The Hindu Business Line : Mother Dairy hikes milk prices again

This marks the sixth such increase undertaken by it since the start of 2006 — the previous hikes happening in October 2007, August 2007, January 2007, September 2006 and February 2006.

Harish Damodaran

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New Delhi, June 2

Mother Dairy Fruit & Vegetable Private Ltd (MDFVPL) has yet again raised prices of milk sold in the National Capital Region by Re 1 per litre.

This marks the sixth such increase undertaken by it since the start of 2006 — the previous hikes happening in October 2007, August 2007, January 2007, September 2006 and February 2006.

In the latest round, the National Dairy Development Board-owned subsidiary increased the retail price of only full-cream milk, containing six per cent fat and nine per cent solids-not-fat (SNF), from Rs 24 to Rs 25 a litre.

Toned milk (three per cent fat and 8.5 per cent SNF) rates have been left unchanged at Rs 20 a litre.

Since February 2006, prices of full-cream milk have gone up from Rs 19 to Rs 25 a litre, while moving from Rs 15 to Rs 20 in the case of toned milk.

Indications are that Mother Dairy’s rival, Gujarat Cooperative Milk Marketing Federation (GCMMF), will follow suit by announcing a similar hike for its full-cream ‘Amul Gold’ variant in the next few days.

The two together account for a bulk of the National Capital’s estimated 40 LLPD (lakh litres per day) packed milk market worth over Rs 3,000 crore.

Tops share

Mother Dairy alone sells 22-23 LLPD (of which about seven LLPD is constituted by full-cream milk) with GCMMF a distant second at 8-8.5 LLPD, followed by the state-owned Delhi Milk Scheme (three LLPD) and private brands such as ‘Paras’ and ‘Gopaljee’ (two LLPD each).

Mother Dairy’s latest increase is unlikely to be welcomed by many, more so because it is said to have made a killing during the recent flush months from December to March, when the cost of raw milk to its dock was about Rs 17 a litre.

This milk was, moreover, of higher 6.5 per cent fat and nine per cent SNF content, as against the three per cent fat and 8.5 per cent SNF for toned milk being retailed at Rs 20 a litre.

Revenue

“For every 100 litres of toned milk sold, they would have been able to dispose of at least 3.5 kg of surplus fat and 0.5 kg of SNF, which at prevailing rates of Rs 135 a kg for ghee and Rs 125 a kg for skimmed milk powder would have yielded an extra Rs 500 or so.

The total revenue from selling 100 litres of toned milk would, then, have been Rs 2,500, compared to the corresponding raw milk cost of Rs 1,700”, industry sources pointed out.

Even if one deducted costs of processing (pasteurisation, plastic film, labour and other overheads), local transport, trade commission and other marketing expenses that add up to Rs 350-400, Mother Dairy would have made a neat Rs 400-450 on every 100 litres of toned milk sold.

“Currently, such a wide margin would not be there, since the cost of raw milk delivered to the dairy dock has gone up to Rs 20.50 a litre.

But this is a temporary phase during summer, which will be reversed after about August when milk availability would shoot up and prices fall with the flush season.

Further, by increasing full-cream milk prices, they will be able to maintain even the earlier margins”, the sources added.

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