Bangladesh Milk Market LEAF

SDC’s Sustainable Land use Programme, Bangladesh Programme Management & support Unit

Value chain analysis report of the milk Market in Bangladesh
C.K. RAO and Puis Odermatt

Livelihoods, Empowerment and Agroforestry Project

June 2006

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Table of Content

Acknowledgements............................................................................................................... 3 List of abbreviations ............................................................................................................. 4 1. Summary ............................................................................................................................ 5 2. Introduction and objectives.............................................................................................. 7 3. Overview of the dairy market in Bangladesh .................................................................. 8 3.1. Trends in production, consumption, imports and prices ................................................... 8 3.2. Analysis of the dairy market and supply chain ............................................................... 10 3.2.1. Primary milk production ........................................................................................ 10 3.2.2. Formal sector consisting of private and cooperative processors.......................... 11 3.2.3. The informal sector remains pre-dominant........................................................... 14 3.3. Policy framework ............................................................................................................ 17 4. Potentials and strategies to collaborate with processors ........................................... 18 4.1. Key strategies and approaches with respect to the formal sector .................................. 18 4.2. Key strategies and approaches with respect to the informal sector ............................... 18 4.2.1. Building LEAF expertise for the dairy subsector................................................... 21 4.2.2. Approach for the formal sector ............................................................................. 21 4.2.3. Approach for the informal sector .......................................................................... 21 4.2.4. Strengthening the sub-sector ............................................................................... 22 4.2.5. Policy debate........................................................................................................ 22 References ............................................................................................................................ 23 Annexes: 1.Actors in the supply chain of liquid milk from farmer to the collections centers.................. 24 2. Workshop 21.6.06 ............................................................................................................. 25 3. Terms of Reference........................................................................................................... 37 4. Programme........................................................................................................................ 40 5. Overview of the major milk processors in the formal sector .............................................. 41

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Acknowledgements
We would like to thank Intercooperation Bangladesh for giving us an opportunity to conduct the assignment. It was pleasure in working with Mr.Bruno Poitevin, Adviser who has been providing excellent support to the mission. The visit to Rajshahi, Dinajpur and Bogra was not only interesting but fruit full and generated lot of inputs. Mr. Shamim Hossain PO was very informative and guided the mission by providing information. We would like to acknowledge the support of Regional office teams of Rajshahi, Dinajpur and Bogra and without their involvement the mission would not have achieved its objectives. All the staff of IC who has been assisting the mission were worth praising. The CBO members despite of their busy agricultural operations have been helping us participating in village meetings for which the mission is highly grateful to them. Finally the mission would like to express its gratitude to the management of Milk Vita, PRAN, BRAC and Professor M. Shamsuddin for their excellent cooperation in providing the information to the mission.

More details: Intercooperation House 2F NE (D), Road 73 G Gulshan – 2 Dhaka – 1212 Tell: 88 02 8815688, 8827633, 8829208 Fax: 88 02 8819688 E-mail: [email protected] Contact Person: Mr. Bruno Poitevin Adviser - Intercooperation E-mail: [email protected]

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List of abbreviations

BAIC BMCCL CBO DLS IC LEAF ME NGO SM

Barandre Advancement Integrated Committee Bangladesh Milk Producer’s cooperative Union limited Community Based Organization Department for Livestock Services intercooperation livelihoods, Empowerment and Agro Forestry Project Marketing Extension Non Governmental Organization Sweet manufacturer

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1. Summary
Dairy is an integral part of many rural livelihoods and an important source of income in Bangladesh, especially for landless and small-scale farmers. The total production of 2 millions ton per year however is well below the nutritional demand: Daily consumption is less than 30 ml per capita while 250 ml are recommended. Given this large deficit it seems paradox that farmers complain about a lack of access to the market. Objective of this study was to identify the constraints and potential of the dairy market in Bangladesh taking into account the various actors and propose a strategy to improve the situation. The milk market is protected with high import duties from the world market. Though Bangladesh has low production costs, it would not be competitive against the world market. Today about 10% of the requirements are imported, mostly in the form of milk powder. Findings of the mission Two clearly different systems of milk marketing exist in Bangladesh (i) village systems (“informal sector”)—where milk from farmers is marketed to consumers by middlemen; and (ii) organised collection of milk from farmers for processing, marketing by private enterprises and Cooperative sector (“formal sector”). Of the amount consumed, less than 10% is obtained from processing plants and the rest (more than 90%) is obtained from indigenous sources. The informal sector itself consists of traditional sweet manufacturing and direct consumption of liquid raw milk. The formal sector is largely driven by the liquid milk business (pasteurized and recently UHT) with focus of the capital Dhaka as main market. The processors anticipate a growing market, given the deficit in consumption and rising purchasing power. A characteristic of this industry is its vertical integration, consisting of more or less formal agreements with the milk producers and service provision by the buyer. The value chain analysis shows clearly inefficiencies, despite an apparent profitability of the companies. As a consequence, the formal sector hasn’t grown as one might expect. It is constrained by the lack of infrastructure, high collection costs from scattered milk pockets and small economies of scale. Nevertheless, new actors are entering the market, who however restrain from investing in new and more compact milk pockets because of high entry costs. They rather prefer to operate in the established milk pockets. Farmers in this system take advantage of more regular supply, some services and in general better prices. However, due to its low penetration in the rural areas, the formal sector has had limited impact on the livelihood and the dairy practices in the country as a whole. Furthermore, the extension and service delivery systems are not apt to stimulate farmers to augment the milk production. Farmers’ stake in the system is not clearly defined though they are theoretically integrated. Their integration in the value chain as stakeholders is a prerequisite for the development of a modern dairy (e.g. of contract manufacturing) as it will help improve quality and increase volume, respective decrease costs. IC’s role with respect to the formal sector consists precisely in facilitating this process (the investment in assets would be wrong): • Generate and share market information • Facilitation: linking farmers to processors (organize workshops within the CBO and invite processors for improving the linkage with the actors)
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•

•
•

Training CBO’s on how to negotiate with the processors (“raise the voice”). Improve services (train local providers) Infuse fat measuring system at individual farmer level

