Analysis fo the Dairy Industry in Pakistan

Analysis fo the Dairy Industry in Pakistan Introduction The prospering dairy industry of the country seems an embryonic market for branded dairy products, especially in the urban areas, where branded and packed milk, curd and butter are rapidly capturing the market. In fact, the consternation of adulteration, germs, decades-old style of improper handling of dairy products, particularly loose milk and curd by milkmen and shopkeepers, are impelling a large number of consumers in the country to bid adieu to the traditional milkman. Consumer preferences have changed in the favor of packaged dairy products, which ensure better hygiene and good value for money. In Pakistan when we talk about adulteration in loose milk. These kinds of fears and health hazards relating to loose dairy items are steadily changing the mindset of the consumers. Seeing this change and an enormous untapped potential of growth in packaged dairy products in the country in future, several local and multinational companies have introduced their branded dairy items in the r ecent past. In Pakistan, when someone talks about branded milk and curd, the name of Haleeb and Nestle comes to the mind of the people as they have emerged as two strong market leaders, who have swiftly captured the unexplored business of packed milk, curd, butter, margarine, etc. The emergence of these two brand leaders in the country has also encouraged several others to introduce branded dairy products. At present over a dozen companies are actively marketing branded dairy items in the country and among them the most famous are CDL Foods Limited, Bhaipheru; Idara-e-Kissan, Pattoki; Kabirwala Dairy; Lahore Milk Plant, Lahore; Millac Food (Pvt) Ltd., Lahore; Monnoo Dairies, Bhowana; Nestle Milkpak Ltd., Sheikhupura; Noon Pakistan Ltd., Bhalwal; Pakistan Milk Food Manufacturers, Jhang; Prime Dairies, Manga; Royal Dairy Products, Karachi; Ravi Dairies, Jaranwala and Unilever Pakistan Ltd., Sheikhupura, Bhaipheru, Karachi. Besides marketing milk and curd most of the companies are sell ing dairy products with innovation such as yogurt (natural and flavored), sweetened milk, UHT and pasteurised cream, butter, ghee, cheese and ice cream. In Pakistan Nestle is a great success story for establishing the largest milk collection network and setting new trends in dairy sector. On the one hand, it has proved a regular source of income for farmers through an assured and growing income resulting from the sale of their milk, and on the other, it has enabled Nestle to collect better quality milk in the quantities it needs. The basic unit of Nestle milkmans milk collection system is the Village Milk Collection Centre where farmers deliver milk, morning and evening. A trained milk collection agent who tests and records every supply for quality and fat content collects the milk. Over three thousand such centres operate throughout Punjab. This milk is then transported to the nearest sub-centres for mechanical chilling and then to the main centres where it is consolidated and chil led further, before being transported in specially designed insulated tankers to the factories in Sheikhupura and Kabirwala. According to background, dairy is one of the growing segment of livestock sub-sector and important component of Pakistans economy. Pakistan is the fifth largest producer of milk in the world. The per capita availability of milk at present is 185 litres, which is the highest among the South Asian countries. Milk production in Pakistan has seen a constant increase during the last two decades. The production has increased from 8.918 million metric tons in 1981 to 27.031 million metric tons in 2001-02. Milk production for the year 2002-03 is estimated at 27.811 million metric tons. Investment Prospects: There is a large and untapped potential in the dairy industry. With a population of 160 million, a significant demand for dairy products exists in Pakistan. There is a need for establishing modern milk processing and packaging facilities based on advanced technolog y to convert abundantly available raw milk into high value added dairy products. In addition, with improved conditions for milk pasteurisation, availability of chilled distribution facilities and consumer preference for the low cost pasteurised milk, the sector provides unique opportunity for investment in establishing pasteurised milk production plants. There is also great scope for establishing related industries in the form of an efficient milk collection system and refrigeration transportation facilities. The sector offers opportunity to foreign investor for establishing a joint venture for the production of dairy products, particularly dried milk and infant formula milk for which great demand exists in the neighboring countries like Iran, UAE and Saudi Arabia. The dairy industrys main ingredient is milk, which is processed at the dairy plants to produce variety of dairy products. The average daily production of milk in Pakistan is estimated at approximately 95 million litres. Punjab is the leading province in milk production with a share of around 80%. Out of the total production of 95 million litres of milk per day, about 55% is consumed at source in the countryside while the remaining 45% is traded in urban centres. Most of the traded milk is marketed un-processed and currently only about 2.5 to 3 per cent of the traded milk is processed by the dairy industry in Pakistan. Processed liquid milk in the form of Pasteurized