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Effect of Covid-19 pandemic on dairy industry
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Tuesday, 14 July, 2020, 08 : 00 AM [IST]
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Gaurav Gairola
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It is not the strongest species that survive, nor the most intelligent, but the most responsive to change -- Charles Darwin
Today the COVID-19, which shook the world to its roots, is a reality and we are living with it. We can very well see ourselves adjusting to the new ways of life, working and thinking. The commercial ads in Doordarshan during early 90’s illustrating the importance of washing hands before we eat food, received no audience then but now it has become a must to-do activity for all of us. Organisations are no different and they behave like an entity, at time.
Food and dairy industry is more dynamic and never goes into wait and watch kind of state. It keeps on evolving while maintaining the existing standards during the calamities and pandemic.
Dairy industry, at its core, not only ensures that farmers who are dependent on it should flourish but also participate in overall well-being of Indian society. In this article, we will try to study the situation from two perspective namely 1) impact on today’s business 2) opportunities for future; more from a cause and effect based methodology as trusting data too early when pandemic is not over, will be an injustice that we will be committing in either understanding the overall impact of this pandemic or in predicting the future. It does not mean that we will not quote data, we will but wherever necessary and within the boundaries of this article.
Milk production in the country is 87.7 million tons, as per the data from NDDB out of which 23 per cent is handled by dairy cooperative, 38 per cent by private dairies and 38 per cent is consumed locally.
Let’s take a deep dive category wise.
Market milk :- Consumption comes from Households, road side tea sellers, restaurants, hotels, big weddings, local sweet shops, temples etc. However the demand of the packaged milk increased because of the more demand of hygienic products, uncertainty on the end date of lockdown adds to long shelf life items like UHT milk and we saw many families stocking the food stuff as their back up plan.
It’s the consumption from other participants that suddenly dip to zero was a bigger set back. With no wedding, no offices running, no outside weekend dinner and shutting down of sweet shops hit the industry as well as farmer very hard.
From last few months and same pattern will continue for some more time, difficult to estimate till vaccine is not in place, we are producing milk more but converting & consuming less. Thus we read in news paper that farmers are draining their milk with no availability of buyer or limited cash flow with the producer.
Cultured Milk :- Curd, Buttermilk, Masala Chach, Sweet Lassi losses there ground immediately. In order to keep oneself safe most of us have avoided the food known to enhance cough and cold. Regional and smaller brands relying completely on these product for their revenue found no shelf to fill with innovative products or new recipe like that of Misti Doi or Mango Lassi or Hing Chach and thus losing a majority of sales for this year.
Fat rich products :- Ghee and Butter were cornered by the consumers from their diet to make sure that they don’t put on additional weight, as most of us were lock downed at our residences and working from home with no possibility to burn those extra calories. A large portion of ghee is used by temples in rituals, which appears to be a phenomenon of past with people not allowed to accumulate in the religious places.
On the go and functional products :- Products like milk shakes, flavored milk, whey drink, protein drinks were not preferred by manufacturer looking at the consumer buying behavior and struggle to get it enlist in the essentials food category.
Ice-cream :- Our sincerest sympathy are with the manufacturer who prepared themselves for 2020 summer by procuring milk powder, butter, flavor, sugar and machinery for expanding existing capacity, as during the period of 2014-19 this industry grows at CAGR of 14.1 per cent and was expected to ride with double digit growth in next decade also.
Manufacturers are burdened not only with non-moving inventories, expiring raw material but also uncertainty for coming two year, if we believe that vaccine is 18-24 months away from today. They will have to write off unsold good, raw material making the current situation more worse for them.
As every dark cloud has a silver lining, this pandemic has given an opportunity to dairy processor to look beyond the usual and safeguard their interest. To unleash the potential they have to engage themselves into product development and new ways of presenting their usual offering.
Product for immunity boosting like haldi doodh, camel milk, goat milk is gaining grounds. Demand for products made from organic raw material will increase. This set back will surely make the manufacturer to think, to be present in one or two categories which were termed as essential during this pandemic.
This way they will be able to at least run their business and be little less effected. More demand of sustainable packaging, long shelf life product with optimized storage space will rise. Food authorities may have to revisit the criteria for declaring the product safe and fresh.
A bigger role will be played by the supply chain to find a solution of how to minimise the loss incurred this time due to inventory carrying cost and ensure a win-win for all client and vendors. Statistician may predict the worse in future but surely it will not be the case as industries and industrialist are already engaged in preparing the bright future for themselves. Coming days will pose more threats and challenge to mankind but human being will surely evolve themselves as a better and stronger being in days to come.
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