Rising fodder prices, coupled with recessionary pressures brought on an inevitable struggle for the dairy industry. The last few months saw most dairy brands raise their prices, particularly of milk. Market leader, Amul, was not immune too. Though it managed to hold the prices of milk and butter steady, a rise in its ghee prices is imminent. R S Sodhi, Managing Director of Amul, sat down with DH’s Lavpreet Kaur, to discuss dynamics his co-operative and the industry at large is negotiating presently, offering some perspective on the future of the sector.
What is the outlook for the dairy industry, especially in the post-pandemic phase fraught with recessionary forces in play?
The pandemic has made consumers conscious about what they eat. All over the world food inflation is at its maximum. Since COVID, we’ve seen consumers move more towards branded, affordable, packaged food. Dairy constitutes 20-21% of the food market and it is growing.
Prices last year increased by 8- 9% but in future price increases will be below the food inflation, which is 6-7% on an average. Demand for food is recession-proof. Our market is the. 1.3 billion stomachs in India, which will be 1.65 billion by 2047. So with more money to spend on protein and fat rich food which is tasty, with more urbanisation and now better availability choices available (shops, e-commerce), food is going to be an ever growing segment. Overall volume growth in organised branded products will in the range of 10 to 12%.
Talking of the urbanisation you mentioned, how are cities driving your sales?
Major part of our growth is coming from Tier-II and Tier-III cities. In those cities people are switching from using loose, unbranded or hyper-local brands to more trustworthy brands. The sales is more of smaller packets, as people choose to spend less per purchase. Most of the growth in our sales of chocolate and beverages are coming from markets in Bihar, Jharkhand, Eastern UP, the North-East, Odisha, Punjab, Himachal and Jammu-Kashmir.
There has been some hiccups in the supply of butter and ghee in this peak season. How are you dealing with it?
There was a major shortage in supply of fat. Given our large share in the butter and ghee markets, we’ve had to work around it. Butter supply has been normalised for over a month now. The pipeline for ghee is still tight. With winter getting delayed this year, milk production will be impacted. Now we’re conserving fat for the summer months, bracing for shortages, though I don’t foresee such a situation.
What is the latest update in your portfolio?
We are focussing on traditional sweets. We are emulating Nandini, which sells good quality sweets. We’ve launched sweets in various cities in the past two-three years and we’re now taking up sweet production wherever we have milk plants.
We’re also looking at organic food - grains, flour, pulses and sugar. People want organic food without pesticides, but are daunted by lack of trust and affordability of the products. Amul can meet these requirements, providing market linkages and testing facilities.
The third focal point is frozen snacks. We’ve already put up a big plant at Banaskanth, Gujarat, which is running at full capacity. We’ve got good response from the domestic and export markets.
What are your plans for the southern markets?
Until recently, we had no presence in the South. We were invited and supported by the Andhra Pradesh government. We’ve already started milk procurement from over 10 districts and started two plants. Next three years we will expand in Andhra and also Telangana. We’re putting up our own plant in Hyderabad. Part of our sales in Tamil Nadu and Karnataka will be covered by our Andhra operations and Kerala is still in planning stage. With our own plant in Goa, we doing exceedingly well.
How has the rise in fodder prices affected your products?
Feed costs account for 70% of the total milk production cost. When that rises, it impact the prices of milk, butter and ghee.
How do you see veganism impacting Amul’s market?
Although India is a young country, we know today’s generation gets influenced very fast. We are not worried in the long term. The three conditions to sustain in the food market for a long term are- taste, nutrition and affordability, vegan food fails to meet these conditions.