Heritage Foods Expects Better Q3 Realisations Following Recent Price Hikes

Heritage Foods expects its realisations in the October–December quarter of 2026–27 to improve over the preceding quarter, following price increases implemented in September, October, and November. According to Srideep Kesavan, Chief Executive Officer of the dairy company, strong consumption between Dussehra and Diwali reduced market stocks and kept prices firm.

The company raised consumer prices as raw milk procurement costs increased by 11 to 11.5 per cent. Consumer milk prices rose by 6 to 7 per cent, while paneer prices increased by 20 per cent, ghee by 24 per cent, and butter by 27 per cent. Drought conditions further added to supply pressures by affecting water availability and the planting of winter fodder crops, driving cattle feed prices up by 25 to 30 per cent and making it harder for farmers to maintain output.

Despite these portfolio-wide increases, overall revenue realisation improved by only 8 to 8.5 per cent. Kesavan noted that the gap between procurement cost increases and realisation growth has affected margins. Companies focused on value-added dairy products managed cost pressures better due to their product mix, whereas those with a larger share of liquid milk faced relatively less flexibility on price increases.

Milk procurement challenges have persisted for several years, with demand growing faster than supply following the pandemic. Production is growing at a rate of 3 to 3.5 per cent, while demand expands at 5 per cent, widening the structural shortfall over time. Kesavan noted that relying solely on cooperative procurement data does not provide a complete national picture, as cooperatives account for only about 15 per cent of India’s milk production. He added that the supply gap must be assessed in terms of milk solids rather than liquid volumes alone.

Consumer demand has shifted towards health and nutrition, with rising demand for paneer, cheese, and yoghurt. Within packaged milk, consumers are shifting from toned milk to full-cream milk, which has 6 per cent fat compared to 3 per cent for toned milk. Meanwhile, buffalo culling has increased significantly, pushing farmers in traditional regions to shift to cows. Because buffalo milk yields higher solids-not-fat and fat than cow milk, the transition physically reduces fat availability in the system, complicating efforts to meet demand for full-cream milk and value-added products.

Kesavan emphasized that the industry requires government intervention and support for rural dairy entrepreneurs to improve breeding and farming practices in the long term. He also welcomed recent actions taken by the Food Safety and Standards Authority of India against paneer and ghee adulteration, noting that the crackdown on smaller, unorganised players substituting milk fat with vegetable fats and palm oil is a positive development for the organised sector.

"The challenges faced by Heritage Foods highlight the broader supply-demand imbalances and rising input costs impacting the traditional and agricultural sectors. When procurement and feed costs outpace revenue realization, businesses must rely heavily on product mix optimization and value-added portfolios to protect margins. Moving forward, sustainable growth in this sector will depend on technological improvements in farming, addressing structural supply gaps, and maintaining strict regulatory compliance across the supply chain." — Dr. Shishir Gupta, Founder & CEO, StartupLanes