With the objective to linking the remote areas with large processors new ideas and approaches might be necessary as e.g. feasibility studies of new technologies (mobile chilling plants, maybe even on water, solar energy or other alternative energy sources) The informal sector itself consists of the manufacturing of traditional and very popular sweetmeats (about 50% market share) and distribution of liquid raw milk to households (40%). Despite its high contribution this sector has been neglected. The production technology for sweetmeats is very traditional and artisanal. The sweet manufacturer is controlling the collectors and indirectly the producers, without interacting with them. Given the imbalance of the power equation and the limited entrepreneurship, this system can be characterized as rigid. At the end of the value chain are the farmers who get the lowest share. However, due to the structural inefficiencies in the formal sector, the informal sector will dominate also in the future the dairy market in Bangladesh. Hence a strategy tailored to local conditions needs to be defined. Recommendations A platform is proposed as a means of compensation of the lacking vertical integration and imbalances of information. It would be composed of the major actors in the value chain (CBO’s, collectors, household, SM, NGO’s and local authorities). The platform is a continuation of the ME activities initiated in the CBO focused on the dairy sector. It is a flexible approach similar to the task force in the context of marketing extension being followed by LEAF. Objectives of the platform: • To improve existing practices of all participants in the value chain. • To create an enabling environment in initiating the process of linking CBO’s and the market. The topics on operational level, which might be of concern, are quality assurance and optimisation of the supply chain (e.g. reduction of the delivery time). Such initiatives will increase the awareness and further improve progressively the practices. Being an entry point, this platform can eventually also serve as a price negotiation fore between the CBO’s-collectors, sweet manufacturers and eventually households, with the effect that the pricing gets more transparent to individual farmers and negotiation leverage of the farmers increases. Such a platform could also stimulate private or community based initiatives for new businesses and innovations which would enhance the employment and value addition in rural areas. The above proposed strategies require however specific expertise with respect to the mechanism and value chain of the milk market. IC has to develop the competences by training one of their staff members who has been working in ME. The key aspects of the training consist of dairy technology, management and marketing. After such a training, this person while coordinating with other teams develop an approach which could be tested on a pilot basis and disseminated.

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2. Introduction and objectives
Dairying is nearly always a part of mixed farming systems in Bangladesh. It has a direct impact on the livelihoods, poverty reduction and availability of animal protein. The sector contributes to 16 percent of total employment in the country. The per capita daily availability of milk is only about 30 ml against the requirement of 250 ml. Consequently, consumers face an acute shortage of milk for which supply fails to meet the requirements of 85% of the population. The major constraints to dairy cattle production are disorganised marketing, limited access to market, shortages of quality feeds & fodder, inferior breeds of cattle, poor management practices and limited access to veterinary services. In addition, there is a lack of institutional support, research and training, which would be beneficial to the farming environment. Livelihoods Empowerment and Agro Forestry Program (LEAF) aims to contribute to the poverty reduction of small and poor farmers of north west Bangladesh through the development of human and institutional capacities and better management of their resources particularly those related to land use. The ultimate vision of LEAF is that communities are capable of taking charge of their own development – negotiating with market actors, service providers and local government. Since the milk sub sector has potential in addressing the livelihood, the LEAF envisages to link the farmers to market for which LEAF wanted to know the potential for milk market by means of an assessment. The main objective of this study is to assess the value chain of the dairy market in order to guide Leaf project, how to support farmers and market’s actors, while improving the quality and the quantity of milk production. In particular, the objectives of the market assessment are the following: To give an overview of the dairy market in Bangladesh: o Trends in production, consumption, imports and prices o Analysis of the dairy market and supply chain (attractiveness of markets, financial and technical resources as well as commercial leverage of the actors) o Policy framework: incentives for production and investment, price policy, food aid, import duties, health and veterinary regulations To assess the potential to collaborate with large processors and buyers as well as partners involved already in dairy and how to address them (Grameen and Danone: finance and market). To provide some key strategies and approaches for supporting this sector in favour of the poor and extreme poor (create value added for the farmers e.g. by increasing the leverage, improving the quality, integration into processing and distribution according to the technical and commercial potential of the actors in the dairy market) To contribute on a project proposal “supporting dairy milk value chain in North West Bangladesh”

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2. Overview of the dairy market in Bangladesh
2.1. Trends in production, consumption, imports and prices
The annual growth in production is approximately 1.9%, (please refer to table 1.) on an average could not compensate the shortfall between production and demand for milk in the country. Table 1. Milk production trends of Bangladesh Years 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 Million tons 1.62 1.65 1.68 1.71 1.76 1.79

A comparison of the average cost of production is shown in table 2 and indicates that Bangladesh has despite relatively low production costs a competitive disadvantage versus its neighbour India. Table 2. International cost comparison of the milk production Rank 1 2 3 4 5 6 7 8 9 10 Country Argentina India Bangladesh Poland New Zealand Brazil The Netherlands Australia Chile Ireland US Cents/KG (ECM)† 7.7 8.0 11.0 11.0 12.0 15.0 15.5 16.0 18.0 18.0

†Energy Corrected Milk (ECM): The average cost of production of a litre of milk, taking into account variations in fat content. Source: www.fonterra.com

The import of milk powder in the local market has only decreased from mid nineties see table 3 because of an increase of the customs duty, which is with more than 45% of the invoice value high (if we include VAT and other charges they sum up to even more than 70%).

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Table 3. Year wise import of milk powder with costs Years 1990–91 1991–92 1992–93 1993–94 1994–95 1995–96 1996–97 1997–98 1998–99 1999–2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 Tonnes (× 103) 60 55 45 35 25 21 14 13 15 16 19 20 18.6 16.25 15 USD (Mio) 132 89 75 62 49 53 45 56 60 62 59 61 61 86

That the domestic production can compete with imported milk powder is confirmed by the cost comparison (table 4), what probably explains that the major processors have invested (or will) in production of milk powder. However, some processors have indicated production of powder would be a costlier choice than importing. Investments are considered necessary in order to balance high seasonal variations in milk production. Table 4 Comparison between the price of local liquid milk and imported milk powder
Items World market Price [Tk/kg] /1 Duties (+70%) [Tk/kg] Price/kg of milk powder [Tk/kg] Liquid milk equivalent [Tk/litre] Price of liquid milk [Tk/litre] + Packing Price of liquid milk [US$/litre]1

Imported full cream milk powder Domestic liquid milk /1 USD/mt Exchange rate

62.80 113.96

76.76

8.50

32.56

?

0.44

– $2'200.0 0 74 T/USD

–

26.00

0.35

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2.2. Analysis of the dairy market and supply chain
Two clearly different systems of milk marketing exist in Bangladesh (i) village systems (“informal sector”)—where milk from farmers is marketed to consumers by middlemen; and (ii) organised collection of milk from farmers for processing and marketing by private enterprises & cooperative sector (“formal sector”). Graph 1. Actor wise share in liquid milk market

Informal: liquid raw milk; 40% Informal: sweets (traditional); 50% Formal sector (most past milk); 10%

Of the amount consumed, less than 10% is obtained from processing plants and the rest (more than 90%) is obtained from indigenous sources. The informal sector itself consists of traditional sweet manufacturing and liquid raw milk. Despite its high contribution this sector has been neglected. The economic development and rise of the purchasing power at least of a certain class of consumers leads to higher quality awareness and new consumption pattern which further offers an enormous scope for the actors to provide processed products.

