Dairy Industry

With India being the largest producer of milk in the world and dairy products being an intrinsic part of consumer diet, the dairy segment in India is poised to register double-digit value growth (10% FY21-FY25).

The key drivers of dairy segment are:

India leads global milk production, contributing ~1/4th of global production in FY22

Dairy products make up 22% of household food spend

The organized dairy market is projected to grow 24x faster than unorganized sectors over the next 5 years.

In the organized sector, the procurement volumes by Private and Cooperative players are comparable

80-90% of dairy demand is via B2C with higher gross margins (28-30%) vs (18-20%) in B2B business

Segments with high growth are: Paneer (25-35%), Ghee and Butter (12-14%) and 2x growth of Yogurt and Ice-cream

Segment share in Dairy Industry 2023

Due to the Cooperative driven model of the dairy industry in India, an increase in raw material prices cannot always be passed on to the customer. Compensating the farmers and supporting them using inputs like feeds and veterinary support not just fosters loyalty but also supports the cooperative ethos. However, it has a negative impact on margins. Constrained on both sides, there are three key techniques to protect margins:

  • Increasing scale of operations: Low margins and low growth can be fixed by increasing the procurement volume and improving asset utilization. This includes:
    1. Procurement Scale: Procuring in scale by working with farmers for cattle well-being, benchmarking and determining the right procurement prices, and cultivating long-term relationships with farmers
    2. Production and Distribution: The impact of higher procurement volume will directly translate to better utilisation of inbound logistics trucks, chilling centres, processing units, outbound logistics, and downstream sales outlets.
    3. Sales Growth: Qwixpert has worked with a leading dairy player to identify sales growth potential. Through micro-market segmentation and customer behaviour profiling, we identified a growth potential of 30%. This included better penetration rates, increasing coverage and scope of new product developments
    4. New Product Development: With the market for modern value-added products growing at a strong 17% CAGR, companies can explore new categories such as Organic products (milk and VAP growing at 30%), Whey drinks (11% growth), Yogurt (24% growth). Qwixpert has experience in working on feasibility evaluation for new product development. By identifying all potential products in the industry through market benchmarking and shortlisting based on operational feasibility, market lucrativeness, and growth potential, we have helped select top products for GTM with strategies to achieve a 10% share and Rs. 150 Cr. topline.
  • Improving the efficiency of unit economics
    1. Procurement Cost Reduction: Cost drivers for procurement include inbound logistics and the efficiency of the chilling centre. Through our in-house route optimisation tool, we can help devise the right route for inbound and determine the right fleet composition.
    2. Improving production efficiency: The major cost-head in manufacturing is utilities; by using our network of experts, we can help reduce manufacturing cost per unit by reducing wastages, improving yield by upstream quality management, and optimising the utilisation of the bottleneck processes.
    3. Optimising the product mix: The cost of servicing a market involves channel cost (margins), outbound supply chain, and ATL marketing spend; with a wide range of products with different shelf life, optimising the right product for the market becomes critical. This involves strategies such as increasing penetration (density) for milk while focusing on coverage enhancement for long shelf-life products.

With a strong growth outlook and consumer shift towards premium-high margin products, Qwixpert believes that understanding the nuances in customer preferences and taste profiles that vary by demography and region is key to cracking the market. We have experience in helping dairy companies understand and cater to the customer’s taste cost–effectively.

What can we do?

Our Solutions for Dairy Industry

Business Plan

We specialize in developing comprehensive long-term plans for business expansion – new geographies, adjacent products, and a new business division. Our team will work closely with you to create a strategic roadmap that maximizes your growth potential. Our roadmap will include investment requirements, organisation capacity building, and stakeholder requirements.

Product Strategy

Innovation is a crucial competitive edge, and our product strategy expertise can help you design the right offering for the customer. Based on consumer profiling and competitive benchmarking, we can identify the product gap in the market. Our skilled consultants will thoroughly evaluate the business case for new product development, helping you make informed decisions that align with your goals.

