New Delhi, December 24, 2025 — India’s dairy industry, long defined by milk volumes and procurement economics, is entering a strategic turning point, shifting focus to value-added products (VAPs), advanced distribution channels, and impulse-driven consumption, according to a new sector analysis by Systematix Research.
As the calendar turns toward 2026, the narrative shaping India’s dairy landscape is no longer just about litres produced — it’s also about products consumed, channels chosen, and margins earned.
Cycles, Surpluses and Supply Shifts
The dairy sector traditionally oscillates through production-demand cycles every five to seven years. The post-Covid period (2022–23) was marked by a sharp drop in milk prices and broken supply chains, discouraging farmers from investing in cattle and weakening output.
From mid-2024, renewed engagement by dairy cooperatives and private players — especially through sustainable fodder programmes and intensified farmer outreach — helped reverse this decline. A robust flush season from **October 2024 to March 2025 saw milk production surge nearly 25%, creating an unexpected surplus.
Dairy firms responded by broadening product portfolios, strengthening cold chain infrastructure, and expanding last-mile reach to absorb inventory.
But 2025 brought fresh disruption:
- Unseasonal rains altered seasonal demand patterns
- Geopolitical uncertainties in northern milk belts disrupted supply dynamics
- Strong festive demand quickly eroded surplus inventories
This combination has tightened supply and firmed up procurement costs, even as retail prices remained stable post-GST cuts.
Value-Added Products: The New Profit Engine
If liquid milk remains the backbone of dairy consumption, value-added products (VAPs) are emerging as its most profitable engine.
Systematix analysts note significant momentum in categories such as:
- Curd, yoghurt and dahi
- Paneer
- Ghee
- Frozen dairy desserts and milk-based beverages
Notably, ice cream demand — once concentrated in summer — has expanded into a year-round category, with peaks observed as early as Ramzan. Similarly, milkshakes and flavoured milks are increasingly replacing carbonated drinks in on-the-go, impulse-buy scenarios.
This shift reflects changing consumer behaviour: dairy products are no longer just staples; they are becoming convenience-led, lifestyle purchases aligned with modern eating patterns.
Distribution Dynamics Evolve Rapidly
One of the most defining shifts in the sector is in distribution channels.
Systematix highlights a decisive trend away from traditional general trade toward e-commerce and quick commerce platforms:
- Quick commerce players such as Blinkit, Zepto and Swiggy Instamart are gaining market share
- Combined, general trade and e/Q-commerce now account for nearly 80% of dairy distribution
- Modern trade, while still relevant, contributes roughly 20% of sales but delivers lower margins and higher promotional costs
For dairy companies, this has prompted rapid reallocation of sales forces, logistics upgrades, and adoption of data-driven inventory and SKU management systems.
UHT Milk: Stable but Not Star
UHT milk continues to have relevance — particularly in metros and eastern states where shelf life and hygiene remain priorities. Yet its growth is now outpaced by value-added UHT formats such as flavoured milks, creams, and ready-to-drink dairy beverages.
Competitive Landscape: Legacy Meets New Challenger
India’s dairy market remains layered and competitive:
- Established giants like Amul, Mother Dairy and Nestlé remain market anchors
- Strong regional brands such as Hatsun, Heritage, Dodla and Parag Milk Foods continue to expand
- Next-generation challengers are innovating in:
- Packaging formats
- A2 milk propositions
- Functional and antioxidant-linked dairy products
- Localized consumer insights
Global players such as Lactalis are also recalibrating strategies, “Indianising” offerings while leveraging global R&D advantages.
Balancing Growth with Margins
Despite resilient demand, margin pressures persist. The GST cut boosted volumes, but also disrupted channel economics. As a result, dairy companies are exploring:
- Selective price increases
- Rollback of volume expansions
- Shift toward higher-margin VAPs
Systematix notes that companies with a higher VAP mix, disciplined channel strategies, and strong geographic diversity — such as Dodla Dairy — are comparatively better positioned to sustain growth and protect margins through FY28.
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Disclaimer
I do my best to share reliable and well-researched insights but occasional errors or omissions may slip through. Please view all content as informational.
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