New Delhi: India’s organised dairy industry is expected to maintain strong growth in the current financial year despite a slowdown in milk production, according to a latest assessment by CRISIL Ratings. While raw milk output is projected to expand by only 4%, organised dairy companies are likely to register 13–15% revenue growth, driven by steady consumer demand, price revisions and a growing contribution from value-added dairy products.
The report suggests that the sector is entering a phase where brand strength, product diversification and pricing power are becoming more important than growth in raw milk availability.
Milk Supply Faces Pressure
CRISIL Ratings estimates that India’s raw milk production growth will moderate to around 4% in FY27, compared with a 5% compound annual growth rate (CAGR) recorded between FY20 and FY25.
The slowdown is attributed to:
- Weather-related disruptions associated with El Niño, including prolonged heatwaves and weak monsoon conditions.
- Higher cattle feed and fodder costs, which have increased production expenses for dairy farmers.
- Lower productivity due to heat stress affecting milch animals.
These factors are expected to tighten milk availability across the country, increasing competition among processors for procurement.
Organised Dairies Expected to Outperform
Despite supply constraints, organised dairy companies are expected to achieve 8–10% volume growth, supported by expanding distribution networks and rising consumer demand.
Average retail prices of milk and dairy products are likely to increase by 5–6% during the fiscal year, enabling companies to offset higher procurement costs.
According to the report, revenue growth is expected to improve by 200–400 basis points over the estimated 11% growth recorded last fiscal, reflecting both stronger sales volumes and phased price increases.
Value-Added Products Drive Growth
The organised dairy sector is increasingly shifting its focus from selling bulk liquid milk to expanding higher-margin product portfolios.
Value-added dairy products not only command better pricing but also strengthen brand loyalty and improve profitability through greater product differentiation.
CRISIL expects dairy companies to record 8-10% growth in sales volumes, supported by continued consumer demand and portfolio expansion.
“The industry’s growth story is gradually moving beyond milk volumes. Brand strength, product innovation and value-added offerings are becoming key drivers of revenue expansion,” industry observers noted.
Margins Likely to Remain Stable
Although procurement costs are expected to rise because of limited milk availability, operating profitability is likely to remain broadly stable.
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CRISIL estimates that organised dairy companies will maintain operating margins of around 4%, as gradual retail price increases help compensate for higher input costs.
Rather than implementing sharp price hikes, companies are expected to follow a phased pricing strategy to minimise the impact on consumer demand.
Organised Sector Strengthening Its Position
The analysis is based on 37 organised dairy companies, representing nearly 60% of the organised dairy sector’s revenue.
The report indicates that organised dairies continue to gain market share by:
- Expanding branded product portfolios.
- Increasing penetration in urban and semi-urban markets.
- Investing in value-added products.
- Strengthening procurement and cold-chain infrastructure.
As consumer preference shifts toward packaged and branded dairy products, organised processors are expected to remain better positioned than the unorganised sector to navigate supply-side challenges.
Outlook
While slower milk production may create procurement challenges during the year, the organised dairy industry appears well placed to sustain double-digit growth through strong consumer demand, premium product offerings and calibrated price increases. The sector’s increasing focus on value addition rather than dependence on raw milk volumes reflects a significant structural shift in India’s dairy industry, where profitability and growth are being driven as much by branding and product innovation as by milk procurement.
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