or Ultra Heat Treated (UHT) milk is the main dairy product in Pakistan while other products include Dry Powdered Milk, Cream, Butter, Butter Oil, Yogurt, Cheese and ice cream. Presently, about 13 units in the organised sector are engaged in the production of various dairy products. Majority of the dairy plants are located in the vicinity of Lahore, which serves as the hub of this industry Milk Processing Out of the 28 million tons of milk produced in Pakistan, only 2.5 to 3 per cent reaches the dairy plants for processing into variety of dairy products. Pakistans dairy industry produces Ultra Heat Treated (UHT) Milk, Pasteurized Milk, Dry Milk Powder, and Condensed milk. Other major milk products produced by the dairy industry include butter, yogurt, ice cream, cheese, cream and some butter oil. Approximately half of the 0.3 million tons of milk available to the industry is processed into UHT milk, 40 percent into powdered milk, and the remaining 10 percent into pasteurised milk, yogurt, cheese and butter etc. Dairy plants in Pakistan Of the 38 major dairy plants established in the country with a capital investment of Rs. 2.392 billion and having a daily rated capacity of 2,180,000 litres, only 13 plants are currently in operation. The rated milk processing capacity of the 13 plants in operation is estimated at a little over one million litres per day. In addition, two dairy farms of the Pakistan military operating on non-commercial basis have raised Pakistans daily production of processed milk, yogurt and butter. The reasons for failure of large number of dairy plants are several and may differ from plant to plant. The most common reasons include an over estimation of demand for processed milk, too rapid investment in UHT technology, lack of consumer education, high price of UHT processed milk, non development of sustainable milk collection system, lack of trained manpower and insufficient operational funds. For the same reasons, the capacity utilisation of dairy plants in operation is around 40 per cent. The low capacity utilisation prevents most UHT milk processing plants from recovering much more than their variable costs. Next to the raw material i.e. raw milk cost available to the plants for Rs. 14 per litre on average, packaging is the most important cost element. Expensive packaging forms part of UHT technology. Despite immense potentials the dairy sector in Pakistan has been victim of criminal neglect by the successive governments in the country. Even at its present lowest-in-the-world yield per milk cattle, Pakistan is surplus in milk production; but due to lack of proper planning, collection and distribution facilities, a major portion of the total production is consumed, per force, by the producers in the far-flung areas. As against this we are importing 25000 tonnes of powder milk annually to meet the demand of the urban areas at a cost of above 300 million dollar. Pakistan ranks 7th among milk producing countries, with an estimated 21 billion liters of milk produced annually. A lthough this level of milk production is more than adequate on a per capita basis for todays population, lack of processing and poor distribution system in a long hot weather (milk has a shelf life of only four hours under moderate temperatures) keeps it from reaching consumers in areas that are either deficient in milk production, particularly the urban centres, or those that are difficult to access. The milk yield per cow in the neighbouring country is about 3000 liters per lactation period as against 1000 liters in Pakistan. In Western Europe the average exceeds 5000 liters, in USA 9000 and Israel exceeds 7000 liters per lactation period. After extensive research Indian Livestock Ministry has introduced a programme to gradually replace buffaloes with cows, which give more milk, by educating their farmers through their well-established cooperatives and successfully carried out the replacement programme during the last decade or so. During this period India has almost doubled its m ilk production from 38 to 72 billion liters and now ranks at No. 2 after USA with 74-billion liters in milk production. Despite feeding its huge population, India is exporting huge quantity of powder and processed and packed milk. To increase its yield of milk, India has made full use of Israeli expertise who have been trained by the US. Through artificial insemination India had developed a new breed of cows which yield 3000 liter per lactation period instead of previous record of 1200 liters. Pakistans tremendous potential to increase its milk production has so far remained unexplored due to the inactivity of the government and the related bodies which were created with much of fanfare. This neglect appears criminal in view of the fact that milk production despite its lowest yield, is even today far ahead of the major cash crops such as wheat, cotton, rice and sugarcane Conclusion There is huge demand of both powdered and packed milk in the neighbouring countries of Iran, UAE, Saudia Arabia beside Malaysia, and Philippine which Pakistan can successfully harness to its advantage if due attention is paid to this sector. By copying Indian plan, Pakistan can also develop a new breed of cows within a period of about 4/5 years and thereby increase its production by over 100 per cent. Pakistan can become a big exporter of dry and processed milk provided due attention is paid to this sector. Presently in Pakistan only about 22 per cent of milk production is processed, about 57.5 