After the announcement of complete lockdown on March 22, 2020, the Indian dairy industry initially witnessed a sharp contraction in demand from bulk consumers as Hotels, Restaurants and Cafes (HoReCa), tea stalls, sweet shops and so on, were completely shut. This was coupled with limited clarity on lockdown regulations, supply chain issues, which disrupted the sales of milk and milk products.

Meanwhile, dairy cooperatives continued to source milk from dairy farmers, possibly in volumes higher than usual, which led to oversupply of milk in the market. The slump in institutional demand was somewhat gradually offset by rise in demand from retail consumers as at-home consumption of food increased.

One of the main challenges the cooperatives had to experience in Q1 (first quarter) FY21 (financial year) was increase in procurement of milk. They procured milk not only from their producer members but also from dairy farmers that before lockdown were supplying milk to private dairies and unorganised players. As per one of the top players in the market, they sourced around 30 per cent more milk compared to prior months.

Private, small and unorganised dairy players either stopped or reduced their operations. This happened mainly because of a steep drop in demand for milk and its products from hotels, restaurants and cafes (HoReCa) segment, sweet shops and tea stalls. Dairy cooperatives, due to their commitment to source milk continued to procure it despite challenging business environment. According to FICCI, average procurement of milk by cooperatives increased by 7 per cent for Q1 FY21 compared with the same period last year.

Many dairy cooperatives had to alter their supply chains for ensuring uninterrupted supply of milk to consumers. It is estimated that the supply of milk improved significantly by 18 per cent from 288 lakh litre per day (LLPD) on March 27, 2020 to 340 LLPD as on June 14, 2020.