultural raw materials, some prepared animal products and some cereals must be accompanied by electronic veterinary certificates. The system contains information about the livestock products produced, moved and sold in India.
Credit policy. Today it is quite difficult to imagine the progressive development of the economy without the active participation of the credit system. It should also be noted that the assessment of the availability of credit resources for both legal entities and individuals is a significant indicator that allows assessing not only the demand for credit funds, but can also serve as a reflection of the real economic situation both in the region and in the economy as a whole.
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The Government of India is actively working towards the availability of credit funds. So the weighted average interest rate in 2016-2020. tends to decrease. Low stable interest rates will allow more confident business planning and consumer spending planning.
Table 4. STEP analysis of factors affecting the butter market
In general, the impact of macro factors on the butter market can be assessed as moderately negative.
It should be noted that seasonality affects the demand in the butter market. In the summer months, consumers try to reduce the calorie content of consumed products.
1.4. Butter Market Life Cycle Stage
The butter market is at the stage of maturity. This is evidenced by:
Increasing requirements for product quality on the part of the consumer;
Rising retail prices;
Reduction and enlargement of the total number of market operators.
The quality of the product is at a high level, so there is no need to make any changes to the basic characteristics of the product. The product is presented on the market by a large number of manufacturers. A distinctive feature of the butter market is fierce competition between producers, with major players increasing their share of the butter market in India.
The increase in domestic production is constrained by the lack of raw commercial milk in the domestic market, and the reduction in imports in 2016-2018. due to the increase in world prices for dairy products. As a result of reduced price competition, domestic butter prices are also rising.
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At this stage, the role of price competition increases, as the product is offered for sale by many manufacturers. The main emphasis in promotional activities at this time is on attracting a mass conservative consumer who prefers a well-known and tested product at reasonable prices.
At the stage of maturity, the main task of marketing activities is to extend the life cycle of the product and involves:
improvement of the trade assortment due to product differentiation;
deeper market segmentation and entry into new segments;
stimulating existing customers;
conducting competitive advertising campaigns;
search for new consumer groups and encourage them to make a purchase.
1.5. Competition from substitute products
The butter market is experiencing competition from substitute products such as spread and margarine. Butter is made on the basis of milk fat, spread - with the addition of vegetable, and margarine - only from vegetable fats.
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Currently, fatty foods that meet the following conditions are considered to be eligible for a healthy diet formula:
reduced calorie;
lack of cholesterol and trans fats;
balanced fatty acid composition, which is achieved by including sources of polyunsaturated fatty acids in the formulations;
the presence of vitamins and other biologically active compounds in the composition.
At the same time, the decrease in the purchasing power of the population and the reorientation of demand for traditional and cheaper dairy products contribute to the increase in the production of margarines and spreads, which consumers often perceive as a cheaper alternative to butter. The volume of production of margarine products in India significantly exceeds the volume of butter production.
Diagram 13. Volume of production of butter, margarines and spreads in India for 2016-2020, thousand tons
The butter market is moderately influenced by substitute products. The consumer's choice of a particular product depends on the traditional components of product use (habits, recipes in cookbooks), advertising activity, media exposure and pricing.
To reduce the negative impact on the part of substitute products, operators of the butter market can be recommended to use more active marketing communications of a reminiscent, inciting nature and the organization of the production of substitute products in parallel with the main production.
Part 2. Competitive analysis in the butter market
2.1. Major players in the market
At the moment, butter production in India is carried out by both large international holdings and small organizations and individual entrepreneurs.
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2.2. Market shares of the largest competitors
According to GidMarket analysts, in 2020 the main market players are ...
The calculation data of the Herfindahl-Hirschman Index in the butter industry show that this market belongs to low-concentration markets (market concentration is low). Mergers and acquisitions are allowed freely.
2.3. Profiles of major players
JSC ""XXX""
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""XXX Group of Companies in India""
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JSC ""XXX milk""
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Part 3. Analysis of butter production
3.1. Volume and dynamics of domestic butter production
An intensive increase in butter production in India began in 2014 after the introduction of special economic measures by India in relation to a number of countries. This made it possible to free part of the domestic market from imports and to occupy the vacant niche for domestic producers.
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The growth of butter production volumes is constrained by the following factors:
increase in the cost of production;
insufficient level of technical and technological modernization of butter producers;
unfavorable economic conditions for the implementation of investment projects;
lack of raw milk for the production of milk-intensive butter;
a decrease in competitiveness in terms of the price of manufactured dairy products (in comparison with imported ones) due to an increase in the cost of production;
a general decrease in effective demand for milk-intensive products.
