Whalesbook
Dairy Sector Faces Rising Costs
Amul, India's largest dairy cooperative with a turnover exceeding ₹1 lakh crore for fiscal year 2025-26, and competitor Mother Dairy will increase milk prices by ₹2 per litre for major fresh variants. The new prices take effect May 14, 2026. This is Amul's first price revision since May 2025; Mother Dairy last adjusted prices in April 2025. The cooperatives blame higher costs for cattle feed, packaging, and fuel for the increase. This highlights ongoing cost pressures in India's dairy sector, which is vital to the economy and supports over 80 million farmers.
Costs Passed to Consumers and Farmers
The price increase means consumers will pay about 2.5% to 3.5% more per litre. GCMMF notes this rise is below the average food inflation rate of 4.25% recorded in April 2026. Meanwhile, GCMMF member unions increased the procurement price paid to farmers by ₹30 per kg of fat, a 3.7% rise from May 2025. Amul passes about 80 paise of every consumer rupee directly to its 3.6 million milk producers, a core practice of its cooperative model aimed at ensuring fair farmer returns. Mother Dairy echoed this, stating the revision balances farmer welfare and consumer interests, with farmer procurement prices up about 6% over the last year.
Market Impact and Industry Trends
This coordinated price increase by Amul and Mother Dairy, India's two largest organized milk sellers, is expected to prompt similar moves from regional dairy companies. The adjustment reflects widespread challenges in the dairy sector, where input costs like feed make up 60% of production expenses. While Amul's strong distribution and brand loyalty help it manage costs, rising operational expenses present an ongoing challenge. India's dairy market, valued at over $125 billion in 2023, features high domestic consumption and supports significant rural employment. Liquid milk accounts for about 50% of consumption.
Margin Pressure and Consumer Response
Despite Amul's strong market share and turnover of over ₹1 lakh crore for FY25-26, ongoing inflation poses risks. Rising input costs could squeeze margins if price hikes fail to cover costs without deterring consumers. While this hike is below general food inflation, consumers, especially in rural areas with higher inflation (3.74% in April 2026), might become more price-sensitive. The dairy sector's dependence on monsoon for fodder also risks future production and cost volatility. Passing nearly 80% of consumer spending to farmers limits Amul's operational buffer, making it vulnerable to sharp cost increases.
Market Position and Future Outlook
Amul's consistent growth and its recognition as the world's number one cooperative highlight its strong market position and operational efficiency. The cooperative model, championed by figures like Verghese Kurien, prioritizes farmer welfare and a fair share of the consumer rupee. This price adjustment is seen as necessary to ensure fair prices for dairy farmers and support continued production. As India's largest FMCG organization, Amul's pricing decisions reflect broader economic trends, including the ongoing fight against food inflation.