per cent is supplied to urban areas in raw form in most unhygenic conditions causing real health hazards. Rest is consumed by the farmers, mostly per force, specially in the far-flung areas for lack of proper facilities to take it to deficient areas. About 75 per cent of the total production of raw milk is produced in Punjab, 14 per cent in Sindh 10 per cent in NWFP and only 1 per cent in Balo chistan. In Punjab we have more buffalos than cowl in about 60-40 ratio, in Sindh it is 50-50, in NWFP dead 20 per cent buffalos and 80 per cent cows. In Balochistan there are mostly cows. Unlike other progressive countries where sale of raw milk is disallowed by law and processing is mandatory due to milk being one of the two major carriers of diseases (water being the other), Pakistan continues to allow 97-5 per cent milk to be distributed through the traditional gawala system. To the bacteria of tuberculosis and hepatitis that naturally occurs in milk, the gawala adds many more varieties through the addition of contaminated water for its dilution. The contractors, who collect milk in bulk from villages in Punjab through the dodhis the middlemen, and sell it to the urban consumers, go a step further. They add unhygenically produced ice slabs, caustic soda and sometimes formaline to the milk they collect to prevent it from going bad due to intense heat in summers. The UHT process, although expensive, has proven to be a success in Pakistan as it increases milks shelf life to 12 weeks. On the other hand, the pasteurization process inspite of its low procession cost, had not made much of a headway due to the short shelf life of its product and its dependence on old chain from production to consumption. Taking advantage of this cost factor, some milk marketers have begun marketing loose milk in urban areas which they claim to be pasteurized. The UHT process add heavily to the cost of milk as it requires huge investment to set up the plant, production of packing material and above all the collection cost of the milk making it beyond the purchasing power of poor and even lower middle class. Pasteurization process is much cheaper comparatively as the process is much simple and packing material much cheaper. Small pasteurization plants can play an important role to meet the milk demand of cities and towns provided there is a strong and efficient organization to ensu re that all necessary precautions are taken and hygienic requirements for pasteurization process are met before supplying milk to the ultimate consumers. Village cooperatives in India have efficiently handled this problem and about 80 per cent of the milk requirement of urban areas are met through pasteurized milk at an average selling rate of Rs. 15 a liter as against Rs. 24 per liter in case UHT processed and packed milk. Nestle Milk Pak. Ltd., a joint venture with the reputed multinational Nestle of Switzerland operating in over 80 countries around the globe, has done the poineer work in the field of milk collection UHT processing on most modern and state of art machines and quality packing. Nestle has almost the monopoly of UHT processed milk in Pakistan. It is a household name in our affluent families. Poor and lower middle class cannot afford the price and for them it is still a luxury which they can enjoy only once a while. The price of Rs. 28 per cent for Nestle UHT processe d and packed milk appears high, but if you consider the cost of infrastructure manpower and middle men involved in the whole process the selling price is justified. Nestle is concentrating only in Punjab and has developed a remarkable set up to collect milk from areas stretching about 80,000 KMs, and keeping the collected milk chilled in the most hygenic conditions until it reaches the processing factory which may take 8 to 12 hours. They have set up over 2500 milk collection centers from where it is transported to the 520 chilling centres within less than 3/4 hours. Chilled milk is then transferred to the two factories at Sheikhupura near Lahore and Kabirwala near Multan in special trucks with freezing arrangements. It sounds unbelievable but it is a fact that all this organizational structure for collection of milk has been set up by a Swiss expert who arrived in Pakistan only seven years back. To meet J. Moser Head of Milk collection department of Nestle at one of Milk chilling c entre at Mandi Bhauddin was one of most exciting experience of my life. By any standard. J. Moser is an authority on milk production and milk cattle. He can talk for hours on various breed of cattle around the world, their milk yield, how they increased the yield and their future plants, domestic consumption of milk, pattern of consumption and capacity to export milk and milk products to deficient countries. In order to keep his knowledge up-to-date he frequently goes on tour of different countries. He has worked in Sri Lanka, frequently instead India since posted in Pakistan in 1993. In this region he is most impressed by the work done by India to increase their milk production, manage its collection and distribution to its ultimate consumers at an affordable cost. The cooperative societies in Indian rural areas have played a very significant role in developing the dairy sector in India. Hundreds of thousand milk collection centers have been set up to supply milk in bulk to thousan d of pasteurization plants under required unhygienic conditions in the outskirts of almost every city to ensure supply of good milk in abundance. Through