KIGALI, Rwanda, May 24 – The strengthening of East African dairy farmers’ associations and improved extension services will remain key to unlocking the sector’s multi-billion shilling market potential in the region, a key player has said.
Tetra Pak Eastern Africa Managing Director Anders Lindgren told a conference in Kigali, Rwanda that this would involve addressing the challenges faced in the value chain which would in turn enable the players to capture the East and Southern African market currently estimated at Sh9 billion.
“Addressing the fragmented chain from farm level to end consumer is an important aspect of improving the longevity and profitability of the dairy sector,” he said.
The lack of emphasis on value addition and technology issues for instance has meant that the Kenyan dairy sector earns less than many African economies despite the fact that it is the third largest milk producer in the continent.
“Although Kenya produces nearly twice as much milk as South Africa, for example, the latter makes almost five times more (money) from the same largely because of its investment in value chain and use of modern technology significantly boosting the industry,” said Mr Lindgren.
To reap more benefits, he challenged players in the sector to forge more partnerships between farmers and processors, facilitate additional financing and adopt innovative marketing models locally and regionally.
Mr Lindgren was addressing the sixth edition of the African Dairy Conference and Exhibition in Kigali which brought together industry experts, practitioners, researchers and scholars.
Participants however heard that demand for dairy products around the globe would remain on the rise which presented an opportunity for the sector to benefit economically.
Commodity prices in the dairy sector have been unstable in the last decade compared to the previous one but both players and policy-makers would need to re-double their efforts to boost value chains and apply modern technology, further reducing costs, they were told.
Despite the global economic crisis, Tetra Pak forecasts that worldwide dairy consumption will continue to grow at a compound annual growth rate of 2.2 percent until 2012.
Dairy sector growth is set to benefit significantly from the trade agreement which will open up the East African region. Global potential remains significant for the region in future given that the market for higher value-added milk ingredients was estimated to be $19 billion in 2008, according to Tetra Pak.
“However, this does not mean the industry will not be impacted. According to current consumer trends, global consumers are increasingly likely to economise – as evidenced by the fact that milk sold through discounters and other non-grocery retailers, such as convenience stores, has grown by 9.6 percent globally over the last three years,” said Mr Lindgren.
Research shows that milk processors collect about 14 percent of the total production annually and a paltry one percent of this converted into value-added, long-life products like cheese and butter, margarine, condensed milk and other related products.
In Kenya, although the marketing of milk is positively skewed towards the formal sector- comprising of about 27 milk processors and 64 mini dairies, 70 percent of milk is sold raw denying the country billions of shillings through value improvement.
Experts speaking at the conference therefore urged players, policy-makers and governments to develop growth propositions and adopt a performance mindset to help unlock the region’s potential.