2.2.1. Primary milk production
Landless and small-scale farmers own cattle (18.4% and 29.6%, respectively) and produce the bulk of milk. In relation to size of land holding, these small farms own more than their proportional share of livestock, while the opposite is true for the larger landowners. Table 5 shows the average livestock herd size by type of livestock farmers. Data is based on a recent survey carried out at seven locations across the country (Saadullah and Hossain 2000).

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Table 5. Average herd/flock size (number of animals) in different types of livestock farm households: landless (28.5% of livestock farm households) = 0–0.049 acres; small (39.6%) = 0.05–2.49 acres; medium (23.5%) = 2.50–7.49 acres; and large (8.4%) > 7.50 acres.
Type of livestock Average herd/flock size (number) by type of farm household Landless farm 2 Small farm 2.9 Medium farm 3.7 Large farm 4.4 Overall average herd/flock size (number)

Cattle

3.5

Source: Saadullah and Hossain (2000). The average milk production by a cow is 200-300 liters per lactation period of 180-240 days a year. These are very low-breed local varieties without any breed description while in certain milk pocket areas cross breed cows are producing 800-1000 liters of milk in 210300 days of lactation. The major constraints in dairy cattle production are the shortage of quality feed and fodder. Since the land holding is very small, farmers prefer to use the land for cultivating agriculture crops which has high returns compared to fodder cultivation. Apart from this the other issues are breeds of cattle kept by farmers yield small quantities of milk and poor management practices followed due to weak extension system and lack of veterinary health care.

2.2.2. Formal sector consisting of private and cooperative processors
The formal sector is largely active in the liquid milk business (pasteurized and recently UHT) which is focused on the capital Dhaka. Another characteristic of this industry is its vertical integration, consisting of more or less formal agreements with the milk suppliers, existence of bye ( Milk vita) laws and service provision by the buyer. The price determination is similar between the different actors, all use the fat content as the basis for payment. Fat is only measured at chilling center level, while at CBO level farmers do not conduct fat testing. The collectors accept milk based on lactometer reading which is an indicator of adulteration. The formal sector has chilling centers which are scattered in the country. These centers are mostly located close to smaller towns, for reasons like better infrastructure. As a Box No1: Price difference in consequence, they are purchasing milk in areas diverse localities places where the price is already high, whereas, In Bogra the farm gate milk price is interior villages, with inadequate marketing around Tk 18 per liter, the farmers facilities, are neglected and farmers are selling in the chars obtain only Tk 9 to 11 per litre. The same price was milk at much lower price. Another commonality observed in a bazar of a village on of this industry is that the dairy plants are the road between Jayporehat and located close to Dhaka. The chilled milk is Bogra. On the other hand, the collected from 2 to 3 chilling centers in road existing chilling capacities are not tankers of capacity of 7’000 and 10’000 liters. In fully utilised some cases to avoid daily transportation the milk is lected once in 2-3 days resulting in spoiling quality of milk. Further, transportation is taking a long time and is expensive.

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Bangladesh Milk producers’ Cooperative Union Limited (BMCCL or “Milk Vita”) This cooperative organization was established in 1973 and has 49% participation of the farmers while 51% belong to the government. It is the pioneer and considered as the market leader, it’s annual intake is 100 million liters. BMCCL has approximately 1000 cooperatives, some 125’000 farmers supply milk daily through 19 chilling centers. It has plans to open 6 more chilling centers in coming few years. BMCCL produces pasteurised liquid milk, butter, ghee, ice-cream, milk powders, flavoured milk, sweet curd, cream and rasa malai (sweetmeats) sells the products under the brand name Milk Vita. The products are mainly marketed in Dhaka through established marketing networks of rickshaw van co-operative societies, apart from formal retail agencies and wholesaling distributors. with locally fabricated insulated milk delivery vans on a hirepurchase basis. From 1991 onwards the company has been running in profits; in the year 2005 it has earned a profit of Tk 60 million, which are partly passed down to farmers as dividend and to employees as bonus. In this year the farmers have received Tk 1 per liter as a dividend. Milk Vita is perceived as a professional but highly centralised organisation, giving no or little scope to the chilling center managers taking decisions. One of the major drawback of Milk Vita is that the registration of new societies takes very long and the incentives for expansion are limited. This explains why some of the visited chilling centers don’t run at full capacity. BRAC Brac is a major and highly diversified NGO having five years of experience in dairy. The annual milk intake is 17 million litres. Its dairy operation has apparently reached the breakeven point in 3 years and has experienced a certain growth with 57 chilling centers and has plans to expand to another 10 centers this year. The product range consists of pasteurised and flavoured milk, UHT-milk ( brick), milk powder, butter, ghee and yoghurt. BRAC sells their products under the brand name Aargon. Rangpur Dairy As new actor in the market has explicitly chosen another strategy with respect to the supply chain: their dairy plant is located in the middle of the milk pocket, which is expected to become operational by September. The shareholders are with 51% Mr. Fakhar-uz-Zaman and 49% the Bangladesh Bank. The total investment for this new dairy plant amounts to Tk 300 million . With an installed capacity of 70’000 liters per shift it is expected to process annually about 25 million liters and reach break-even point at 50’000liters /day in 2 years. So far 120 CBO have been organised, with a potential to supply 24’000 liters of milk per day. The originality of their marketing strategy consists of polymer (3 layer) packed UHT milk, with lower packaging costs than the currently used Tetra brick used by other companies. The target price per liter is Tk 26 (wholesale) (Tk30 retail), which competes directly with the pasteurized milk price of Milk Vita and others. Other products the company intend to produce are flavoured milk and milk powder. As an innovation, it is planned to produce sweets (rasgulla in tins) in a 2nd phase for the first time on an industrialised level for the national and export markets. The company, once commissioned, has plans to provide livestock services to farmers with own personnel (as the others).

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Danone-Grameen Joint venture Objective of this joint venture is the production of yoghurt on a small scale of maximum 10’000 liters per day milk intake which should be economically sustainable, with profits reinvested for the scaling up in other locations. If the pilot project in Bogra is successful 20 to 30 other plants are expected to take off on a franchise basis. In the pilot venture, Grameen is expected to provide the land and organising the milk collection, while Danone is responsible for the construction and equipment and commencement of the production and then handed over to Grameen for the managment. Market: low cost yoghurt, enriched with vitamins, which targets the poor rural community. Market tests have proven Tk 6 /100ml as affordable. Having as a different segment, this project is not supposed to compete with traditional sweet manufacturers. The pilot plant will be located in Bogra town in order to make use of the natural gas supply. Investment at this stage amounts to Tk 54 million and should be operational by October 2006 starting with 3’000kg milk intake per day and the break-even point is planned in 1 ½ years with 6000 kg per day. The project so far has not been commenced as the site has not been selected yet and the milk collection procedures haven’t been finalized neither. A major concern of the project managers is the procurement of cheap raw materials in order to reach the target price. Table 6. Strengths and weaknesses of formal sector players
Buyer Annual milk intake ( million kilos) 75 No. Chilling Centres 19 Strengths • Market leader • Professional • Provides services to producers • Having long presence BRAC 17 57 • Large presence in the country • Working under flexible system • Diversified in processing agricultural products • Contract farming system • Having production synergies • Compact milk pocket • Usage of low cost UHT bags • Strong financial basis Weaknesses • Working under centralized decision mechanism • Depends on the government • Incurring high transportation costs. • Having commercial strategy • Incurring high transportation costs. • Reliability(?) • Unclear strategy • Logistics • The nature of communication with producers is informal. • Reliability(?) • No experience in dairy sector • new in market • Sharing of milk pocket with others.

