India's ₹2 trillion paneer rush, and a battle with fakes

Mint

3 days ago

New Delhi: New Delhi's Okhla Mandi, a sprawling wholesale market, supplies fresh produce to vast swathes of homes and restaurants in the city. It is also home to half a dozen paneer or cottage cheese selling units.
Rows of neatly stacked paneer slabs line up the market's covered sheds. The slabs range from 200 grams to 5kg.
At New Haryana Paneer Bhandar, a store in the mandi, cottage cheese can be bought for ₹270 per kg. Neighbouring Malai Paneer Bhandar sells them at ₹240 a kg, to small restaurants. Branded and packaged paneer, in contrast, can cost double the price.
Some shopkeepers claimed to source the milk, used to make their paneer, from villages outside Delhi. But anyone who has followed the recent controversy around 'analogue' and adulterated paneer, would be more guarded. To the naked eye, they all look like the real thing. But are they?
In July, in Uttar Pradesh's Saharanpur, the state's food safety department seized 1,200 kgs of adulterated paneer and contaminated milk. In Gorakhpur, another city in the state, 2,500 kgs of adulterated paneer was discovered and destroyed. In June, Chandigarh's food safety officials uncovered approximately 450 kg of potentially harmful paneer during a raid.
'We use only milk we procure from our village in Mewat (in Haryana) for this paneer. Koi milawat nahin hai (There's no adulteration)," a sales executive at one of the stores in the mandi stressed, when asked about the purity of their products.
The proliferation of adulterated cottage cheese points to a market on steroids—there's a paneer rush—and companies, big and small, want to capitalize on it. The humble food from north Indian homes is now finding new consumers across the country, even in the south. Restaurants sell everything from the drab paneer tikka to fancier versions. Heard about pesto-stuffed grilled cottage cheese steak?
In 2024, India's paneer market was valued at ₹64,810 crore. This market is projected to expand significantly to over ₹2 trillion by 2033, according to data sourced from the annual reports of listed dairy companies. However, well over 90% of paneer consumption in the country is through local dairies and in unpackaged form—like the ones sold at Okhla Mandi. Organized players like Anand Milk Union Ltd (Amul), Mother Dairy Fruit & Vegetable Pvt Ltd, Heritage Foods Ltd, Milky Mist Dairy Food Ltd, Parag Milk Foods Ltd and Beejapuri Dairy Pvt Ltd (Country Delight) account for less than 10%.
The controversy around adulterated paneer has given Big Dairy the wind in their sails. There is yet another major headwind—the global trend towards more high protein food. Paneer fits in well, particularly if you are vegetarian. Some companies are expanding capacities, hoping to shift consumption from unbranded to branded paneer in the years ahead.
Real and unreal
Before we delve deeper into the organized industry's plans, let's look at the cheese making process, and what differentiates a real paneer from an unreal one.
Normal paneer is made by curdling cow or buffalo milk using an acidic agent like lemon juice, vinegar, citric acid, or dahi. The milk is heated, an acid is added to separate the milk solids (curds) from the liquid (whey). These curds are then drained, pressed, and often submerged in cold water to achieve a firm, non-melting block. As per standards set by the Food Safety and Standards Authority of India (FSSAI), paneer must contain at least 50% milk fat and cannot exceed a moisture content of 70%.
Analogue paneer, on the other hand, is primarily composed of non-dairy ingredients such as vegetable oil or fat, starches, milk solids or skimmed milk powder, rather than milk fat. This version is designed to mimic the appearance, taste, and texture of real paneer while being a more affordable alternative. While generally safe for consumption, it often lacks the same nutritional value and isn't typically marketed as 'analogue', which can mislead consumers.
Adulterated paneer is entirely different and unsafe for consumption. It combines starches with chemical preservatives and whitening agents, including hydrogen peroxide and sometimes even urea.
The Indian Dairy Association (IDA), an industry body, has suggested that manufacturers of analogue products should use nomenclature that provides a distinct identity to its product—meaning, they should avoid the term 'paneer' altogether.
'Paneer can be made using skimmed milk powder, cheap vegetable oil. Some even use starch instead of skimmed milk powder to drive down costs," R.S. Sodhi, president of IDA, told Mint. 'Only packaged paneer should be sold, where you need to declare the ingredients," he added.
Sodhi was the managing director of Amul, India's largest dairy brand, between 2010 and 2023.
As part of a consultation paper floated earlier this year, FSSAI has stated that if analogue of paneer has been used for preparation of kadhai paneer or analogue of cheese is used in a burger instead of dairy products in restaurants or by caterers, the exact nature of the ingredient must be mentioned in the menu.
Fat price
Nonetheless, many small restaurants continue to prefer analogue paneer because it's cheaper but they don't declare it to consumers.
So, how expensive is the real one?
A kilogram of the real paneer requires at least five litres of milk. Considering one litre costs ₹60, the input expense on milk totals ₹300 for 1 kg of cottage cheese. Add to this 12% GST, transportation and marketing costs, and the final selling price could be upwards of ₹450 per kg to the end consumer.
The cost of dairy fat and vegetable fat differ hugely—vegetable fat could be one-third the cost of dairy fat. If companies substitute even 50% dairy fat in the paneer with vegetable fat, the final cost to consumers could fall drastically. But large dairy companies don't.
Amul today sells 200 grams of fresh paneer for ₹95 ( ₹475 a kg), similar to Mother Dairy. Parag Milk Foods' Gowardhan paneer retails at ₹105 for the same quantity ( ₹525 a kg).
Soft paneer, hard facts
58-year-old Neelam Mason stays in Delhi's Lajpat Nagar. Recently, she read all the news around the raids on fake paneer manufacturers. Now, she is both worried and confused. All her life, she has solely relied on paneer from local diaries, buying 200-250 grams once or twice a week. The controversy made her try a branded one.
