Protein shift is adding much-needed margin to India's dairy industry

Rising protein awareness is pushing India's dairy sector beyond low-margin liquid milk, driving a shift towards value-added products like whey, cheese, and fortified dairy

India is world’s largest milk producer, generating over 216–239 million tonnes of milk annually. Yet, for years, the industry has relied on volume sales with little revenue, mainly due to government-controlled pricing. Now, a growing focus on protein consumption is bringing a shift.

 

Rising demand for protein is pushing companies to rethink monetisation. The shift is from volume-driven sales to higher-margin products such as whey, cheese, and fortified dairy.

 

"The shift toward protein-rich, value-added products structurally improves profitability by enabling higher value realisation per litre of milk and stronger product differentiation," said Akshali Shah, executive director at Parag Milk Foods, in a conversation with Business Standard.

   

According to Srideep Kesavan, CEO at Heritage Foods Ltd, the shift is not about moving away from liquid milk, which remains the foundation of nutrition. "The opportunity to improve profitability lies in building on this base, not moving away from it," he told Business Standard.

India’s protein gap: Demand no longer the problem

A nationwide survey by the Indian Council of Medical Research (ICMR), published in Nature Medicine in October 2025, shows diets remain cereal-heavy. Nearly half of protein intake comes from low-quality sources like pulses. About 73–80 per cent of Indians do not meet recommended protein levels.

 

"The rise in protein awareness in India is both significant and structural, particularly among urban and younger consumers," said Shah. "Almost 73 per cent of Indians do not meet recommended protein intake, which reinforces the need for accessible, high-quality protein sources."

 

Dr K Rathnam, CEO and whole-time director, Milky Mist Dairy Food, told Business Standard, "Post-Covid, awareness around nutrition has increased significantly, and protein has become a mainstream requirement, not just for fitness but overall well-being."

 

For a largely vegetarian country, dairy sits at the centre of this shift.

Why dairy protein is gaining traction

The National Dairy Development Board (NDDB) highlights that population growth, rising disposable incomes and urbanisation, combined with India’s lacto-vegetarian culture, are steadily driving demand for milk and milk products.

 

An October 2024 report by the US Department of Agriculture’s Foreign Agricultural Service notes that India's middle-class growth, health awareness, and ecommerce are boosting dairy consumption.

 

At a category level, this is driving growth in:

• Cheese and yoghurt
• Fortified milk
• Whey protein and supplements

According to MarkNtel, India’s whey protein market was ₹795 crore in 2023. It is projected to reach ₹1,078 crore by 2030.

 

"There is huge traction, particularly in the last year,” said Rathnam. “Protein was earlier limited to gym-goers, but now it has become a mainstream requirement for overall health." 

Milk vs protein: Where margins come from

The shift is clear in unit economics.

 

Fluid milk remains:

• High-volume
• Price-sensitive
• Low-margin

In contrast, protein derivatives such as whey, casein, cheese, paneer, Greek yoghurt, and milk protein concentrates deliver higher returns.

 

"Converting milk into products like protein derivatives can deliver approximately 1.5x to 3x higher value," said Shah.

 

She added that products such as cheese and whey deliver margins of around 25–45 per cent, far higher than fluid milk.

 

Rathnam said: "In value-added products, margins can go up to around 40 per cent, compared to significantly lower levels in liquid milk. That’s where the real expansion is happening."

 

Kesavan cautioned against viewing this purely as a product shift: "Dairy economics are best understood at a portfolio level. Milk builds trust and scale; value-added products build margins. The real opportunity lies in increasing consumption frequency across the day."

From commodity to strategy: Industry response

The shift is visible in corporate strategy. Companies are:

• Expanding value-added portfolios
• Investing in protein processing
• Building nutrition-led brands

Companies such as Amul, Parag Milk Foods, Heritage Foods, and Milky Mist are positioning themselves as nutrition companies.

 

"When managed through an integrated product mix, every dairy product contributes to overall value creation," said Shah. "With Avvatar (whey protein), we are moving up the value chain, transforming whey into a consumer-facing protein brand."

 

Milky Mist has taken a sharper approach. "We are a 100 per cent value-added company, no liquid milk in the market," Rathnam said. "We saw the protein opportunity early and built a portfolio around Greek yoghurt, high-protein paneer and cheese." 

Scale advantage vs structural bottlenecks

India’s position as the world’s largest milk producer gives domestic players an edge. Whey, once treated as a by-product, is now a high-value input.

 

"Indian companies are no longer just competing on price, but building end-to-end capabilities," Shah added.

 

But structural bottlenecks remain. According to the Brickwork Ratings Dairy Sector Report 2025, less than 18 per cent of milk is handled by the organised sector. This limits value addition.

 

"Scaling protein-led products requires advanced processing and strong cold-chain systems," said Shah.

 

Kesavan pointed to farm-level issues: "Milk quality, particularly protein levels, needs to improve. Standardisation is critical for scaling protein extraction."

 

Rathnam added: "You need high-end technology and strong cold-chain systems. Without that, scaling protein products across India becomes difficult."

Affordability vs premiumisation

India’s biggest challenge is pricing. "India is a price-sensitive market, but consumption scales once products fit into everyday habits," said Shah.

 

Companies are responding by:

• Offering smaller packs
• Embedding protein into daily foods
• Localising formats

According to Kesavan, if protein is positioned only as a premium add-on, it will remain niche. "The goal is to make it part of everyday consumption through familiar formats like curd and paneer," he said.

 

Rathnam added: "When it comes to health and wellness products, consumers are willing to pay a premium."

Exports remain limited

Despite export potential, industry experts say domestic demand will dominate.

 

Rathnam added: "India has a huge population to serve. The priority is meeting domestic protein demand rather than focusing on exports."

Trend or structural shift?

Shah called the 'proteinisation' of dairy a structural shift, not a passing trend.

 

Kesavan seconded this, saying: "India does not have a protein trend, it has a protein deficit. The transformation will come from embedding protein into daily diets."

 

With rising awareness, changing diets, and industry investment, India’s dairy sector is shifting from volume-led growth to value-led transformation.