Milk Vita

PRAN

10

9

RANGPUR

15 ( in two years period) 25

0

AKIJ

4

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Issues related to farmers supplying milk to formal sector: The farmers who have been interviewed expressed dissatisfaction regarding the inefficient and ineffective services rendered by the formal sector which is affecting their production. Further, CBOs supplying milk to Milk Vita are facing problems of not getting their CBO registered despite of their request. It is also evident that farmers are lacking the understanding of fat based pricing system being followed by formal sector. Table 7: Value chain analysis of the formal sector

Value chain of the formal system
Chain component Costs per stage (Tk/kg)

Producers Management CBO cattle development Shares Transport Chilling centers Transport& Processing Distribution Retail price

14.5 0.65 0.25 0.2 0.3 to 0.9 1-2 11.5 30

Conclusions: Despite an apparent profitability and the potential of this market segment, the formal sector hasn’t grown as one might expect. It is constrained by the lack of infrastructure, high collection costs from scattered milk pockets and reduced economies of scale. Given this background, the arrival of new actors might surprise; it proves however the positively perceived potential of this market. Farmers in this system take advantage of more regular supply, some services and better prices. However, due its low penetration in the rural areas, the formal sector has had a limited impact on the livelihood and the dairy practices in the country as whole. Farmers’ stake in the system is not clearly defined though they are theoretically integrated.. Due to weak extension and service delivery system farmers are not receiving stimulus to augment milk production. Lastly, the farmers are not empowered to bring changes in the system so that services are improved, because they feel that they are only a supplier to formal sector

2.2.3. The informal sector remains pre-dominant
Sweetmeats: As previously mentioned, the informal sector, consisting of sweetmeats and liquid milk, is the pre-dominant channel in the dairy market of Bangladesh.

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share of Value addition by processing&distribution: ~ T 13.0/kg

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In Bangladesh, sweets are very popular, with a share in the raw milk market of about 50%. The production is very traditional and artisanal. The milk intake by individual sweet makers varies from 80 to 1600 liters per day. The sweet makers procure milk through milk collectors and partly from bazaar. Hygiene and quality standards of these people are very low and they do not perceive much benefits from such standards as they feel that milk will be boiled after the reception. Further, quality control practices they follow at reception of milk is by using the lactometer and smelling the milk (organoleptic test) Practically all of them have their own retail outlets to sell their sweets. The scope for innovation in sweet making is limited as the market is very local and the knowledge is ancestral. So the interviewed sweet makers have expressed little interest for improving their technology or organisation. The profitability seems to be high which is also confirmed by the value chain analysis: it is estimated that more than Tk 70 can be generated per kg processed milk (which does not include expenses related to selling outlets, taxes etc) (see table 8A & B) Table 8 A: Value chain analysis of the curd manufacturing Case: Curd
Costs for milk: Sugar Labour Fuel packaging material Total Whole sale price Margin of the curd manufacturer

Tk/milkequivalent
16.50 7.81 2.81 1.25 1.75 30.13 43.75 13.63

Table 8 B: Value chain analysis of the sweet manufacturing Case: sweets
Costs for milk: Sugar Flour wheat flower veg. Oil Milkpowder Labour Fuel packaging material Total Retail sale price Margin of the sweet manufacturer

Tk/milkequivalent
16.5 50 0.2 0.4 0.5 12.8 4.5 2 0.4 87.3 160 72.70

Though the collectors act theoretically as independent agents, they are dependant of the sweet makers and rarely change the client. For any revision in the price, the SM gives a notice period of 7 to 14 days. There is neither any assurance of supply for the collector nor formal agreement between the parties.

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Table 9. Analysis of traditional sweets manufacturer

Sweet manufacturers in a snapshot: largest channel (50% of the total milk production), size: 80-1600kg/day, artisan (up 30 employees), sweets have a shelf live of 7 days without refrigeration, market limited to the town, own outlets Strengths: •Market share •Lower technological & quality requirements than formal sector •No cold chain required •Fast moving products ( liquidities) •Logistics: close to the milk pocket Opportunities: •Rising income will increase demand Weaknesses: •Lack of technical know-how •No quality standards •Not innovative (“wait and see”) No stimulus for improving the value addition of producers

Threats: •Competition from innovative and/or large scale manufacturer

As a conclusion, the SM is controlling the collectors and indirectly the producers, without interacting with them. Given the imbalance of the power equation (and oligopolist behaviour) and the limited entrepreneurship, this system can be characterized as rigid. However, this might change with intrusion of new actors on an industrialised level. At the end of the value chain are the farmers who get the lowest share. In addition to this they are not integrated in the decision making system due to the lack of lack of information and empowerment). Liquid milk: Contrary to the sweet market, the collector play an important role in the liquid raw milk market which has a market share of about 40%, He buys the milk from farmers at e.g. Tk. 14.5/kg and sells it directly to the households at Tk 20 taking profit and bearing the risks. Both formal and inform sector collects milk from villages through a person belonging to same village or neighbouring village. These persons are called as collectors, cyclewala and managers.

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Graph 2: Value chain analysis of the sweet manufacturing

Producers

Bazar: T 8-12 2 sales to SM: T 16.5 (agreement for defined qty)

Collector: T 14.5 cyclewala 1 sales to household: T 20

2.3. Policy framework
Department for Livestock Services (DLS) has the main mandate of providing services to the farmers. Qualified veterinarians of DLS are available at Upzilla level covering almost 100 villages. Furthermore, para-veterinarians are posted at some strategic unions. They provide services like; artificial insemination, treatment and prevention & control of diseases. However, our observations confirm that the accessibility to farmers for the services is a major constraint and the DLS has also not been able to provide timely advises to farmers in order to improve the productivity. In order to overcome the situation as an alternative to DLS the formal sector has been providing services to their members directly through their own personnel. In case of informal sector, NGO’s and DLS jointly intending to train para-veterinarians which is a recent initiative. In Bangladesh dairy technology expertise is not available as could be observed in the formal sector; mostly veterinarians and social scientists are managing chilling plants. In Agricultural Universities dairy science is offered only as a course in the agricultural and veterinary faculties, which is insufficient to develop the sector. As a consequence quality training to the farmer is lacking and leading to inefficient practices. The chances that new practices could percolate are into informal sector are even smaller. Local governance: Unions are the lowest tier of the government. Our observations show that the elected representatives are not aware of their roles, responsibilities and accountability vis-à-vis to their people. Furthermore, they don’t see a role in improving this sector.

