Dairy Sector Check – Industry to Record Double-digit Volume Growth in FY25/26: Systematix

We attended a panel discussion hosted by Crisil titled ‘Strong Milking Growth’ which focused on the outlook for the dairy sector for FY25/26.

The key conclusions are:

1. Milk supply is expected to increase due to healthy monsoon and lower feed prices;

2. In FY25, industry revenues are expected to grow by 10-11%, led by 9-10% volume growth and unchanged prices (0-1%). In FY26, volumes are expected to grow by 10-11% and prices to grow by 1-2%, resulting in revenue growth of 12-13%;

3. The growth in new value-added products is expected to be 20%, while the growth of traditional value-added products is expected to be 18%.

4. Despite limited water availability, milk prices are expected to remain stable in summer 2024 due to high flooding and stocks; Average retail milk prices are expected to be flat in FY25, also due to a 6-8% growth in FY24;

5. Stable milk procurement prices (80-90% of total costs) in FY25 are expected to increase operating margins by 30-40 basis points in FY25 and 26;

6. Investment of over Rs 90 billion expected by FY27 in key milk producing states; investments from the cooperative sector are expected to outweigh investments from the private sector, but private entities are more focused on investments in value-added products;

7. Key elements monitored – increase in SMP stocks and weather conditions affecting milk supply.

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