Fresh dairy products will grow at a fast clip over the next decade, says a study by Ambit Capital. Analysis of NSSO (National Sample Survey Office) data on household milk consumption suggests that around 90 per cent of milk is still consumed in liquid form. This includes curd, ghee and other milk products prepared at home using milk.

Consumption of liquid milk in households has increased at 10-12 per cent at a compounded annual growth rate over the last decade. Purchase of packaged ghee, curd and other fresh dairy products has increased at 15-16 per cent CAGR over the last 10 years in both urban and rural households. Increasing household income levels should help sustain this demand. Consumption of value-added dairy products like cheese and paneer is still dominated by consumption in the HoReCa (hotels, restaurants and café) channel with only 35-40 per cent consumption at household level.

Demand for dairy products could get a boost with the roll-out of the direct benefit transfer scheme across the country over the next 12-18 months.

Households are not increasing the proportion of spend on dairy products. An analysis of NSSO data over the last three decades revealed that urban households spend 16-18 per cent of their food budget on dairy products while rural households spend 13-15 per cent.

The data shows per capita consumption has increased at approximately 9 per cent CAGR in both urban and rural India over 1988-2012. However, in value terms, the share of allocation of budget for dairy has virtually stagnated over the last 25 years.

Expenditure on value-added dairy products has been increasing over the last decade in both rural and urban households. Products which contributed to higher growth in this segment are fresh dairy products such as curd, buttermilk and others like baby food, ice cream and cheese. Around 9 per cent of the 10-12 per cent expenditure growth in liquid milk over 2005-2012 has been driven by price hikes.

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