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3. Potentials and strategies to collaborate with processors
The focus for developing the sub-sector should be on linking the farmers to the market. The improvement of the practices, like breeding, feeding and health as well as handling the milk, are complementary to the efforts in the area of marketing. To ensure this identify promising young persons in collaboration with the CBO’s and train them. A curriculum has to be prepared jointly with DLS for a foundation course followed by specific programs like AI and re orientation courses. Financial institutions linkage to CBO for the procurement of cross-bred cows should not be on the high agenda of the NGO at this stage.

3.1. Key strategies and approaches with respect to the formal sector
Supplying the formal sector remains the preferred choice of the farmers as it ensures the price revision, guarantee of collection and provision of services. However, the scope and potential of the formal sector in Bangladesh is limited on a short and mid term as it covers still only small part of the rural areas, for which reason the traditional sector remains important. The lack of penetration and dynamics of this sector rises the question of the strategy on how to link farmers in remote areas with it. The experience has shown that extending the milk routes with new chilling plant has its limits, in particular if the plants are not financed by the processors (eg. Care in the northwest). A collaboration of NGO and farmers with the formal sector in extending new areas requires a thorough analysis and robust business plan. As a principal, the CBO should be in reach of the milk routes of these processor. Future development needs obviously to be taken into account. Nevertheless to strengthen the sector certain procedures given below need to be followed by the actors. NGO’s role should consist in linking the farmers to the processors. This can initiated by providing the producers list to processors and organising workshops etc.) Training CBO’s on how to negotiate with the processors on price, services etc. ( raising voices) 1. Organize workshops with CBO members and invite processors for improving the linkage with the actors. 2. Organise technical trainings on fat testing at individual farmer level. 3. Act as vital link between CBOs, DLS and formal sector to ensure quality livestock services. New ideas and approaches might be necessary in linking the remote areas as eg: • Following the potential for producing traditional products on behalf of the formal sector needs to be explored. • Establishing mobile chilling plants • Chilling plants with solar energy or other alternative energy sources In such activities the role of the NGO’s needs to be confined to facilitation and avoid investing directly in chilling plants.

3.2. Key strategies and approaches with respect to the informal sector
As mentioned previously, the informal sector will dominate also in the next future the dairy market in Bangladesh. Hence a strategy tailored to local conditions needs to be defined. Due to the inexistence of vertical integration and imbalances of information and power, a platform is proposed which would be composed of the major actors in the value chain, as

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CBO’s, collectors, household, SM, NGO’s and Unions (Health department). The platform is a continuation of the ME activities initiated in the CBO focused on the dairy sector. It is flexible approach similar to the task force in the context of marketing extension being followed by LEAF. The difference however lies in the involvement of (if possible) all actors of the value chain. Objectives of the platform: 1. To improve the existing practices of all participants in the value chain. 2. To create an enabling environment in initiating the process of linking CBO’s and the market. Possible activities: NGOs with experience in marketing extension approach will initiate the process of forming the group. It is appropriate to identify representatives who can see a benefit from participating in the group. Accordingly the platform needs to be presented in attractive terms. The topics on operational level, which might be of concern, are quality assurance, control at reception, reduction of the delivery time etc. Such initiatives will increase the awareness and improve progressively the practices. Being an entry point, this platform can eventually also serve as a price negotiation fore between the CBO’s-collectors, SM and eventually households, with the effect that the pricing gets more transparent to individual farmers and negotiation leverage of the farmers increases. Such a platform could also stimulate private or community based initiatives for new businesses and innovations which would enhance the employment and value addition in rural areas. Value addition by chilling and packing the milk for direct marketing could be one of the strategies as well the production of other milk products by or in the community. For the selection of the activities following factors need to be taken into account: Complexity of the market and products and requirements on investments (see graph 3).

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Graph 3. Innovations at CBO-level: opportunities and constraints

Chilling plant, filling line (electricity etc)

+
Complexity of markets and products

Chilled, raw milk to households

Sweets

Diameter= value addition

-

Ghee

Requirements on Investment

The higher the complexity of products and markets as well as the requirements on investments, the higher is the risk. As an example, the production and marketing of ghee represents an activity which is apt in very remote areas with little infrastructure facilities and technical know how. However, ghee as generic product creates less value addition than sweets and chilled milk. This could be compensated, if the skimmed milk is utilised for making liquid milk products which would increase the revenues. With regards to sweetmeats, the technical know-how is available and adapted to local condition. The value addition is very high, however only if it is marketed through own outlets as it is common practice, which might be a constraint. Consumption of chilled, packing and branding quality liquid milk is growing trend. Though no experience has been identified in the field visit there seems to be an interest from various actors (Baic, Care). The expected advantages of this lie in the enforcement of a higher price for farmers increase the loyalty of the customers (consumers) and therefore result in a more assured supply. The challenge consists in handling technical equipment and logistics as well as in convincing the customers (marketing and promotion). For processing activities we should not only consider CBO’s with cooperative approach, as any individual should be allowed to take up the business. In any case, a business (and contingency) plan would be required, due to the importance of milk in the livelihoods of farmers on one hand and possible investments (risks) required on the other. Target costing for the business plan is the recommended approach. Given the lack of experience at all levels, this process requires the support and facilitation of NGOs which need to be trained specifically on coordinating the process. Possible constraints: Interest for the participation of some actors in the platform may be limited, eg. sweat meat manufacturer (see chart attractiveness) as their potential benefit is perceived as not high enough. Strategies to involve these actors have to be developed.
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Graph 4. Platform: stakeholder mapping

Impact of the platform on the actors

+ beneficiary

(motivation of the actors)

Households

CBO (with ME experience) Hotels

? Facilitators: •NGO’S •Gover. organisations (unions,upzillya)
Sweet manufact urer Collectors

?

3.2.1. Building LEAF expertise for the dairy subsector
The project staff in LEAF has developed expertise in marketing extension, which is a good basis to adopt new activities in milk marketing. However, specific expertise is required in order to understand the dynamics and value chain of the milk market and provide support to the NGO’s to conceptualize the process. IC has to develop the competences by training one of their staff members who has been working in ME. The key aspects of the training consist of dairy technology, management and marketing (in particular value chain analysis). After such a training, this person, while coordinating with other teams, develops an approach which could be tested and disseminated.

3.2.2. Approach for the formal sector
Location of the chilling centers and milk routes of the processors along with the expansion plan should be prepared, updated and distributed to the interested CBO. A benchmarking and comparison of the terms and conditions of the processors has to be communicated to the CBO’s.

