Year: 2026 | Month: March | Volume 71 | Issue 1
Demand System of Functional Dairy Foods and its Projection: Implications for Dairy Processing in Tamil Nadu
Dhasarathan M
Subhasis Mandal
Biswajit Sen and Ajmer Singh
DOI:10.46852/0424-2513.1.2026.17
Abstract:
The study examines the demand structure and future prospects of functional dairy foods (FDF) in Tamil Nadu using primary data collected from 220 respondents (160 consumers and 60 sales points). A double-log demand model was employed to estimate income and price elasticities, while a growth rate approach was used to project demand up to 2036. The results indicate that functional dairy foods currently account for a small but emerging segment of the dairy sector, constituting about 1.26 per cent of total milk production and 3.78 per cent of processed milk in milk-equivalent terms. The demand analysis reveals heterogeneous consumption behaviour across products, with significant expenditure elasticities observed for fortified milk, probiotic drinks, and malted milk foods. Own-price elasticities were significant and inelastic for most products, indicating relatively stable demand in response to price changes. Cross-price relationships suggest limited and product-specific substitution and complementarity effects among functional dairy foods. Demand projections under pessimistic (2.12%), business-as-usual (5.44%), and optimistic (8.18%) growth scenarios indicate steady expansion, with total demand reaching 157.44, 181.29, and 203.40 ML/year by 2036, respectively, corresponding to compound annual growth rates of 1.51, 2.61, and 3.53 per cent. The findings suggest that while the functional dairy segment is still in a nascent stage, it holds potential for gradual expansion driven by income growth and changing dietary preferences. From a policy perspective, strengthening supply chains, improving product accessibility, and enhancing consumer awareness will be important to support sustained growth in the functional dairy food sector.
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