Friday, March 29, 2024

Sri Lankan dairy growth resumes

Avatar photo
Growth in Fonterra’s Sri Lankan milk supply has resumed as local farmers improved their cow management and production, Sri Lanka managing director Leon Clement says.
Reading Time: 3 minutes

Fonterra’s leadership position in Sri Lankan dairying was a great platform from which to expand milk collection and boost dairy consumption.

Starting from a low base of dairy consumption the growth prospects in that market were very good, he said.

Following regular episodes of disruption to collection and processing amid local protests seeking more indigenous control of the dairy industry, the Sri Lankan and New Zealand governments signed a co-operation agreement in late 2013.

Milk supply was now growing after several years of being static, Clement said.

That would help the company to pursue growth opportunities along with some changes in the business model.

Fonterra already had the number one and number two market positions for the largest category, full cream milk powder. Number one was the Anchor brand and number two Ratthi, Singalese for happy cow.

“That 55% market share is a great leadership position with established brands and a very good platform from which to grow further.

“That has been built on the Sri Lankan habit of drinking tea with teaspoons of milk powder mixed in.

“But per capita consumption of dairy foods in Sri Lanka is relatively low and we have plenty of opportunity to increase from the present one-third to half of a glass of milk a day.

“We know from other developing markets that getting to 1.5 or two glasses a day is readily achievable.

“The challenge is making sure we target relevant consumer needs.

“That is likely to be in other formats, such as UHT liquid milk rather than powder or flavoured milk for growing children or in a yoghurt category.

“New formats and new products will increase the number of dairy occasions in a week.”

Clement has been with Fonterra 13 years, the past eight offshore, first in Vietnam for five years and the past three leading the co-operative’s business in Sri Lanka.

Prior to moving aboard he worked for Tip Top, the Fonterra ice cream subsidiary at Mt Wellington, Auckland.

He mentioned the contrast between Vietnam and Sri Lanka.

In Vietnam Fonterra was quite small and competition among many dairy companies was fierce as the local economy grew strongly.

The main emphasis was on Anlene and Anmum branded products and a lively foodservice business. 

Sri Lanka was one of Fonterra’s four leadership markets with NZ involvement going back more than 35 years. It employed 750 local people.

The other three are NZ, Chile and Malaysia, where Fonterra has market leadership or majority shares in one or more dairy categories.

“It was quite humbling to be entrusted with a big legacy established by a long chain of NZ dairy executives.”

Fonterra Sri Lanka collected a peak of 40,000 litres a day from 4400 small dairy farms scattered throughout the hilly country.

If less than 10 litres of milk a farm sounded small, it was because they had an average of three or four hand-milked, light cows feeding on a variety of household and crop wastes plus cut and carry grass.

The milk was all taken to Fonterra’s Biyagama site on the outskirts of Colombo and processed into liquid and cultured products. An adjacent plant blended, bagged and branded all the imported NZ powders.

 “The Sri Lankan government also wants to lift the standard of nutrition and human health.

“We can cater for all powder and nutritional needs – Anchor full cream, Pediapro, Ratthi and Anlene – plus the emerging everyday consumption in fresh dairy foods.

“The economy is growing relatively strongly, 6% to 7% annually, and that adds to our growth prospects here.

“Fonterra’s co-operative ethos is valuable here in Sri Lanka, building more economically sustainable family farms and producing, more, better-quality milk.

“We have invested a lot in supply relationship officers working closely with farmers and improving their animal health and cow feeding.

“Fonterra in Sri Lanka has its own grassroots fund, from which we have been able to invest in water schemes and other community projects.”

The farmer training and development was a hands-on approach through field days, discussion groups, practical demonstrations and mentoring.

It aimed for best practice farming techniques to be learnt and adopted by local farmers so they could farm more sustainably, productively and profitably.

“That 55% market share is a great leadership position with established brands and a very good platform from which to grow further.”

 

Leon Clement

Fonterra

Model farms were also planned to provide practical training and advice and to teach future extension leaders in dairy.

Sri Lanka was only 20% self-sufficient in dairy products and had imported a steadily increasing volume of milk powder from NZ.

Three years ago the quantity was 45,000 tonnes, which increased to 47,690 tonnes then to 51,184 tonnes in the 12 months to the end of September, Statistics NZ reported.

Sri Lanka was a price-controlled market, where the government fixed the retail price of milk powder sachets, within which the importers, packers and retailers had to make ends meet.

“We have to strike a balance between the need to provide nutrition through powders at regulated prices and the development of new products that are not price-controlled,” Clement said.

“Locally sourced milk and locally processed dairy products enable us to showcase what can be done in the domestic dairy industry and how we can have a positive impact.

“It complements Fonterra’s portfolio and is a strong growth opportunity for us.”

Total
0
Shares
People are also reading