Next ‘flush’ season key to cooling milk prices – Godrej Jersey CEO

  • Indian dairy products and cattle breeders have barely recouped their input costs, thanks to rising feed and fertilizer prices.
  • South Indian dairy brand Godrej JerseyCEO of Bhupendra Suri told Business Insider India that the harvest season could bring relief for the industry.
  • As milk margins plummeted, Suri explains how the company experienced 69% year-over-year growth from value-added products in its portfolio.

Indian dairy and cattle farmers have barely recouped their input costs this year, thanks to higher feed and fertilizer prices. As a result, dairy manufacturers have resorted to several price hikes.

The flood season, or the period when milk production is high, will play a key role in moderating milk and dairy prices. The hunting season begins in September and ends in March.

Although it is unclear how far prices will fall from a high base, Bhupendra Suri, CEO of Godrej Jersey, said the color season will bring some relief.

“Around September, October, there is a flush. Cows have more carbs and they have more milk to come. And because of the supply-demand equation, there is some price decline, which should relieve dairy margins. But we don’t know for sure how high the flush will be and whether prices will fall less or more. These are still very open questions,” Suri told Business Insider India.

The price changes, Suri said, should be reflected in October if other macro factors remain stable.

“Rainfall is impacting overall milk production and then there is a nodular cow disease in Gujarat which has created a severe shortage of milk. So we’ll see in the months to come. And industry margins will be a big question,” Suri said.

The
lumpy skin disease affected 11.2 lakh of livestock, including 49,682 deaths, in 165 districts. The Food and Agriculture Organization of the United Nations (FAO) has described it as “a vector-borne smallpox” which is “characterized by the appearance of skin nodules”.

“Purchase prices at unimaginable levels”

Farm gate prices for raw milk have increased by approximately 10-11% over the past six months. It also led to three subsequent increases in consumer prices.

Suri said that in the commodity market, dairy margins have always been tight. This year, it has reached a new high.

“There is massive inflation in the environment, inflation never seen before. The purchase prices of milk are at unheard of and unimaginable figures. Ukraine has had an impact on everything. So several things are leading to huge inflation in procurement costs and all the other costs of running the business,” Suri said.

The only silver lining, Suri said, is that volumes have increased. Due to the strong increase milk priceconsumers have switched to cheaper options or are buying smaller packs more frequently.

“I would say [volume increase] is a drop in the ocean compared to inflationary pressure,” Suri added.

Godrej Jersey generated a
revenue of around ₹12 billion in the financial year 2022. Previously called Creamline Dairy Products, the company was acquired by Godrej Agrovet in 2015.

Value-added products save the day

As margins shrink, the South Indian-focused Godrej Jersey has satisfied the high demand for value-added products such as curds, buttermilk, ghee, lassi, flavored milk, etc. . value-added products in its portfolio.

“The growth rate for at least value-added products will be a very high double-digit level, and milk will also show decent growth, largely because every element of the market that has been closed is opening up. The problem we will face is marginal,” Suri said.

According to Suri, milk occupies 70-80% of the market consumption share of the whole dairy industry. Of the rest, sour milk accounts for 10-12% and newer products such as flavored milk and yoghurt occupy the remaining share.

Due to the extended shelf life of value-added products, Godrej Jersey has focused on expanding its presence across the country. Currently, it has a strong presence in South India.

As part of its expansion plan, Godrej Jersey recently invested ₹20 crore in a milk processing plant in Keshavaram,
Telangana. It has a production capacity of 20,000 liters per day and will soon increase it to 70,000 liters of milk per day.

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