Supply chain disruptions in the early weeks of the nationwide lockdown, and bread-and-butter issues for hotels, restaurants, and cafes, have materially reduced demand for dairy products.
This is despite the supply of most dairy products continuing during the lockdown since they are categorized as essentials.
The shuttering of hotels and dine-ins has also dried up off-take of skimmed milk powder and khoya.
According to a report by CRISIL Research on the state of the dairy industry and supply chains, products that can’t be made at home easily – such as cheese, flavored milk and also khoya – 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 (accounting for 40 percent of annual sales) has just melted away. Rural areas, which are feeling the income pinch more, seem to be staying off butter and ghee, the report by global analytics firm has said.
To be sure, since the third week of April, supply chains have turned smoother, so the demand for staples such as milk, curd, paneer, and yogurt are expected to see a quick rebound, leading to an on-year expansion in sales, CRISIL said.
The pandemic, however, may sour the business for unorganized dairies because of pervasive contamination fears.
Conversely, as consumers shift, revenues of organized dairies and packaged products should fatten.
Overall, demand for milk and dairy products would be lukewarm in the near term, so prices are unlikely to boil over, according to the report.
Large brands such as Amul and Mother Dairy had already hiked retail milk prices by 4-5 percent last fiscal. They may not serve an encore.