3.2.3. Approach for the informal sector
The proposal of a platform is new in Bangladesh and hence the approach has to be carefully introduced with a pilot project. It needs to be monitored properly in order to take lessons for a possible scaling. Particular attention is required while including the platform members: what are their roles, what do they expect? Terms of reference and stakeholder mapping need to be developed.
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- loser
Participation of the actors on the success of the platform

3.2.4. Strengthening the sub-sector
It has become clear that a number of international NGOs active in the development of livelihood of poor have identified the dairy sub-sector as a means of improving the revenues of the poor. The approach followed by these actors is compartmentalized. A further collaboration among them would create synergies and evolve to common strategy. This could be initiated by an event, e.g. a national workshop on the development of the dairy sub-sector with the involvement of the key stakeholders (producers, processors, universities, NGO’s and dealers).

3.2.5. Policy debate
With our interactions we understood that the political, institutional and legal framework for the dairy sub-sector and livestock sector seems to be weak or not existing. The international NGO’s, donors and other actors need to understand this if they want to initiate any programs. These actors need to raise their voices with the government, in order to create an environment which is favourable to a sustainable dairy development a coordination within these actors would be necessary. Further, workshops have to be organized inviting formal & informal sector players, concerned government officers to discuss on the dairy sector, debate on policy issues related to the sector. In the absence of dairy technology expertise explore possibilities of building this expertise. The scope for building in house expertise within government training centers has to be emphasised for providing options to farmers in trying out innovation for the value addition of milk. Link the CBO program to local unions so that the elected representatives can actively participate in the program and contribute in scaling up the process to other unions.

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References
M.Shamsuddin et al; A survey to identify economic opportunities for smallholder dairy farms in Bangladesh, Trop. Animal Health Prod, Springer, 2006 G. C. Saha and S.A.M.A. Haque: Small-scale processing and marketing in Bangladesh including reference to micro-credit facilities (good market access)—Milk Vita: A case study Bangladesh Milk Producers' Co-operative Union Ltd., Dugdha Bhaban, 139–140 Tejgaon I/A, Dhaka – 1208, Bangladesh Tel. 00–880–2–882 6888 or 881–3614. Fax 00–880–2–882 6880 M. Saadullah Smallholder dairy production and marketing in Bangladesh, Department of Animal Science, Bangladesh Agricultural University, Mymensingh, Bangladesh E-mail: [email protected] Rajiv Pradhan; Survey of the vegetable,egg, milk and fish activities implemented by the Community Business Incubators, presented to CARE, Oct. 2005 Ambassade de France au Bangladesh, Missions Economiques: Le secteur du lait au Bangladesh, 10.8.04 CARE Bangladesh: Study on Milk Mini Chilling Centers, June 2005 International Dairy Federation Special Issue No 9002: Handbood on Milkcollection in warm developing countries, Brussels, 1990 Action for Enterprise: Subsector Analysis/Market Assessment of the Dairy (Milk) Subsector, March 2002

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Annex 1

Actors in the supply chain of liquid milk from farmer to the collections centers
Cycle wala This kind of person collects milk from CBOs sells it to chilling center on profit basis. In this case chilling center has no communication with the CBO, the cycle wala is responsible for making payment to the farmers. These people also have some autonomy to sell their milk to other needy person as there is no agreement drafted between him and the chilling unit. Where there are no chilling unit he sells milk to sweet manufacturer at a agreed price. Here also the SWEATMEAT MANUFACTURER has no direct link with farmers. Gwala This kind of persons collects milk from CBOs sells them SWEATMEAT MANUFACTURER or consumers directly with a pre determind price for the milk. Out of the collection he sells 75 percent to at house hold level at a price of TK26 and 25 percent to SWEATMEAT MANUFACTURER for TK 16. SWEATMEAT MANUFACTURER in this case has verbal agreement to take some definite volumes of milk with certain quality control standards. The other character of Gwala is to milk the animals directly in order to avoid adulteration. Collector he collects milk from CBOs at a common place daily and transport milk to chilling unit for which he receives commission ( Tk 1 per lirter) from the chilling unit for further distribution. Managers Are appointed by society management once the society registered. BMCCL deducts Tk 1.01 ior every one liter of milk that is collected from the society out of which TK 0.65 is spent for paying the salary of the Manager. This person operates a joint bank account with the society President of the society. He is responsible for milk collection, management of society accounts etc.

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Annex 2

Workshop 21.6.06

Value Chain Analysis of the Dairy Market in Bangladesh
CK. Rao, P. Odermatt
Workshop, Intercooperation-LEAF, Dhaka, 21.06.06

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Expectations from the Mission
• Overview of the key actors (farmers, raw milk collectors, processors, retail, governmental agencies, food aid, financial institutions) and their strategy involved in dairy value chain in Bangladesh, detailing their experiences, constraints, opportunities and future plan. • Providing some scenarios how to address and support those key actors in order to improve the milk competitiveness with a visualisation of dairy milk value chain. • Contributing to a strategic action plan in dairy milk value chain notably at level of large processors and partners.

Approach
1. Field visits (Rajshahi division):
• • • • • • • CBO’s Chilling plants: Milkvita, Brac, Pran, Baic Sweet manufacturers, collectors, milk bazar NGO’s: national&internationals DLS Visit of large processors Academics, importers (Nestlé)

2. Dhaka:

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Expectations from the Mission
• Overview of the key actors (farmers, raw milk collectors, processors, retail, governmental agencies, food aid, financial institutions) and their strategy involved in dairy value chain in Bangladesh, detailing their experiences, constraints, opportunities and future plan. • Providing some scenarios how to address and support those key actors in order to improve the milk competitiveness with a visualisation of dairy milk value chain. • Contributing to a strategic action plan in dairy milk value chain notably at level of large processors and partners.

Milkproduction in Bangladesh
[mio tons]

1997-98 1998-99 1999-00 2000-01 2001-02 2002-03

1.62 1.65 1.68 1.71 1.76 1.79
Average growth: 1.89% ( population growth)

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International cost comparison of the primary milk production
Rank 1 2 3 4 5 6 7 8 9 10 Country Argentina India Bangladesh Poland New Zealand Brazil The Netherlands Australia Chile Ireland US Cents/KG (ECM)† 7.7 8.0 11.0 11.0 12.0 15.0 15.5 16.0 18.0 18.0

†Energy Corrected Milk (ECM): The average cost of production of a litre of milk, taking into account variations in fat content. Source: www.fonterra.com

Negative trend of skimmed milk-powder import thanks to high import duties
Years 1990–91 1991–92 1992–93 1993–94 1994–95 1995–96 1996–97 1997–98 1998–99 1999–2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 Tonnes (000) 60 55 45 35 25 21 14 13 15 16 19 20 18.6 16.25 15 132 89 75 62 49 53 45 56 60 62 59 61 61 86 USD (Mio)

Import duties: > 70 % ad valorem!

