The State of the Economy podcast recently featured an interview with Srideep N Kesavan, CEO of Heritage Foods Ltd, to discuss the current state of the dairy sector in India. Despite being the world’s largest milk producer, generating nearly 240 million tons of milk annually, the dairy sector in India faces several challenges. The industry is fragmented, unorganized, and lacks technological advancements, with over 60 million cows and a large number of small-scale dairy farmers.
Kesavan highlighted the slowing growth in milk production, with cow milk production increasing but buffalo milk production stagnating. This has led to a slowdown in the overall growth rate of milk production, from a 10-year CAGR of 5.5% to 3.5% in recent years. He also discussed the recent increase in milk prices, attributing it to inflation and rising production costs. However, he emphasized that the dairy industry has seen price stability for a long time, and the recent price hikes are necessary to maintain balance in the market.
A significant challenge facing Indian dairy farmers is the low milk yield per animal, compared to global standards. Kesavan suggested that improving feeding practices is crucial to increasing milk yield, with balanced diets and concentrated feed essential for boosting productivity. The cost of quality feed remains a significant barrier, but some farmers are beginning to adopt better breeding practices.
The discussion also touched on the evolving consumer behavior in India, with a rise in demand for nutritious dairy products such as probiotic buttermilk and paneer. Kesavan noted that urban dairy consumption is still relatively low, but with increasing organized retail and higher spending power, dairy consumption is poised for substantial growth.
Looking to the future, Kesavan is optimistic about the dairy sector’s potential. With organized retail penetration still below 30% in India, there is significant room for growth. As consumption per capita increases and new dairy products find their place in the market, India’s dairy sector is expected to continue growing, driven by both supply-side improvements and changing consumer preferences. The sector’s growth will be driven by the increasing availability of organized retail, higher spending power, and the adoption of better breeding and feeding practices. Overall, the Indian dairy sector has the potential to become a significant contributor to the country’s rural economy, but it requires addressing the challenges it currently faces.