Private dairy companies are facing pressure on margins as the West Asia conflict disrupts input supply chains, weakens institutional demand and tightens labour availability, industry executives said.
Since early March, rising input costs have begun to directly hit profitability even as consumption slows in key channels. Nearly 70% of every rupee earned on a dairy product goes towards milk procurement, leaving a 25–30% band to cover packaging, logistics, processing and overheads.
“For a Rs 50 landing cost, about Rs 44–44.50 goes to the farmer and Rs 5.50 to logistics and chilling. Margins sit in the rest, and every component – packaging, logistics, labour – is going up,” Ranjith Mukundan, CEO of Stellapps Technologies, told Fe. He said the company has already seen a 15% margin hit in a month and expects at least a 20% impact on revenue.
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At Milky Mist, CEO K Rathnam said margins have taken a definite dent, with plants running at full capacity and logistics utilisation pushed to 100% from 80–90%.
Packaging Pinch
Packaging has emerged as the sharpest cost pressure. While it typically accounts for about 5% of product cost, it rises to 20–30% for low-value packs, said Ananda Dairy Chairman Radhey Shyam Dixit. Polymer-based packaging costs have risen about 47% in March, while lubricants and chemicals are up about 23%, he said. Metal barrels and tin cans used for exports have increased 35–40%, according to Nova Dairy Director Ravin Saluja. Plastics, laminates and aluminium are up 15–25%, while glass, dependent on LPG, has risen about 45%, Mukundan said.
Supply constraints have compounded costs. Packaging lead times have more than doubled, with some vendors declining fresh orders. Mukundan said suppliers are running down inventory with no clarity on replenishment, while Akshayakalpa founder Shashi Kumar flagged opportunistic pricing by some vendors.
Institutional Slump
Demand from hotels, restaurants and catering has contracted sharply, particularly among smaller establishments dependent on commercial LPG. mooMark’s sales through such channels fell over 50% in March, Mukundan said. At Nova Dairy, around 10% of volumes sold to bakeries and caterers have come to a complete halt, Saluja said. Ananda Dairy has seen a 20–25% sales impact across key products, Dixit added.
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The slowdown is feeding back to farmers as input costs rise while procurement prices remain flat. “It’s a double whammy for farmers as costs are up, and prices have even fallen in some districts,” Mukundan said.
Labour shortages have intensified after Holi and Eid, with migrant workers delaying returns. Companies are offering accommodation and food to attract workers back. “There is lingering Covid trauma. We are assuring housing and food to bring them back,” Mukundan said.
Companies are currently absorbing costs, but price increases are likely within three to four weeks. Paneer prices may rise 4–5%, while curd, buttermilk and lassi could see 7–9% increases, Mukundan said.
TOPICSMother DairyThis article was first uploaded on April four, twenty twenty-six, at forty-three minutes past twelve in the am.