Heritage Foods Limited

STATUTORY REPORTS MDA 29 th Annual Report 2020-21 | 103 has opened up the opportunity for the dairy industry to bene fi t as large sections of consumers may shift from meat-based to dairy-based protein. COVID-19 has made people more aware of the need to adopt a healthy diet. The dairy sector is more resilient compared to other sectors and according to various industry reports signs of recovery are observed. Being more equitable in distribution the dairy sub-sector is the new growth dynamo of the agriculture and allied sectors. The CORONA virus outbreak has severely impacted the dairy industry. Despite domestic demand for milk increasing with consumers stocking up essentials such as milk, the supply chains have been impacted with logistics being a challenge. Moreover, consumption of milk and other dairy products dropped signi fi cantly by 30% in FY 2020-21 with closure of hotels, restaurants, sweetmeat shops during the lockdowns imposed by the Government to contain the spread of the virus. Loss of demand led to a pressure on milk procurement prices as the industry faced an oversupply of milk with respect to subdued demand. Therefore, dairies have been converting the surplus milk into skimmed milk powder (SMP) and white butter, leading to SMP prices crashing domestically. The long-term outlook of the Indian dairy sector seems promising on account of increasing population and per capita consumption, higher spending on packaged food, greater brand awareness, rising urbanization and increase in nuclear families, and government support. Growth will primarily be driven by increase in demand for value-added milk products, which, in turn, is margin accretive for the organized players. Government Initiatives TheGovernment has implemented various policies and schemes that are favourable for the growth of the dairy industry. The Department of Animal Husbandry, Dairy and Fisheries has formulated a comprehensive plan named ‘National Action Plan for Dairy Development: Vision 2022’, which envisages building additional milk processing infrastructure and strengthening milk production in major milk producing areas. Other programs to enhance milk production and improve cattle productivity include Intensive Dairy Development Programme (IDDP); Dairy Entrepreneurship Development Scheme (DEDS); National Programme for Dairy Development (NPDD), etc. As part of COVID-19 support measures, the Government has announced a ` 15,000 crore Animal Husbandry Infrastructure Development Fund (AHIDF) with an interest subsidy scheme to support private investment in dairy processing, value addition, and cattle feed infrastructure. The AHIDF will enable greater infrastructure investments in dairy and animal feed plants, which will also boost exports. For the fi nancial year 2021-22, the government has raised the farm credit target to Rs 16.5 lakh crore, from Rs 15 lakh crore in 2020-21. Market Drivers and Opportunities Demography and Urbanization India is one of the youngest economies, with more than 65% of the population in the working age group of 15-65 years. The urban population of the country is expected to witness an increase from 31% in 2011 to 39% by 2036. A growing working population and rapid urbanization will drive strong consumption growth, boosting demand for dairy and dairy products in India. Rising income levels India’s population continues to grow. Increasing incomes and expansion of middle-income and high-income households have resulted in higher spending propensity and more participative economic growth. Rising a ff ordability will enable people to spend more on dairy and value-added products due to improved lifestyles. Increasing health awareness Worldwide, consumers have become increasingly health conscious focusing on nutritious food and active lifestyles. Particularly, rapid spread of the coronavirus has elevated health consciousness among consumers, who prefer immunity- boosting foods and beverages to reduce their chances of contracting with the virus. This has been propelling food manufacturers and dairy companies to innovate and invest in new product development to cater to the growing demand of immunity boosting products. Preference for premium products Changing lifestyles, increasing internet penetration, and growing disposable incomes are fueling brand consciousness as brands are seen to bemore trustworthy due to better quality and hygiene, which has become tremendously important in the post COVID-19 scenario. Demand for value-added products such as cheese, yoghurt, buttermilk, among others, have been on a spurt with majority of organized players penetrating this segment to ful fi ll the exponential demand and enhance margins and pro fi tability. Challenges • Climate change and adverse weather conditions remain major threats to the dairy industry • Anticipating and responding to changing consumer preferences in a timely manner and introduction of newer products may pose a challenge to the dairy players • Poor conditions of dairy farms and lack of awareness on improved dairy practices continue to impact quality milk procurement