The Hindu Business Line : Mother Dairy, GCMMF hike milk prices again

Rising prices
Since February 2006, prices of full-cream milk have gone up from Rs 19 to Rs 24 a litre.
Toned milk prices (3 per cent fat and 8.5 per cent SNF) have risen from Rs 15 to Rs 20 a litre.
Every Re 1 increase in milk price adds around Rs 80 crore to Mother Dairy’s topline.

Our Bureau

New Delhi, Oct. 18 Mother Dairy India Ltd and Gujarat Cooperative Milk Marketing Federation Ltd (GCMMF) have yet again raised prices of milk sold in the National Capital region by Re 1 per litre.

fifth increase

This marks the fifth such increase by the country’s two biggest liquid milk marketers within a space of 20 months.

The previous hikes had taken place in August and January (this year), September 2006 and February 2006.

Since February 2006, prices of full-cream milk, containing 6 per cent fat and 9 per cent solids-not-fat (SNF), have gone up from Rs 19 to Rs 24 a litre, while that of toned milk (3 per cent fat and 8.5 per cent SNF) have risen from Rs 15 to Rs 20 a litre.

Marketing volume

Mother Dairy currently markets 22-23 lakh litres per day (LLPD) of liquid milk in the National Capital region, with GCMMF selling 6.5-7 LLPD under its ‘Amul brand’. Every Re 1 increase in milk price adds around Rs 80 crore to Mother Dairy’s topline, with the same for GCMMF being Rs 25 crore.

According to sources, Mother Dairy is currently paying Rs 20 for every litre of milk at its dairy dock.

However, this raw milk contains 6.5 per cent fat and 9 per cent SNF, as against the 3 per cent fat and 8.5 SNF toned milk that it will now sell at the same Rs 20 a litre.

“The profits come from the surplus 3.5 per cent fat and 0.5 per cent SNF that can be disposed of separately,” they pointed out.

extra realisation

For every 100 litres of raw milk that is processed and sold as toned milk, there is extra realisation from 3.6 kg of fat and 0.51 kg of SNF (one litre of buffalo milk equals 1.028 kg).

Total revenue

Taking the current price of Rs 135 per kg for fat (ghee) and Rs 130 per kg for SNF (skimmed milk powder), the total revenue from 100 litres works out to about Rs Rs 2,550.

As against this, the cost of the raw material is only Rs 2,000 per 100 litres.

“Even if you deduct costs of processing (pasteurisation, pouches, labour and other overheads, adding up to Rs 200) and local transport, trade commission and other marketing expenses (another Rs 150), there is a neat margin of Rs 200 per 100 litres or Rs 2 a litre,” sources added.

Margins to go up

The margins would go up further in the coming weeks, with the arrival of the ‘flush’ winter period.

“Once supplies increase, it will be possible to reduce raw material cost from the current Rs 20, whereas the sale price would remain the same,” they said.

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