Unlocking the billions hidden in India’s milk: The rise of value-added dairy products

Have you ever wondered if India’s humble milk could unlock billions in revenue beyond just being poured into a glass? The country, home to the world’s largest dairy herd, is witnessing a quiet revolution: consumers are increasingly craving cheese, probiotic yogurts, flavored milk, and other innovative dairy creations.

Behind this surge lies a massive untapped potential—both in domestic premium markets and global exports. Exploring how value-added dairy products could transform incomes, exports, and the future of India’s dairy sector reveals opportunities few have fully imagined. In this article, we explore the types of value-added dairy products, market opportunities (domestic and export), challenges, and strategic levers for growth.

The Indian dairy sector has always been more a lifeline for millions of rural households. Generations of farmers have relied on their herds for income, while cooperatives like Amul have shown how collective effort can turn milk into a national story. In 2023–24, India produced 239.3 million metric tonnes of milk, roughly a quarter of the world’s output, contributing around 3.5% of the country’s GDP.

Despite this scale, most of the milk produced still ends up as plain fluid milk or basic products. The share of value-added dairy—cheese, yogurt, fortified milk, specialty ghee—remains small, leaving huge potential untapped.

Creating higher-value products is not just about profits. It can improve returns for farmers, reduce waste, manage seasonal fluctuations, and meet changing consumer expectations. Today’s consumers are looking for nutrition, convenience, and products that blend tradition with innovation. Value-added dairy offers a way to deliver all three.

India’s dairy story is one of hard work, resilience, and community, and value addition represents the next step in that journey. By transforming surplus milk into differentiated products, the sector can support better livelihoods, strengthen brands, and carve out a bigger role in global markets.

What are value added dairy products?

Value-added dairy products go beyond raw or basic pasteurized milk to processed or specialty forms, such as:

• Cheese, processed cheese, paneer, mozzarella, etc.
• Yogurts (including probiotic, flavored, Greek-style), dahi, lassi
• Flavored milk and milk-based drinks
• Skimmed Milk Powder (SMP), Whole Milk Powder (WMP), whey powders
• Butter, ghee, anhydrous milk fat (AMF), butter oil
• Casein, lactose, infant formula, and milk derivatives
• Traditional Indian dairy sweets (khoa/mawa, rabri, etc.), condensed milk
• Dairy ingredients (for infant formula, bakery use, etc.)

These processed forms command higher margins, longer shelf life, diversified markets, and often better risk absorption against farm-level volatility.

Globally, the dairy ingredients segment alone was valued at US$ 78 billion in 2024 and is expected to reach US$ 124.8 billion by 2033 (CAGR ~5.4%). Meanwhile, the global dairy market (all product types) was estimated at US$ 991.5 billion in 2024 and projected to grow to US$ 1,505.8 billion by 2033 (CAGR ~4.75%).

In India, rising health consciousness, urbanization, disposable incomes, and the demand for convenience foods are driving consumers toward yogurt, cheese, flavored milk, and probiotic variants. The IMARC Group notes a “significant shift toward value-added dairy products like cheese, yogurt, flavored milk, and probiotic drinks.”

Thus, for India, scaling up value-added dairy is not just about exports—it is central to capturing consumer shifts and improving margins across the value chain.

Market size and growth outlook

India’s dairy sector is entering a strong growth phase, backed by rising incomes, evolving consumer preferences, and expanding processing infrastructure. The domestic dairy market was valued at US$ 135.3 billion in 2024 and is projected to nearly double to US$274.1 billion by 2032 (CAGR ~9.3%). In rupee terms, the industry was estimated at INR 18,975 billion in 2024 and is expected to reach INR 57,002 billion by 2033.

According to Brickwork Ratings (2025), sustained growth will be driven by increasing urban consumption, modern retail penetration, cold chain development, and the expansion of branded dairy portfolios. CRISIL similarly anticipates revenue growth of 11–13% for dairy companies in FY 2025, supported by the rising share of value-added products.

What consumer trends are shaping the demand  for value added dairy?

India’s dairy consumers are moving up the value chain, preferring products that combine nutrition, convenience, and indulgence.
Key trends include:

* Premium and health-oriented products: Strong demand for probiotic, low-fat, lactose-free, fortified, and clean-label dairy offerings.

* Convenience formats: Rapid adoption of single-serve yogurts, flavored milk, cheese slices, dairy-based desserts, and snacking cheese.

*Modernized traditional sweets: Revival of regional dairy-based mithai (khoa, burfi) positioned as premium or giftable items for urban and export markets.

*Rising industrial demand: Increased use of dairy-derived ingredients—such as whey, casein, and milk powders—in bakery, infant nutrition, and protein drinks.

*Rural and peri-urban expansion: As incomes rise beyond metros, consumption of packaged and branded dairy products is gaining traction.

The Government of India recognizes that strengthening the dairy value chain—from feed and breeding to cold chain logistics and market access—is critical to ensuring inclusive growth. Under the National Programme for Dairy Development (NPDD), investments in processing and marketing infrastructure are being scaled up.