Export Market Feasibility Study

India is the largest producer of dairy products, and the country exports dairy products to middle-east; Qwixpert can help you identify the right export market based on financial lucrativeness and operational constraints. We will further deep-dive into the customer behaviour, channel profile, and regulatory landscape to develop a route-to-market plan for your product.

Procurement Growth Strategy

Milk farmers evaluate a multitude of factors, such as prices, credit periods, and additional incentives, before deciding to sell the product to a brand. Getting a high-quality and consistent supply of milk is critical for the dairy business. We can help you improve procurement volume by identifying the right catchment zones and designing farmer incentives (monetary and non-monetary) to increase the coverage of farmers and improve yield per farmer.

Sales Growth Strategy

Uncover untapped opportunities in the market with our sales growth expertise. We excel at identifying “white spaces” within micro markets – penetration and coverage gaps, allowing you to discover new avenues for growth. We will develop a go-to-market strategy tailored specifically for the new micro-market you’re targeting, giving you a clear roadmap for success.

Brand Communication and Marketing

Effective brand communication is essential for building a strong presence in the market. We help determine the right brand communication strategies based on your desired brand perception. Our experts work closely with you to develop a marketing mix that aligns with your brand values and resonates with your target audience.

Pricing Strategy

Channel and distribution partners play a crucial role as influences of customer brand preference, and identifying the right incentives for partners will be a crucial component of product costing. We can help you work within the constraints of highly competitive procurement and selling prices to identify the targets and incentives for channel partners based on the bottom-up working of their business costs.

Procurement Cost Reduction

Due to raw milk’s very low shelf life, the inbound logistics from farmer to processing centres need to be highly efficient but cost-effective as margins are very thin in the dairy segment. We can help you optimise the route and determine the fleet size for milk-collection vans based on the plant’s location and farmers’ location. By accounting for rapidly increasing bacteria formation, the objective will be to ensure that savings for inbound logistics do not impact the cost of downstream processing activities.

Enhancing Manufacturing Effeciency

• As milk is available in limited quantity, identifying the right mix of products to develop will result in a better bottom line. Considering the demand factors and taking into account the cost of producing different product categories and variants, we can recommend the right product range for your business
• Two challenges in dairy manufacturing are low utilisation rates and high wastages; we can help identify the factors leading to them, and by leveraging our network of experts, we can design techniques to improve the overall productivity of the plant

Outbound Logistics

We evaluate your primary and secondary logistics operations and identify optimisation scope through network design, route optimization, and better vendor negotiations. By streamlining your logistics processes, we help you minimize transportation costs and improve overall supply chain efficiency.

Our in-house products can help get to solutions faster

Our Technology

Our insights

In the financial year 2022, the industry has shown promising revenue growth with an industry median of 10%. However RoCE has taken a plunge from 25% in FY21 to a meagre 5% in FY22. High 2-digit inflation in fodder cost, Low milk yield and quality due to malnourished milch population and cattle diseases such as LSD among the key reasons for reduced profitability.


RM cost has increased 5% YoY against 1% degrowth in revenue in the same period due to higher milk cost resulting from COVID19 affected supply chain, cattle diseases such as LSD reducing milk yield, weak flush season as well as inflation in cattle feed prices. RM inventory days has witnessed a median growth of 16% from FY19 to FY23.


WIP days have increased 8x from 0.7 days to ~6 days indicating a strong uptake in production of Value Added Products

Sales and Distribution

Wholesale milk prices have increased 7% YoY in past 3 years. Dairy companies have also raised milk selling prices by 8-10% in FY23 due to sustained rise in milk procurement prices. Sales & Marketing costs have increased 46% since last year. Median Finished Good inventory is 19 days


PBT has plunged 33% YoY for the industry due to double digit growth in costs across the supply chain from CoGS, manufacturing, logitics and Sales & Distribution. Companies with >₹1,000 Cr. revenue have recorded growth of 12% while companies with <₹1,000 Cr. have degrown by -10% in FY22

Analysis: Growth VS RoCE

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