India’s dairy segment grows despite global slump

Photo: iStock

India has bucked the trend shown by the globally depressed dairy sector, and is expected to witness significant growth this year.

The largest producer and consumer of milk globally, India should see 15.6% year-on-year increase in revenues in the 2016 financial year, according to data by Research & Markets, an analytics firm. 

While traditionally the country’s dairy sector has largely engaged in producing liquid milk, the past two decades have seen a change in demographic and dietary patterns and now value-added products have gained importance, with segments such as ice cream, yogurt, cheese and flavoured milk etc each seeing wide acceptance in the market. 

However, during the last year, milk prices have increased due to a rise in cost of cattle feeds, with this milk inflation adversely affecting the margins of the companies involved in production. 

With weak import demand and oversupply, global milk prices have remained low over the last year, exacerbated by a slowdown in China's economy, the abolition of the European Union's dairy-production quotas and Russia's ban on EU produce. 

China's dairy sector, which was valued at US$40.6bn in 2013, is currently experiencing oversupply to such an extent that farmers are pouring milk down the drain and slaughtering cattle. 

The sector is also suffering on account of the global fall in milk prices and the quality issues in domestic milk production. Locals who can afford it prefer to consume only foreign brands of milk and milk products, thereby causing a decrease in demand. 

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