The cooperative model, exemplified by Amul, has demonstrated how integration across procurement, processing, and distribution can deliver higher returns to farmers. Yet, a significant share of India’s milk remains outside formal processing: only about 32% of the marketable surplus (47 MMT of ~150 MMT) is handled by the organized sector. Expanding formal processing capacity can convert this informal volume into high-value, export-ready products.

Current export performance

Despite being the world’s largest milk producer, India’s dairy exports remain relatively small. In 2023–24, India exported 63,738 tonnes of dairy products worth US$ 272.6 million, accounting for just 0.25% of global exports.

Exports strengthened in FY 2024–25, reaching 113,350 tonnes valued at US$ 492.9 million — an increase of nearly 78% in volume and 81% in value. Growth was led by ghee and butter exports, which surged 142% to 67,565 tonnes, while milk powder exports declined.

Between 2009 and 2019, India’s dairy exports grew at a CAGR of 6.5% in quantity and 12.5% in value, though volatility remains high across destinations such as Egypt.

India’s export basket is dominated by ghee and butter (59%), followed by milk powder (27%), cheese (11%), and products like buttermilk and casein. Major destinations include the UAE, Saudi Arabia, Bangladesh, the USA, Singapore, and Bhutan.

Why value-added exports matter?

Bulk commodity exports like milk powder face stiff price competition and volatility. In contrast, value-added dairy exports—including cheese, specialty ghee, functional yogurts, infant nutrition ingredients, and whey derivatives—command higher margins and greater global appeal. They also help mitigate logistical and shelf-life constraints.

Cheese, one of the fastest-growing global dairy categories, is a key opportunity area as India ramps up production of processed and mozzarella varieties. Similarly, casein, lactose, and specialty proteins are emerging as high-value export ingredients with strong demand in the food, health, and nutrition industries.

Challenges and constraints

Despite the potential, the Indian dairy sector faces several challenges:

1. Quality, standards, and regulations: International markets demand strict standards (HACCP, ISO, microbial limits, traceability). Many small processors struggle to comply.
2. High logistics and tariff barriers: Dairy is perishable; cold chain breaks cause spoilage. Trade barriers, tariffs, and non-tariff restrictions—especially in developed markets—add risks. For instance, the U.S. has imposed reciprocal tariffs of ~25% on Indian exports, impacting competitiveness.
3. Low processing share and fragmented supply: Much milk is handled informally; scaling aggregation, quality control, and transport is difficult.
4. Seasonality and supply fluctuation: Milk supply varies seasonally; converting surplus into value-added forms requires significant investment.
5. High capital and technology requirements: Processing value-added dairy (cheese, UHT, functional dairy) demands advanced equipment, skilled manpower, and R&D.
6. Export instability and market concentration: Some markets show high volatility; dependence on a few destinations (e.g., UAE, Bangladesh) increases risk exposure.

Strategies and enablers for export growth

To unlock the export potential of value-added dairy, India can pursue the following strategies:

• Cluster-based processing hubs: Create dairy parks or export zones near production belts, equipped with shared facilities, cold chain, labs, and quality infrastructure.
• Standards and certification push: Support small processors in upgrading to global food safety standards through subsidies, shared labs, and facilitated audits.
• Product differentiation and branding: Focus on niche and gourmet dairy like artisanal cheese, grass-fed ghee, probiotic yogurts, ethnic cheese (paneer variants), organic dairy, and A2 milk products.
• Innovation and R&D: Invest in R&D for shelf-life extension, novel formulations (e.g., lactose-free, fortified), and efficient utilization of by-products (whey, casein).
• Trade agreements and tariff relief: Negotiate preferential access or reduced tariffs in key target markets, while proactively managing trade policy risks.
• Exporter support and aggregation: Strengthen organizations like APEDA and export promotion councils to assist dairy exporters in marketing, buyer linkages, and logistics.
• Cold chain and logistics: Expand refrigerated transport, chilling centers, active packaging, and last-mile cold logistics to maintain export quality.
• Financial and risk support: Provide credit, export insurance, and incentives for converting surplus milk into exportable forms.

Implementing such strategies can help transition Indian dairy exports from commodity-driven to premium, margin-rich segments.

Do value-added dairy products represent the next high-potential for India’s dairy sector?

Value-added dairy products represent the next high-potential frontier for India’s dairy sector. Domestically, consumers are already gravitating toward cheese, probiotic yogurts, flavored milk, and premium variants. Internationally, export growth in butter, ghee, specialty dairy ingredients, and niche cheeses presents exciting opportunities.

Global dairy markets are expanding, with ingredients and specialty segments particularly promising. India’s challenge is to integrate smallholders into a modern, quality-focused value chain, invest in compliance and branding, and strategically target export markets.

If structural constraints—such as cold chain gaps, regulatory compliance, and capitalization—can be addressed, India could significantly expand its global share in value-added dairy, boosting farmer incomes, enhancing processing margins, and earning worldwide recognition for Indian dairy innovation.