There is no slowdown in dairy industry, reiterates Amul MD
Economic slowdown has impacted the growth of most consumer product companies. Have you felt the pinch as well? How has the demand been for you?
We have been hearing and watching about the economic slowdown but actually as far as the dairy industry is concerned, we do not see any slowdown, because we are dealing with the mass consumption items. People have not reduced consumption of milk or any milk product like ice cream or beverages or cheese or butter or ghee. In fact, in the first six months, our cumulative growth is around 26% or 27%. Last month, it was 30%. No doubt some growth has come because of increase in prices of commodities, but overall, across all product categories, we have seen growth from 10% to 30% and even 40% in case of dahi (curd) or fresh products. So slowdown may have come in some other product categories, but I do not see any decline in sales as far as dairy is concerned.
Ordinarily do you see an uptick in milk and dairy consumption during festivals? What percentage of your total sales is seen during the festive season? What kind of uptick do you usually see?
In India, festival means celebration and celebration means coming together, eating together amd enjoying it. When it comes to eating food, dairy is the most important. We have seen that across all religious festivals — Eid, Raksha Bandhan, Shivratri, Dussehra, Diwali — demand of milk and other milk products increase 10% to 20%. People make lots of desserts at home, consume a lot of milk products.
Some of the FMCG companies have flagged off that consumer demand have been down trading. Have you witnessed any of such trends? What are the smaller packs that are looking up in this market?
This small pack sale is definitely increasing at a much faster rate than the bigger packs and it is coming across in all product categories, starting from milk or dairy whitener or ghee (Rs 20 packets) or ice cream (Rs 5 or Rs 10). Smaller pack demand is coming from the poorer urban as well as rural areas. Depending on the product category, 20% to 30% sales is now contributed to small packs because now everybody wants to consume ice cream or cheese or beverages or butter. You cannot say only the middle class or upper middle class people are consuming, lower middle class and below that also, people are consuming butter, cheese, milk power, etc.
Can you give us a trend analysis of the rural sales for you?
Definitely. In the last few years, as we expand in 10,000 plus villages for distribution and with any shop having 5,000 to 10,000 population per outlet, sale is more than the urban areas because rural demand is only for small packs. But in rural areas also, they want branded packed food. They are consuming what urban consumers are consuming because now they are exposed to media and people are earning better and have the capacity to buy. So the line dividing rural and urban as far as dairy consumption is concerned, is fading away.
Milk prices have been rising. They rose about 15% from FY19 bottom. Will the dairy profitability be under pressure because of high milk procurement cost?
When you talk about dairy profitability, are you talking about 10 crore milk producers or you are talking on behalf of a few diary processors? The milk price increase in the last three years is only 4% to 5% to the consumer. Definitely compared to previous year, the price paid to the farmers has increased by 25 to 30% which was required because the cost of production was increasing and farmers were moving away from dairy because they were not getting even the cost of the feed.
Today, the cost of feed has increased by 45% compared to the previous year. We were selling at Rs 15 per kg. Cattle feed today costs Rs 22/kg and then to get around six to eight litres of milk from a cow, you have to feed 4 kg cattle feed, 20 kg green fodder and 10 kg dry fodder. The cost of feeding cost is coming Rs 22 to Rs 25. Last year, farmers were getting only Rs 18 to 20 in some parts of India. Now in Maharashtra, processors have to pay Rs 30/kg. So, they are under pressure.
Source : economictimes.indiatimes