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Value-added mix - dairy (VAP share)
What it is
Curd, paneer, cheese, butter, ghee, ice cream, flavoured milk and whey products, as against liquid milk. VAP carries brand pricing and far better margins than the commodity liquid business
Liquid milk is the volume base that secures procurement; VAP is where profit is made
Impact on industries
- The central margin lever - VAP realisation and gross margin run well above liquid milk on the same procured litre
- Brand and cold chain create barriers that liquid milk does not, since a consumer chooses paneer or cheese by brand and milk largely by availability
- Requires cold chain, shorter shelf life and higher distribution complexity, so the cost to serve rises with the margin
- SMP and bulk butter are the commodity residual - surplus milk is dried into powder, so VAP mix and commodity exposure move inversely