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Cost comparison import vs. domestic milk
World market Price [Tk/kg] /1 Duties (+70%) [Tk/kg] Price/kg of milk Liquid milk Price of powder equivalent liquid milk [Tk/kg] [Tk/litre] [Tk/litre] Price of liquid milk + Packing [US$/litre]1

Items Imported full cream milk powder Domestic liquid milk /1 USD/mt Exchange rate

162.80

113.96

276.76 –

8.50 –

32.56 26.00

?

0.44 0.35

$2'200.00 74 T/USD

Pre-dominance of the informal sector

Informal: liquid raw milk; 40% Informal: sweets (traditional); 50% Formal sector (most past milk); 10%

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Actors in the formal sector
Buyers Milkvita milk-intake 75 Mio kg/y = 170'000/d # Chilling Centers 19 Strengths market leader (pricing) professional service to the producers long presence large presence in the country flexibility Weaknesses centralised decisions high transportation costs (chilling center to dairy plant) dependency of the governement Commercial strategy high transportation costs (chilling center to dairy plant) Communication with producers (informal) Reliability(?) Strategy unclear Logistics Informal relationsship with producers Reliability(?) no experience in dairy and food

BRAC

17 Mio kg/y

57

9 diversified in processing (6 planned) agricultural products (contract farming) production synergies juices RANGPUR Dairy 15 Mio in 2 yr 0 compact milk pocket (start: 10.06) = 50'000/d in 2 yrs UHT in bags (cheaper) ( 210'000 capacitiy) Akij (start: 10.06) (25 Mio capac 4 Solid financial basis (TBC) Distribution

PRAN

10 Mio kg/y = 30'000/d

New in market Milk pocket "shared" with others

Value chain of the formal system
Chain component Costs per stage (Tk/kg)

Producers Management CBO cattle development Shares Transport Chilling centers Transport& Processing Distribution Retail price

14.5 0.65 0.25 0.2 0.3 to 0.9 1-2 11.5 30

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share of Value addition by processing&distribution: ~ T 13.0/kg

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Logistics in the formal sector
CC Actual practice CC CC CC CC

Dairy plant (Dhaka)

Optim. Practice

Analysis of traditional sweets manufacturing
Sweet manufacturers in a snapshot: largest channel (50% of the total milk production), size: 80-1600kg/day, artisan (up 30 employees), sweets have a shelf live of 7 days without refrigeration, market limited to the town, own outlets Strengths: •Market share •Lower technological & quality requirements than formal sector •No cold chain required •Fast moving products ( liquidities) •Logistics: close to the milk pocket Opportunities: •Rising income will increase demand Weaknesses: •Lack of technical know-how •No quality standards •Not innovative (“wait and see”) No stimulus for improving the value addition of producers

Threats: •Competition from innovative and/or large scale manufacturer

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Relation of POWER in the traditional dairy market (eg. sweet manufacturer)
Sweet Manufacturer (SM): •Controls the collectors •Determines the price

Sweet manufacturer

•Determines the quality standards, which are not transparent (solid content by yield of chana) •No awareness of quality issues Draw backs:

Producers

Case: Curd Costs for milk: sugar labour fuel packaging material Total Whole sale price Margin of the sweet manufacturer
Data: estimated

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Market information&leverage

Power:
Producers

Collector

•Limited to local marketing •Market doesn’t work for the producers •No direct contact with the producers (SM controls producers via collector) •SM has little interest to improve the value chain conservative rigidity of the system

Producers

Producers

Producers

Producers

Value chain: sweet manufacturing
(traditional)
Case: sweets Costs for milk: sugar flower wheat flower veg. oil milkpowder labour fuel packaging material Total Retail sale price Margin Tk/milkequivalent 16.5 50 0.2 0.4 0.5 12.8 4.5 2 0.4 87.3 160 72.70
Tk/milkequivalent 16.50 7.81 2.81 1.25 1.75 30.13 43.75 13.63

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Value Chain: “Cyclewala” & Bazar
Producers

Bazar: T 8-12 2 sales to SM: T 16.5 (agreement for defined qty)

Collector: T 14.5 cyclewala 1 sales to household: T 20

Adulteration of the milk sold to household is common practice (no control neither by producers nor authorities

Dilemma of the milk market
DEMAND
(nutritional demand, purchasing power rising, consumption pattern)

economies of scale (critical mass) Transparency, Information Processors&trade are the bottleneck Oligopolies Infrastructure: high transport costs Collectors

MILK PRODUCTION (low practice high potential )

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Suggestions: formal sector
LEAF is in process of: Facilitation: linking farmers to processors (organize workshops within the CBO and invite processors for improving the linkage with the actors) Training CBO’s on how to negotiate with the processors (from “beneficiaries” to stakeholders: “raise the voice”). Improve services (local providers) Emphasise: • Market information :• Information about chilling centres and milk routes • Fat measuring at individual farmer level • Feasibility of new technologies:
• Mobile chilling plant (boat?) • Chilling plants with solar energy or other alternative energy sources

Suggestions: informal sector: “Platform”
Objectives of the platform* : • Improve the practices of all participants in the value chain (training, link with service providers) • Create an enabling environment in initiating the process of linking CBO’s and the market • Coordination & improvement of the supply chain • Market information leverage of producers • Innovation: Value addition in rural area (processing job creation)

* eg. Practical Action in Dinajpur

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Impact of the platform on the actors

+ beneficiary

(motivation of the actors)

Households

CBO (with ME experience) Hotels

? Facilitators: •NGO’S •Gover. organisations (unions,upzillya)
Sweet manufact urer Collectors

?

- loser
Participation of the actors on the success of the platform

Chilling plant, filling line (electricity etc)

