April 1, 2020
Demand for dairy products drops sharply
Bulk consumers such as hotels, restaurants and cafes (HoReCa) across the country have brought the shutter down and the inter-State trade of dairy products has stalled due to the 21-day lockdown which has drastically reduce demand for milk and milk products resulting in drop of sales.
Amul, the largest player of dairy industry has witnessed 25% dip in sales, while the Karnataka Milk Federation (KMF), the second largest milk co-operative in the country has seen a fall of about 30 per cent, with private players in some states have seen a sharper decline of around 40 per cent.
“The HoReCa segment demand has dropped drastically. People’s departure from big cities to rural areas caused the drop. We believe, going forward, the overall consumption will remain lower by about 10-15 per cent from the normal,” said R.S. Sodhi, MD, Amul.
KMF has witnessed low sales in the state of Maharashtra, Goa, Kerala, Telanagana and Tamil Nadu and also in Bengaluru and has be burdened with a surplus of about 10 lakh litres a day (LLPD) of milk, have plans to convert into skimmed milk powder, said Managing Director B.C. Sateesh.
According to data, KMF is now converting about 22 LLPD into SMP from the normal 15-16 LLPD. KMF procures about 68-70 LLPD, of which about 40 LLPD is sold as liquid milk, UHT milk and curd. “We have seen an increase in procurement by about 2 LLPD after this crisis as private players have stopped purchasing in the border districts of Kolar and Belagavi,” stated Sateesh.
The Indian dairy sector is largely dominated by unorganised players but the organised sector, co-operatives holds a 60 per cent market share, while the private sector accounts for the rest 40per cent. Point to note is that India’s annual milk output is estimated at 188 million tons for 2018-19.
The private sector, too, has witnessed a sharp dip in consumption. Hatsun Agro Chairman RG Chandramogan said the dairy sector is going through a demand destruction situation.
“The demand has dipped in the range of 20-40 per cent depending on the players. Obvious reasons are the shutdown of bulk consuming establishments (hotels, etc) and impact on informal sector employees. It is also due to movement restrictions between regions and States. There is demand for dairy products in metros and other regions, but manufacturers aren’t able to transport due to restrictions. We are seeing demand destruction in the dairy sector,” he said.
“Though the excess milk gets diverted to SMP, there is no certainty when the markets are going to open. So, SMP can’t help because the reconstitution of milk is not happening. The demand (from confectioneries, ice cream makers and HoReCa) is lesser-than-the-required for milk to get reconstituted. So, there is panic among players to buy more milk,” Chandramogan said.
Devendra Shah, Chairman of Parag Milk Foods said, “The milk consumption has dipped by up to 40 per cent and there is no optimism about SMP demand any time soon. Additionally, we are also facing supply chain and distribution challenges, including for packaging material, fuel, and distribution of products.” He further added that many private players are diverting their liquid milk to make cheese, butter, ghee and paneer.
Summer season is known for lower milk production by the cattles. surprisingly, milk output has increased in recent weeks despite the onset of summer. The milk flush, when the lactation of a milch animal peaks, was delayed this year because of the extended monsoon last year.