The dairy market in Africa is characterised by low yield herds, loose milk consumption and low returns for the entire supply chain. However, with growing investment by individuals, processing and packaging businesses, dairies and government support, the situation is gradually being reversed.
There is little law enforcement against illegally selling loose milk, which is raw milk sold on the street. Informal processing facilities lead to a great deal of wasted milk, informal retail outlets undermine industry regulation and result in debilitating price fluctuations, and rainfall volatility results in fluctuating grazing that directly affects milk yield.
It is difficult to precisely establish the opportunity for local market growth. In Kenya, one of the highest producers on the continent in terms of volume of milk at around 4,2 billion litres annually, only about 30 per cent is marketed formally, according to various sources. In contrast, as much as 90 per cent of SA milk is marketed formally, and the local industry is consequently that much more profitable.
Nigeria is another example of a country producing enormous quantities of milk. At last count the country's dairy herd was 900 000 strong and produced around 1,3 billion litres annually, a figure well below the national demand of 3 billion litres, according to government sources. The country has a population of about 138 million people, almost 50 million of whom are involved in agriculture.
Nigeria experiences many of the difficulties that plague Kenya. This includes herds that typically produce low yields and an informal supply chain that results in a great deal of waste. More importantly, Nigerians love powdered milk and while liquid dairy consumption is currently low, it is growing.
One advantage liquid milk has over powdered is that it requires no additional water for consumption, which is often drawn from unsafe supplies. However, the Nigerian liquid dairy industry is currently being reborn and dairies are now selling processed liquid dairy to local producers.
Much of the liquid dairy produced in SA is fermented milk and sold locally. There is enormous opportunity throughout Africa to become one of the pre-eminent producers of dairy products, both liquid and other, for the growing needs of the continent and the rest of the world.
While African producers must secure their supplies of liquid milk and grow the necessary raw materials, infrastructure, skills and supplies to do so if they are to compete locally and globally, they must also look to market demands such as affordability, convenience and consumer confidence.
The growing middle class wants healthier products but it also wants products that are credible. They want to know where they originate, what goes into them, and a number of other factors that revolve around product safety. Producers must be able to trace every ingredient that goes into batches, trace the batches and even, in some cases, individual cartons identified by unique codes. But consumers, demanding as we are, want convenient products too. We want them in different shapes, sizes and with different openings because we want to consume more of them while we are on the move.
These factors are shaping the African dairy industry, which is a hive of activity at the moment as the various parties jockey to get the necessary solutions into place.
In 2008, people around the world consumed 258 billion litres of liquid dairy products. By 2010 that number was 270 billion litres and it is expected to brim at 350 billion litres by 2020. The reason is there are more people on the planet, more of them are in the middle class (defined as earning between $10 and $20 daily), a number the World Bank reckons is growing from 430 million in 2000 to 1,15 billion by 2020, and they are more health conscious than ever before. Emerging and developing markets, of which Africa is one of the largest, are expected to account for 60 per cent of all liquid dairy production.
Rae McGraw is Tetra Pak's marketing director, environment and communications cluster leader for sub-Saharan Africa.