+
Complexity of markets and products

Chilled, raw milk to households

Sweets

Diameter= value addition

-

Ghee

Requirements on Investment

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Conclusions

Thank you for your attention

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Annex 3

Terms of Reference Market assessment on the dairy milk value chain
1. Background
The Livelihoods, Empowerment and Agroforestry (LEAF) Project contributes to poverty reduction among small and marginal farmers of NW Bangladesh. This is to be achieved through the development of human and institutional capacities; better management of resources, particularly land, and an exploration of approaches which address extreme poverty. The core approaches of LEAF, are Human and institutional development, livelihoods and marketing. Regarding marketing, in 2004, Leaf started a piloting action for testing an innovative approach, calling Marketing Extension approach (ME). The main objective of this approach is to empower villagers for identifying market opportunities and to plan, how to exploit them. This piloting action was run with 80 CBOs in 2004 and extended in 2005-2006. Today, at least 300 CBOs have benefited of this course. Those are involved in this approach, have developed positively a lot of self initiatives, in marketing such as forming group marketing or small micro enterprises, developing linkages with local traders. Even, they have increased their production in bulk amount, while improving quality of their product. Their success has encouraged them to scale up their marketing activities. At present those groups are trying to access new markets at regional or national level. In this regard, the most of them are interested in linkage with large buyers. So, LEAF has begun to identify the promising value chains in the areas of its intervention. So far, the milk value chain has been considered by leaf as promising due to the involvement of lot of families in it, Actually, a majority of the poor rear 1 or 2 cows. Somehow, this asset constitutes in numerous case, their single wealth, using as saving, food item as well as income. Furthermore, there is high demand in milk products, provoking a lot of competition between the large and national processors in milk. However, Milk market is not so organised, particularly in collection of milk production. There are a lot of problems for milk farmers to sell their milk. They have to go very far from their place. In addition, collectors cheat them in numerous cases. Even, the lack of services doesn’t allow ensuring a good preservation of milk. So, the lack of infrastructure is a real constraint in this value chain such as chilling milk plan as well as collection centre for improving quality and increasing collection of milk. Due to the high demand in milk, there are a lot of potential not yet exploited. The objectives of leaf in this value chain, can be summarized in two ways: o Strengthening and empowering poor and extreme poor, becoming a acknowledged actor for bargaining with market’ s actors involved in this promising value chain in order to get additional value added, while developing their SME in dairy milk in sustainable way. Promoting business services (e.g. service providers) and organisation of market, in order to improve the competitiveness of product on market (quality, price, suitable to market’s demand).

o

Hoping that this market assessment can guide Leaf project, how to support farmers and market’s actors, while improving quality and milk production. Even it may contribute to propose some strategic options to address all those issues.
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2. Objective of the assignment
The main objectives of the market assessment are the following: To give an overview of the dairy market in Bangladesh: o Trends in production, consumption, imports and prices o Analysis of the dairy market and supply chain (attractiveness of markets, financial and technical resources as well as commercial leverage of the actors) o Policy framework: incentives for production and investment, price policy, food aid, import duties, health and veterinary regulations To assess the potential to collaborate with large processors and buyers as well as partners involved already in dairy and how to address them (grameen and danone: finance and market). To provide some key strategies and approaches for supporting this sector in favour of the poor and extreme poor (create value added for the farmers e.g. by increasing the leverage, improving the quality, integration into processing and distribution according to the technical and commercial potential of the actors in the dairy market) To contribute on a project proposal “supporting dairy milk value chain in North West Bangladesh” To orient the IC staff on the conditions and rules for reaching international market ( optional based on available time)

3. Expected results
o Overview of the key actors (farmers, raw milk collectors, processors, retail, governmental agencies, food aid, financial institutions) and their strategy involved in dairy value chain in Bangladesh, detailing their experiences, constraints, opportunities and future plan. Providing some scenarios how to address and support those key actors in order to improve the milk competitiveness with a visualisation of dairy milk value chain. Contributing to a strategic action plan in dairy milk value chain notably at level of large processors and partners. Guideline on the steps, rules and conditions to reach international market (optional)

o o o

4. Process
4 steps will be planned as the following: First step, field visits in the three regions of leaf project (Dinajpur, Bogra and Rajshahi) for understanding the current activities held by farmers, leaf project and large processors ( how market is running and organising from farmers to regional market). Visits of the different infrastructures from partners and large processors (factory, chilling plan, and system of collect….). Second step, will be organised in Dhaka. Meetings with all large dairy milk processors for analysing and exploring their activities and strategies ( PRAN, Milk vita, Akiz, Grameen dairy, Brac, Nestle, Novartis, Unilver, etc…) as well as partners ( CARE, Practical action, etc….). Third step, will consist to analyse with the IC staff information collected for elaborating different strategies and scenario ( workshops….) and contributing in a first draft of project proposal.

-

-

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-

Fourth step will be devote whether time is available to orient IC staff about international market (flexible).

5. Key documentation
o Projects documents o Capitalisation documents published by the SLU Programme / Projects; o Relevant studies and other documents regarding the context in Bangladesh

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Annex 4

Programme
The duration of the mission is tentatively estimated for 3 weeks, starting to 4th June to 23rd June.

Date 4/06/06

Place Dhaka

Activities Arrival in Dhaka Discussion and review TOR (expectations, methodology, collection and reading of relevant documents, planning of visit ) Departure to Rajshahi

Main responsibility Bruno

5 to June

7 Rajshahi

Discussion with the leaf team and fields visits (e.g. BAIC) Visit of PRAN, Milk Vita factories, Discussion with the leaf team and fields visits Visit of Practical action and CARE activities

Hossain/RO/ BPO Hossain/RO

8 to 10 Dinajpur June

11 to 15 Bogra June 16 to 17 Dhaka June 18 to 20 21 June Dhaka Dhaka

Discussion with the leaf team and fields visits Rangpur food products and CLP Visit of partners and large processors in dairy milk Pursuit the visits of large processors and partners

Hossain/RO

Hossain/Bruno Bruno

Workshop with IC staff for developing a Bruno strategic action plan and a project proposal Way forward LEAF discussions Departure to Bern Bruno

22 June 23/24 June

Dhaka Dhaka

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Annex 5

Overview of the major milk processors in the formal sector
Milk Vita Ownership milk intake /d milk intake / year # farmers chilling centers #chilling centers ( + planned) State: 51% Societies: 49% 170'000 75 Mio 125'000 19 (+6?) PAST, UHT, butter, ghee, ice-cream, milk powdermilk powder, flavoured milk, sweet curd, ice cream, cream and rasa malai Milk Vita riksha-system in Dakha (80%) written contract with CBO 15.75 mgt fee, cattle development, share -1.1 -0.90 13.75 (plus dividend) 57 (+10) in propriety of the processor 9 (+6) Brac NGO 45'000 17000 Pran Private: 100% 30'000 10 Mio Rangpur Private (Fakhar): 51% Bank of Bangladesh: 49% 50'000 (planned) 15 Mio in 2 yrs Akij Private

25 Mio full capacity

Products

PAST, UHT, butter, ghee, milk powders, flavoured milk, yoghurt drink Aargon Dhaka (own outlets) mixed (also via collectors) 14.8 ("flexible" approach)

PAST, UHT (Powder planned)

UHT (+powder planned)

Brands Distribution

Pran "juice channel"

Bengla Milk

Agreeements with producers Milk price 3.5% (delivered chilling plant) Costs charged on producers = total deductions Transport Farm gate price

mixed (also via collectors) 15.7

-0.90 13.80

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Influence fat content Milk pricing according to fat content Price breakdown: mgt fee, cattle development, Validity of price Volumes (garantee/obligations)

0.3 T/0.1% 449.9

0.3 T/0.1% 0.3 T/0.1%

0.34 T/0.1% yes

6-12 months exclusivity

< 6 months +/-regular

< 6 months planned powder plant should give garantee of supply over the whole year not defined not defined

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