Stories

Indian dairy industry to grow by 9-11 pc in FY22: Report

The dairy industry is expected to grow by 9-11 per cent in 2021-22,
driven by a revival in economic activities, increasing per capita
consumption of milk and milk products, changing dietary preferences due
to rising urbanisation, according to a report.

The industry-wide demand to grow by 9-11 per cent in the financial year
2021-22, Icra said in a report maintaining a stable outlook for the
diary industry over the long term.

Revival in economic activities, increasing per capita consumption of
milk and milk products, changing dietary preferences due to rising
urbanisation, and continued government support to the dairy industry
will drive demand, it added.

Domestic milk production is estimated to increase by 5-6 per cent in the
financial year 2021-22, supported by a normal monsoon and early onset of
the flush season in some regions, the report said.

Post the moderate impact of the pandemic, the industry witnessed a
steady recovery in consumption across end segments, it added.

dairy farming - wikipedia

Rise in the dairy industry

Demand recovery was stunted by the resurgence in Covid-19 cases in the
first quarter FY22, and the impact was severe in institutional segments.
However, there has been a healthy revival in demand in recent months
with a sharp fall in fresh Covid cases and resumption in business
activities. Organised dairy segment, which accounts for 26-30 per cent
of industry (by value) has seen faster growth compared to unorganised
segment and we expect the trend to continue,” Icra Vice President and
Sector Head Sheetal Sharad said.

She said that growth in the liquid milk segment, which accounts for over
half of the dairy industry, is likely to remain stable (6-7 per cent in
FY22), while the majority of value added dairy products (VADP)
categories are estimated to grow by 13-15 per cent. However, demand
recovery of a few VADP categories such as frozen yogurt, ice-cream among
others, will be slow with consumers’ aversion for cold dairy products
post-pandemic, she noted.

See also  China's Loss May Become India's Gain In Shifting Supply Chains Post Covid-19

identifying opportunities, embracing change in the dairy industry | 2020-02-28 | dairy foods

“With the expected recovery in demand during the festive season, skimmed
milk powder (SMP) prices are likely to improve and leading to the
liquidation of stocks in FY22. Raw milk procurement prices, which were
subdued in FY21 due to weak demand, have increased in the current fiscal
supported by a recovery in demand.

Nevertheless, the higher procurement
costs are not compensated by an equivalent increase in selling prices,
which coupled with elevated fuel costs will result in contraction of 150
bps margins for dairy players in FY22, she added. Icra report further
stated that growth over the medium term would continue to be driven by
demand from stable liquid milk consumption growth and steady recovery in
institutional demand for the VADPs segment (especially from HoReCa segment).

how is technology revolutionising the dairy industry?

Most industry players continue to maintain high SMP inventory levels as
the procurement remained high in H1 FY22, the report said.

This along with the soft SMP prices is expected to result in additional
working capital debt requirements, though inventory levels are expected
to decline from FY23 onwards as demand-supply dynamics normalise, it added.

The rating agency also expects private players to continue their capital
expenditure on the VADPs segment, given its better margins.

Further, the industry will remain supported by the government’s
continued support and favourable cost of funds leading to growing
processing capabilities. Despite moderation in margins and increase in
long-term debt (to fund the capex) and working capital debt (mainly due
to SMP stocks), coverage indicators for integrated players are expected
to be comfortable, it said.

However, the financial risk profiles of pure-play ice-cream
manufacturers are expected to be under pressure in the near term given
the slow pace of recovery, it added.

 

Related Articles

Leave a Reply

Your email address will not be published.

Back to top button
%d bloggers like this:

Adblock Detected

Please consider supporting us by disabling your ad blocker