Diagram 15. Dynamics of butter production in India for 2016-2020, thousand tons
In the structure of butter production by types, sweet butter accounts for the largest share - the share of output of this product in 2019 amounted to ...%. Other types of butter together account for about ...%.
Estimating the total revenue of the market leaders is complicated by the fact that market operators provide data on revenue volumes for the company as a whole, without a breakdown by industry. However, the general dynamics can be traced. As a consequence of the above-described feature of providing data on revenue, the revenue structure allows us to evaluate only competitive dynamics.
3.2. Share of exports in butter production
The key recipient countries of Indian exports are: ...
According to the results of the analysis, it was revealed that butter in India is produced mainly for domestic consumption.
3.3. Segmentation of butter production by regions
3.3.1. Production by Union Territories
The geographical structure of butter production covers the territory of all federal districts. The leaders of this production for the period from 2016 to 2020. are the Central, Volga and Siberian federal districts. Together, their share in 2020 accounted for ...% of the total production of the studied products.
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Table 8. Dynamics of Butter Production in India by Union Territories, 2016-2020
3.3.2. Production by states of India
Leaders among producers of butter - ...
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Part 4. Analysis of foreign trade supplies of butter
4.1. The volume and dynamics of imports of butter
Imports in the butter market, as noted earlier, occupy a small share.
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Diagram 19. Volume and dynamics of imports of butter in physical terms, 2016-2020, t.
4.2. Structure of imports by countries
In the structure of butter imports to India by sending countries in 2020, ...% falls on the CIS countries and ...% on non-CIS countries.
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4.3. The volume and dynamics of exports of butter
The volume of exports of butter from India in monetary terms in 2016-2019 showed negative dynamics and in 2019 amounted to ... mln USD
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The balance of exports and imports in the butter market in 2016-2020 was negative (the excess of imports over exports). Thus, the volume of butter imported from abroad is greater than that exported from India. The negative balance of foreign trade indicates the low demand for these Indian products in global markets.
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4.4. Structure of exports by countries
The volume of Indian exports of butter in 2020 amounted to ... t.
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Part 5. Analysis of butter consumption
5.1. Butter consumption dynamics
During 2016-2020 Butter consumption dynamics in physical terms was positive, except for 2018, when the market shrank by ...%.
Average annual growth rate for 2016-2020 amounted to ...%.
The reduction in volumes of consumption in physical terms in 2018 was caused by a reduction in the purchasing power of real incomes of the population, high inflation rates, in particular for food products, which led to a change in the structure of the consumer basket towards cheaper products and the choice of more affordable analogues of butter oils. In addition, due to the increase in the number of counterfeit dairy products, since 2014 there has been a gradual reduction in the consumption of many dairy products, including butter.
5.2. Analysis of the results of tenders for the purchase of butter
From the beginning of 2021 to 06.02.21/710/ about tenders were announced for the purchase of butter worth from ... thousand Rs. up to ... million Rs.
The organizers of the procurement through a tender are mainly state organizations, whose share is ...% of the total number of announced tenders for the purchase of butter,
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Part 6. Price Analysis
6.1. Average producer prices by union territories
In general, in India in 2020, the average prices for products of butter producers increased by ...% compared to 2019, and compared to 2016, the price increase amounted to ...%.
6.2. Average consumer prices by states in India
The average consumer price for 1 kg of butter in India in 2020 was ...
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Part 7. Evaluation of factors of investment attractiveness of the butter market
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Negative factors of the butter market investment climate dominate over the positive ones. A comprehensive assessment of investment attractiveness factors is “minus” 0,80 points - a neutral investment climate.
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Part 8. Forecast for the development of the butter market until 2025
We will analyze the market based on methods based on identifying trends over time, adjusted for expert opinion in the industry. The butter market in India is stable, however, the processes in the country's economy and external factors have a negative impact on the market, primarily due to rising prices for raw materials and the value of the currency, which leads to an increase in retail prices and a reduction in consumption of butter per capita.
Further development of the Indian butter market will largely be determined by the general economic state of the state and the dynamics of real incomes of the population.
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The government has prepared a three-stage plan for economic recovery until 2022. A complete lifting of restrictions on businesses is scheduled for the end of 2021.
