Liquid milk sales in India to sustain momentum despite fall in institutional demand due to Covid – report


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Growth of liquid milk sales in India is not seen being impacted by a sharp fall in institutional demand for dairy products due to a pandemic-led lockdown in the first half of the year, according to a report by credit ratings agency ICRA.

Speaking with, Gaurav Jain, Vice President (Corporate Ratings), ICRA, said household demand has been strong and is expected to push domestic milk production to beyond 200 million tonnes mark for the first time in the country.    

Gaurav Jain

“The first half of the current fiscal was bad in terms of institutional demand of dairy products due to lockdown spells. In the second half,  the situation is improving with relaxations but still the drop in institutional sales of milk products is expected to be around 15 percent in 20-21. However, the liquid milk sales would maintain a positive growth trajectory of 4-5 percent because of strong household demand,” Jain said.

Milk sales growth would continue to spike in the range of around 5 percent till 2023 due to the strong demand in the next three years, he further added.

According to Jain, sale of most of the value-added dairy products (VADP) is expected to remain flat in 2020-21 even as some product line like ghee can defy the trend with incremental household demand. The ice-cream segment would continue to witness massive erosion in business.

“The peak season for ice-cream business is April-June or the first quarter when nearly 70 percent of their annual sales happen. This year, it has been a complete wash out. And the business may continue to face serious problems in the next fiscal,” he said.

ICRA, in its report, has maintained a stable outlook for integrated dairy producers and negative outlook for pure ice-cream companies. Meanwhile, the organised integrated companies are expected to register small single digit growth at the end of the year (0 to 5 percent).

The drop in milk procurement prices at the farm gate seems to have emerged as a major cushion for the leading firms.

“In the pre-Covid days, the average procurement price of milk at farm gates was Rs 29-30. This has now come down in the range of Rs 24-25. But the dairy firms have not passed on the benefit to the retail consumers,” Jain pointed out.

Ritwik Sinha chased trucks in his childhood, without realising logistics would become a deep love for him. Inherently a television man, he now spends long hours interviewing key people for our very popular YouTube channel. Podcasts are next on his list. In his free time, Ritwik is either looking for a warehouse filled with commodities or hitching a ride on a cold truck – all of which yields great stories!

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