Dealers and retailers are the last-mile link between dairies and end consumers. (Representational image)Stung by losses, dairies in Maharashtra are looking at ways to eliminate middlemen both at the procurement and distribution ends. This, dairies hope, will help them improve their balance sheet and make price viable for both the dairies and the end customers.
Prakash Kutwal, secretary of the Milk Producers and Processors Welfare Association, said the unusually high commission charged by dealers was making business non-viable for many dairies.
Dealers and retailers are the last-mile link between dairies and end consumers and by selective placement can either increase or decrease visibility and sales of the dairies. While the normal rate given by dairies to dealers is between Rs 3-4 per litre of milk sold, there are instances where dairies have allowed payment as high as Rs 10 per litre to dealers in order to boost sales. “Such high dealer rate is completely non-viable for business,” Kutwal said.
At the procurement side, farmers generally deal with the village-level dairy cooperative societies (in case of cooperative dairies) or bulk milk cooler (BMC) operators. BMC operators normally deal with the dairies who pay them the highest in order to procure milk.
Since September 1, dairies in Maharashtra have raised their cost of procurement for farmers to Rs 28 per liter for milk with 3.5 per cent fat and 8.5 per cent solid not fat.
Village-level dairy cooperative societies are normally paid Rs 0.80-1 per litre of milk collected, while the onward transport charges to the chiller is generally Rs 1. By the time milk reaches the dairy, transport and other costs push the total cost to Rs 32 per litre.
Processing and packaging charges add Rs 3 to the cost, while management charges (cost towards sales, etc) is kept at Rs 3.50.
Adding dealer and retailer costs, takes the total amount to around Rs 41 per litre. However, in both onward and backward chains, middlemen push up the costs. Players like Amul (the Gujarat Cooperative Milk Marketing Federation) or Nandini (Karnataka Milk Federation) have the advantage of brand value as well as direct link with farmers, which allows them an advantage.
Multiple brands in Maharashtra have often seen many dairies paying dealers or milk collectors extra to sustain their businesses.
Kutwal said they will be studying the chain in detail and come up with solutions for the betterment of the dairy business.