The government intends to implement the plan by the end of 2021 in three stages:
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However, at the same time, it is worth noting that the government's plans regarding the pace and timing of economic growth after the crisis quite often do not come true.
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Part 9. Recommendations and conclusions
In 2016-2020 The volume of the butter market in India in monetary terms was growing, with the exception of 2018, when the market slightly decreased by ...%.
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In the long term, the butter market in India shows stability. However, the processes in the country's economy, as well as factors influencing from outside, have a negative impact on the market, primarily due to rising prices for raw materials and the value of the currency. In general, the impact of macro factors on the butter market can be assessed as moderately negative. A group of economic factors, a group of technological factors (with the exception of the use of functional additives), as well as a group of social factors (with the exception of the formed consumer culture) have a negative impact. A group of political factors, as well as the use of functional additives and a formed consumer culture, have a positive effect.
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GidMarket analysts predict ...
In general, the butter market is attractive due to its stability, the presence of a well-formed consumption culture, and the affordability of products for most of the country's population.
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Diagrams
Chart 1. Dynamics of butter prices in India, 2016-2020
Diagram 2. The ratio of imported and domestic products in the butter market,%
Diagram 3. Dynamics of butter market volume 2016 - 2020, million Rs.
Diagram 4. Revenue (net) from the sale of butter by union territories for 2016-2020, %
Diagram 5. Dynamics of the population of India, as of January 1, 2015-2021, million people, thousand people
Diagram 6. Population forecast in India for the period 2021-2024, million people
Chart 7. Dynamics of real incomes of the population of India, 2015-2020 (9 months)
Chart 8. Dynamics of India's GDP, 2015-2020 (Q1-Q3),% of the previous year, trillion Rs.
Chart 9. Monthly dynamics of the US dollar against the rupee, 2016-Jan. 2021, Rs. for 1 US dollar
Diagram 10. Dynamics of the inflation rate in India, 2016-2020, %
Diagram 11. Dynamics of the average interest rate on loans, 2015-2020, %
Figure 12. Life cycle stage of the butter market
Diagram 13. Volume of production of butter, margarines and spreads in India for 2016-2020, thousand tons
Diagram 14. Shares of the largest competitors in the butter market in 2020, %
Diagram 15. Dynamics of butter production in India for 2016-2020, thousand tons
Diagram 16. Butter production by types, %
Diagram 17. Dynamics of the total revenue of the largest producers of butter (TOP-5) in India, 2016-2020, billion Rs.
Diagram 18. The share of exports in production for 2016 - 2020
Diagram 19. Volume and dynamics of imports of butter in physical terms, 2016-2020, t.
Diagram 20. The volume and dynamics of imports of butter in monetary terms, 2016-2020, thousand dollars
Diagram 21. Average price for imported butter, 2018-2020, USD/kg
Diagram 22. The volume and dynamics of exports of butter in monetary terms, 2016-2020, thousand dollars
Diagram 23. The volume and dynamics of exports of butter in physical terms, 2016-2020, t.
Diagram 24. Balance of exports and imports, i.e.
Diagram 25. Average export price for butter, 2018-2020, USD/kg
Chart 26. Structure of butter exports by countries, 2020
Diagram 27. Dynamics of butter consumption in natural terms, 2016-2020, t.
Diagram 28. Forecast of butter market volume in 2021 - 2025, billion Rs.
Tables
Table 1. Basic types of butter
Table 2. Industrial production index by state of India (in % of the previous year), 2015 - 2020
Table 3. Average weighted interest rates of credit institutions on credit operations in rupees, excluding PJSC Sberbank (% per annum), 2015-2020 (Oct.)
Table 4. STEP analysis of factors affecting the butter market
Table 5. Characteristics of goods-substitutes for the product ""butter""
Table 6. Main companies participating in the butter market in 2020
Table 7. Main companies participating in the butter market in 2020
Table 8. Dynamics of Butter Production in India by Union Territories, 2016-2020
Table 9. Dynamics of butter production by states of India, 2016-2020
Table 10. Structure of imports by importing countries of butter in 2018-2020, t.
Table 11. Data on tenders for the purchase of butter over 1000 thousand Rs., announced from 01.01.21/05.02.21/ to / / .
Table 12. Average producer prices for butter in the Union Territories, 2016-2020, thousand Rs./t.
Table 13. Average consumer prices for butter by states of India, 2016-2020, Rs./kg
Table 14. Assessment of factors of investment attractiveness of the butter market
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