The Covid-19 pandemic now in its second year and with lockdown restrictions still in place has taken a toll on the retail industry and the supply chain. With the uncertainty of the pandemic still at large, the consumer's habit of mass buying and stocking up on essential items has not stopped. Thus, the supply gap gave impetus to local brands and increased consumption of dairy products. This shift enabled local and regional brands with local manufacturing units and distribution networks to plug the supply gap.
The Shift in Consumer Preference
Despite the challenges, one of the sectors in India that handled the pandemic well is the dairy industry, especially in terms of packed dairy products. What boosted the industry was that the COVID-19 pandemic dramatically affected consumer’s dietary habits. As the lockdown gave people the opportunity to rustle up dishes just like chefs do, the broadening culinary engagement pushed up consumption of dairy products.
With more and more people locked in their homes, consumers ended up spending extended hours in their kitchens, thus, leading to a surge in household consumption of dairy products. Demand for categories such as cheese and paneer witnessed an especially greater demand due to their versatile nature.
Also, another factor that is aiding dairy product consumption is the growing preference for nutritious vegetarian food. As Indians quite often see vegetarianism more as a good virtue rather than a life choice, the negativity of the pandemic and lockdown led people to opt to eat more paneer and other packaged dairy items as compared to non-vegetarian options. Hence, the Covid-19 pandemic and the ensuing focus on nutrition have boosted paneer sales.
Over the last 12 months and going forward, consumer behavior will be different than it was pre-pandemic, and as that behavior takes root, dairy products supply chains will need to adjust from farm-to-fork. Furthermore, the pandemic also ensured consumers stirred away from loosely available products and chose to consume more locally available or regional branded dairy products. This caused an accelerated shift in the supply chain and vastly prompted PM Modi’s vision of ‘Vocal for Local’.
Although the biggest component of India’s dairy market is liquid milk, seeing the demand for longer-lasting value products, manufacturers converted the surplus milk into highly demanded value-added dairy products such as paneer, butter, cheese, ghee, and sweets, thus further boosting the dairy industry.
Most importantly, the global pandemic being a major health crisis, was the silver lining for the dairy industry. While other industries and sectors across India struggled, Indian consumers turned towards indulging in homemade comfort food. Consumer choices shifted to consuming products made from organic materials. This set manufacturers in the dairy sector to expand their product offerings.
How Bright is the Future?
As the end of the pandemic remains uncertain, and the best option for survival being hygiene and health, people have realized that it’s important to improve one’s immunity. Hence, consumption of dairy-based ingredients continues to be the favorable option for many.
Furthermore, Covid-19 has brought about a shift in the buying pattern of consumers and many dairy players acknowledge food safety has fuelled a growing trend in consumer preference towards packaged and branded products.
The outlook for the dairy sector in India continues to be positive on the back of government support, increasing population, per capita consumption, and expenditure on value-added products such as paneer, cheese, and butter items.
In the long run, the domestic demand for value-added products such as paneer will only continue to rise. Towards strengthening the value-added product market, the Government may consider measures such as rationalization of GST to build market resilience, giving further impetus to regional brands.
Moreover, the dairy industry, which was facing headwinds during the onset of the COVID-19 pandemic, has turned this crisis into an opportunity as the supply and consumption of value-added dairy products has risen and only continues to witness an upward trajectory.