Prices of dairy products in India unlikely to rise in short term after lockdown hits demand, says CRISIL

Supply chain disruptions in the early weeks of the two-month nationwide lockdown and bread-and-butter issues for hotels, restaurants and cafes that had to shutdown, have materially reduced demand for dairy products in India, ratings and research firm CRISIL said in a report.

This is despite supply of most dairy products continuing during the lockdown, since they are categorised as essential commodities, it said.

The shuttering of hotels and dine-ins has also dried up off-take of skimmed milk powder and khoya, while products that can’t be made at home easily — cheese and flavoured milk – haven’t found their way back to the dining table in the same quantities as before the lockdown.

Demand for ice creams, which usually peaks in summer, which accounts for 40% of annual sales, has just melted away while rural areas were staying away from usual essentials such as butter and ghee due to falling incomes.

“To be sure, since the third week of April, supply chains have turned smoother, so demand for staples such as milk, curd, paneer and yogurt are expected to see a quick rebound, leading to on-year expansion in sales,” the report pointed out.

It said the pandemic may however sour the business for unorganised dairies because of pervasive contamination fears.

“Conversely, as consumers shift, revenues of organised dairies and packaged products should fatten,” the report said, adding that prices of milk and dairy products were unlikely to boil over as demand will be lukewarm in the near term.

Large brands such as Amul and Mother Dairy had already hiked retail milk prices by 4-5% last fiscal. They may not serve an encore, it added.

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