After Amul, Mother Dairy hikes milk prices; dairy products set to be pricier

Dairy companies, Amul, Mother Dairy and Parag Milk Food increased liquid milk prices from Monday on the back of a rise in production costs and the impact of the heatwave stress.  There are indications that this could also lead to a hike in prices of other dairy products such as curd in the coming days. At the same time, prices of milk-based products such as “mithai” and ice creams may not see a direct impact for now.

Meanwhile, dairy majors say the rise in milk prices is unlikely to push headline inflation.  Milk and products have a weight of 6.6 in the Consumer Price Index (CPI) which is the base for retail inflation. Data show retail inflation of milk and products are on decline since April last year.

On Monday, Mother Dairy announced a ₹2 per litre hike in milk prices across all operating markets. “The increase in consumer price is mainly to compensate the producers for increased production costs, which have been on the rise for over one year,” a company statement said.

“We plan to increase the price by ₹2 a litre. We have not decided on the date. But it should happen in the next 2-3 days so that communication can go to all packing plants and to sync with inventories,” said Rahul Kumar, COO of Parag Milk Foods.

3-4% hike in MRP

Late on Sunday, the Gujarat Cooperative Milk Marketing Federation (GCMMF), which markets milk and milk products under the brand name Amul, said: “The increase of ₹2 per litre translates to a range of 3-4 per cent increase in MRP, which is much lower than average food inflation,” it said. Both said the last revision took place in February last year.

Sources said prices of dairy products such as curd and butter are also likely to see some rise in the coming days, without specifying quantum of hike.

RS Sodhi, President, Indian Dairy Association, said: “In last 25 months only three times, the milk prices have been raised, and only ₹2 per litre each time. It translates to 5 per cent annual increase, which is less than the food inflation. We expect the dairy industry to pass on 70-80 per cent of this increase to farmers. We do not expect any sizable appreciation in prices of milk products in near future. It is not necessary that milk products prices have to go up whenever there is an increase in milk price as it depends on various factors.”

Meanwhile, sweets manufacturers do not see much impact on the overall market. According to Manish Aggarwal, Director of Bikano, Bikanervala Foods Pvt Ltd , the recent surge in milk prices is likely to have an impact on consumers and small sweet shop owners, leading to higher prices for milk-related products. However, he said the demand for ‘mithai’ and other milk-based products may not be significantly affected by these rising costs.

“We are absorbing the increased cost of milk and have no immediate plans to pass it on to our consumers. We are carefully balancing consumer price sensitivity with price elasticity and competitive dynamics. While we aim to maintain a steady volume momentum, if this scenario persists, we may need to consider adjusting the prices of our products in the future,” he said.

Another milk-based product, ice cream, is also not likely to see direct impact of current price hike, though manufacturers do not rule out some indirect impact. “Higher prices of cream and butter will impact the cost of ice cream. In other words, rise in milk prices will have indirect impact on ice cream as butter and cream are by-products of milk,” an industry source said. Further he said that prices of skimmed milk powder (SMP) are stable at approximately ₹230 a kg, which will provide some cushion. Also, SMP is not exported as global prices is low, which is also good for the industry.

(With inputs from  K V Kurmanath, Hyderabad and Prabhudatta Mishra, New Delhi)