'I recently bought Amul paneer from Blinkit and while it seemed firm, on cooking it softened up. I may try that again," she said.
Big Diary is listening to consumers like Mason.
Two years ago, at dairy cooperative Mother Dairy's research centre, at its Patparganj plant in east Delhi, food scientists focused on reformulating the company's packaged paneer. The company had spent months collecting consumer feedback on how they preferred their paneer—most wanted their paneer to be softer, in line with what they consume from unbranded players.
'This prompted us to make a slight change in the recipe," Manish Bandlish, managing director of Mother Dairy Fruit & Vegetable, told Mint in an interview.
Mother Dairy is a wholly-owned subsidiary of the National Dairy Development Board.
Why does packaged cottage cheese feel firmer?
The fact is, real paneer is meant to be that way—firm, chewy in texture, not extra soft. Paneer made from cow milk will also have a slight yellow/cream tinge. Packaged brands soak the product in a brine solution.
Local players, on the other hand, soak paneer in water for a long time, giving it greater moisture content and making it soft when purchased, a food scientist, who didn't want to be identified, explained.
Several executives also pointed out that the water used to soak the paneer in stores may not always be clean or hygienic. Handling is a huge red-flag since it happens with bare hands, said this person.
Back to Mother Dairy, which began selling branded cottage cheese well over a decade ago, but has recently stepped up its efforts. It significantly ramped up production capacity, doubling it in 2024, in addition to launching more pack sizes and variants. Currently, it produces 25 tonnes of paneer daily, a small portion compared to its curd and milk sales. 'We are doubling our capacity now. We are planning to take it up to 50 tonnes and even more," said Bandlish.
In Maharashtra, Parag Milk Foods has been using advertising as a plank to drive consumer awareness and a shift to packaged dairy products. Convenience and hygiene are the two main reasons driving the shift.
'Paneer has blown up as a category because people know it's a great source of protein. That's why paneer is very crucial for us. In the next three to five years, we are expecting to expand our capacity," said Akshali Shah, executive director, Parag Milk Foods.
The paneer category contributes 7-10% of the company's sales—it reported ₹3,432 crore in consolidated revenue in 2024-25.
Meanwhile, Jayen Mehta, managing director at the Gujarat Co-operative Milk Marketing Federation Ltd, the company that markets dairy products under the Amul brand, says cottage cheese is the category of the future, growing at high double digits annually. The cooperative already exports its paneer to markets like the US, Japan, Singapore and West Asia. 'We have 15 plants across India that make paneer. Amul has a total of 78-80 plants for milk alone. We are expanding—wherever we have milk, we will make paneer," he added.
Idli stuffed paneer
A new frontier in India's cottage cheese story is the south. Traditionally, south Indian states didn't consume too much of this milk product even though 'paneer dosa' has been around for sometime now.
The paradigm may change in the future, given the aggressive promotions from some companies.
Heritage Foods, founded by Nara Chandrababu Naidu, the current chief minister of Andhra Pradesh, is a case in point. Its marketing campaigns, uploaded on YouTube, coaches you to make 'mini idli stuffed with tempered paneer', 'paneer tomato pappu', 'paneer upma' and 'paneer pollichathu'.
'We realized that people are eating paneer in restaurants, but they're not eating paneer at home. The reason is they don't know what to do with it—paneer doesn't go with any of the south Indian dishes," Srideep Nair Kesavan, chief executive officer (CEO) of Heritage Foods, said. 'Our north star is to integrate paneer into south Indian dishes," he added.
'In four years, we have seen a CAGR of 40% on paneer. We are growing very aggressively. We are doubling our volumes every two years," the executive further said.
Heritage Foods is ramping up capacity to match demand. Last year, it commissioned a new paneer line at its plant in Hyderabad. A new plant is expected by the middle of next calendar year.
The company reported revenues of ₹4,134.6 crore in 2024-25, up 9% over the previous year.
For Tamil Nadu based dairy company Milky Mist, paneer is the largest product category already—it contributed close to 30% of total revenue in 2024-25, as per its Draft Red Herring Prospectus.
The company wants to raise ₹2,035 crore through an initial public offering.
'The consistent growth underscores strong consumer demand, backed by Milky Mist's integrated manufacturing and cold chain distribution capabilities," K. Rathnam, CEO of Milky Mist, said in an email response to Mint.
Revenue from the sale of paneer increased from ₹437.9 crore in 2022-23 to ₹693.6 crore last year.
'There has been a notable shift in consumer preference towards hygienically packaged and branded dairy products, including paneer, particularly in the wake of regulatory scrutiny around counterfeit products," Rathnam added.
Apart from paneer, Milky Mist sells cheese, butter, curd, ghee, yogurt and ice cream among other products.
Before you say cheese!
While the going appears to be good for the branded players, they do have some challenges to overcome. Consumer perception is one of them. We have already mentioned that many prefer their cottage cheese to be softer. Second, they also believe that 'fresh' paneer—getting the water-soaked product from the neighbourhood store—is better.
'People are obsessed with the idea that packaged means bad. People ask, 'paneer comes with a 30 days shelf life?' They are made by a 140-year-old technology called pasteurization. So packaged is probably the only clean label product you can get off the shelf," Kesavan of Heritage Foods said.
Price is the third area of concern, a place where analogue paneer wins hands down. India's Big Dairy companies say that growth of branded paneer in the hotel, restaurant, and catering segment is slow.
'Paneer will continue to stay premium because it has a good amount of fat and protein in it. The price parity (with analogue) is not going to come down anytime soon," said Akshali Shah of Parag Milk Foods.
Cornering a higher share of that ₹2 trillion market, a dream worth chasing, won't be an easy affair.