artificial insemination programme going on for over a decade with the help of Israel and United States they have developed a special breed of cows with yield of over 3000 liter of Milk per lactation period as against 1000 about 12/13 years back. Mr. Moser told this correspondent that he developed his milk collection and chilling centres on the pattern of Indian cooperatives. A business organization, whatsoever bigger size it may have cannot meet the national requirements. We are concentrating only on the central parts of Punjab which is densely populated and where more milk is available. For other areas in Punjab, Sindh, N.W.F.P. and Balochistan no such arrangement exists. This huge task cannot be done without the financial assistance, help and cooperation of the government. With proper planning and financial support of the governm ent Pakistan Milk production can be doubled in 10 years time and country can become a big exporter of milk and milk products, Mr. Moser said disclosing that by giving shorts of seaman imported from Europe we have successfully carried out artificial insemination programme in Pakistan on experimental basis. Our experiment proved successful as some of the cows conceived and nurtured through this system are giving 18 liter milk a day instead of normal 10 liters. The work has to be done at a large scale for which Nestle is not equipped, he added. It is imperatives, therefore, that the issues of increase in its production, and distribution are tackled on progressive line. The federal government may appoint a task force to study the various aspect of the disarray sector, identify the factors which has hampered growth sofar and recommend measures to develop this sector properly to harness its tremendous potential for the betterment of national economy. Inclusion of a person like, J. Moser i n the proposed task force can be a real help. With the every passing day, dairy products are becoming costlier because live stock farming has not scientifically grown with the increase in population and also it did not match with the pace of urbanization. Recently, milk prices in Karachi increased without any reason. In a short time of two years, milk prices have gone up from Rs 20 per liter to Rs 25, showing a 25 percent increase. Moreover, meat prices have also risen to about 25 percent in the last six months. In such a situation, the only way to control prices is to develop the dairy industry on scientific lines, which will not only provide meat and milk in abundant quantities to the domestic consumers but extra quantities can also be exported. In spite of having a large population of LIVESTOCK, the country is spending some $40 million annually on the import of formula milk only, which is the highest amount spent by any country in the world on this particular commodity. Pollution affecting the Pakistani Dairy industry Seventeen units, including three run by multinational companies, are engaged in the manufacture of dairy products in Pakistan, but environmental pollution, as well as an inadequate supply chain, is hampering the growth of the dairy industry. Noise pollution is one of the factors. Pakistan exports meat to Saudi Arabia but is yet to export dairy products to it, although that is a possibility, said Ibad-ur-Rehman, an executive of Cleaner Production Programme, a private-sector company based in Karachi that offers environmental solution packages to the industry in the backdrop of rising local and international competition. The growth necessitates consistent and adequate supply of raw material, and this is possible in contract production. This is being done by at least one multinational company. Balochistan and Tharparkar district in Sindh, which have a sizeable livestock population, are some of the ideal locations for dairy farming, besides Punjab, he said. Milk, by and large, is the main ingredient of almost all dairy products. Average daily production of milk in Pakistan is about 130 million litres. Most of the traded milk is marketed unprocessed, and hardly two percent of the traded milk is processed by the dairy industry in Pakistan. Processed liquid milk in the form of pasteurised milk or ultra-heat-treated (UHT) milk is the main dairy product in Pakistan. Other products include dry powdered milk, cream, butter, butter oil, yoghurt, cheese and ice cream. The milk-manufacturing process includes pasteurization, homogenization, UHT treatment and packing. Through little additional work, cream is also produced during the pasteurization cycle. Pasteurized cream is churned to make butter. In order to obtain butter oil, butter is heated to 90C degrees in ghee-melters and then liquefied. The milk powder-making process primarily involves evaporation and drying. The main steps around which whole ice cream manufacturing process revo lves are pasteurization, homogenization, freezing and packing. But CPP findings show that the major environmental problem of the dairy industry is wastewater, while solid waste, soil pollution and noise pollution are potential aspects of environmental pollution. Wastewater generation at a dairy industry is characterized by very large volumes of discharge besides the pollution loading from various dairy processes. Estimates show that the proportion of the waste discharge at a typical dairy industry per unit of processed milk ranges from 12:1 to 24:1. This is a very high figure considering the typical ratio of 3:1 in cleaner factories in the developed countries. In modern plants this ratio gets as low as 1:1