AN EXPERT SUB-SECTOR STUDY

REPORT ON THE DAIRY SUB-SECTOR IN UGANDA

FINAL REPORT

WRITTEN BY:

KIZIBA INVESTMENTS LIMITED P.O. BOX 70093 KAMPALA

2

Table of Contents ACRONYMS…………………………………………………………………………….3 EXECUTIVE SUMMARY……………………………………………………………..4 CHAPTER ONE: INTRODUCTION 1.1 BACKGROUND OF THE STUDY………………………………………………….6 1.2 METHODLOGY……………………..…….……………………………..………....10 1.3 LITERATURE REVIEW……………………………………………………………12 1.4 FIELD STUDY, MARKET AND INSTITUTIONAL ALYSIS…….…………...….14 CHAPTER TWO: DAIRY SUB SECTOR STATUS QUO 2.1 BACKGROUND TO THE DAIRY SECTOR……………………….……….…….21 2.2 TRENDS AND PERFORMANCE OF THE SECTOR…….……………….………22 2.3 MILK PRODUCTS……………………………………………….............................25 2.4 MARKETING STRUCTURE OF DAIRY PRODUCTS………………………..….27 2.5 CHALLENGES FACING THE SUBSECTOR………………………………..……30 CHAPTER THREE: THE SUBSECTOR DYNAMICS 3.1 GLOBAL AMRKET ANALYSIS…………………….……….……………..……..32 3.2 NATIONAL SUB SECTOR ANALYSIS………………………..……………...….32 3.3 KEY MARKET PLAYERS……………………………….…………….…...….…..35 3.4 DAIRY BUSINESS DEVELOPMENT SERVICES……...…………….………..…38 CHAPTER FOUR: SUBSECTOR VALUE CHAIN ANALYSIS 4.1 THE VALUE CHAINANALYSIS……………………………………..……..……41 4.2 SCTOR VALUE CHAIN ANALYSIS………………………………..………..…..42 4.2.1 SEGMENTS RECOMMENDATIONS..……………………..…….….....45 CHAPTER FIVE: CONCLUSION AND RECOMMENDATIONS 5.1 CONCLUSIONS…………………………………………………….…….…….….48 5.2 RECOMMENDATIONS…………………………………………………..……..…49 5.2.1 Generic recommendations towards multi stakeholders……. …........49 5.2.2 Specific recommendations to POs…………………….… .…..…...51 ANNEXES Service providers………………………………………………………………………...54 Key sector players………………………………………………………………………..60 Small scale milk providers (retailers)……………………………………………………61 Machinery needed for milk cooling and processing……………………………………..62

3

ACRONYMS

ASPS Agriculture Sector Program Support

BUDS Business Uganda Development Scheme

DCL Dairy Corporation Limited

DANIDA Danish International Development Agency

DDA Dairy Development Authority

DIA Dairy Industry Act

GDP Gross Domestic Product

KADP Moroto Karamoja Agro-Processing Development Programme, Moroto

MAAIF Ministry of Agriculture, Animal Industry and Fisheries

NARO National Agricultural Research Organisation

NDDB National Dairy Development Board

NGOs Non Governmental Organisations

PSFU Private Sector Foundation Uganda

UDPA Uganda Dairy Processors Association

UHT Ultra Heat Treated

UMA Uganda Manufacturers Association

UNBS Uganda National Bureau of Standards

UNDATA Uganda National Dairy Traders Association

UNDFA Uganda National Dairy Farmers Association

UNFFE Uganda National Farmers’ Federation

UIA Uganda Investment Authority

SOCADIDO Soroti Catholic Diocese Integrated Development Organisation

4

Executive Summary In Uganda the livestock sub-sector contributes 17% to 19% of the agricultural GDP and 7 to 9% of the National GDP. Of the livestock GDP, the dairy industry is estimated to contribute 40 to 50%. It is estimated that mixed farming smallholders and pastoralists together own over 90% of the national cattle herd, with dairying as an integral part of the agricultural system in most parts of the country. The history of the dairy industry of Uganda dates back to the sixties when the post independence governments started stocking exotic dairy breeds through a number of projects in order to increase milk production. The first Dairy Industry Act of 1967 set up Dairy Corporation as the government body responsible for development, marketing and regulating the industry. In 1993, the Government of Uganda with assistance from the Danish Development Agency (DANIDA) developed “A Master Plan for the Dairy Sector” with three major recommendations; that milk marketing should be liberalized, a Dairy Board be created to oversee the liberalized industry and that Dairy Corporation should be privatized. Thus the Dairy Industry Act 1998 created the Dairy Development Authority (DDA) and a purely commercial company the Dairy Corporation Ltd (DCL). The DDA took over the development and regulatory functions of the dairy industry and DCL is to be divested. DCL was consequently divested and its now called Sameer Agriculture and Livestock Limited. As a result of liberalization of the market, other players joined the market and there are currently over 10 large-scale processors. The government also put in place strategies for development of support services like extension and breeding. In addition, government is encouraging the revival of co-operative societies as well as promoting the export drive. Total national milk production has grown from an estimated 365 million liters in 1991 to 900 million liters in 2001 to 1,100 million litres in 2003 with the main milk production areas in the southwest contributing 38.2% (DDA, 2004). Milk losses are a major constraint affecting the efficiency of production in Uganda. This is largely attributed to marketing constraints. Overall, the major cause of milk losses is limited demand for milk. Losses are highest during the flush (rainy) season. This is because the production levels rise. This is due to the increase in the grass and fodder. With the increase in production, farmers have a big amount of milk to sell in a relatively short time. In Soroti, farmers gave scenarios where they pour milk in rivers because they have too much of it, can not get a market for it and yet they have to go and milk the cows again for more milk! It is estimated that up to 50% of milk produced during the rainy season is left at the farm unsold. In the formal milk market however, very little milk is lost. However, loses in the

5

informal sector although not documented are likely to be very high. This is probably due to the mishandling and adulteration practices rampant in this sector. Average national per capita consumption of fresh milk is 40 liters (2001 DDA estimate). In Uganda, the most commonly consumed types of milk are unprocessed raw milk, domestically processed packaged milk (pasteurized and UHT) and boiled unpackaged milk. Dairy products consumed include: yogurt, and indigenous fermented milks, ghee, butter, cheese, ice cream, sweet and sour cream. Unprocessed milk marketed through the informal channels has the highest demand followed by processed packaged milk. Income level is an important determinant of milk and dairy products consumption and higher per capita milk consumption is observed in well-to-do households. Other influencing factors include nutritive value, cultural, proximity to milk distribution outlets, taste and preference. Since the 1960s, one of the most critical problems facing dairy farmers in Uganda has been recognised as that of marketing their milk. This problem has been recognised in the overall context of the importance of marketing considerations not only in stimulating increased milk production but also in raising dairy farm incomes and living standards and improving the nutritional well-being of the population in rural as well as urban areas. Hence, in Uganda the development of milk marketing infrastructure has been inextricably linked with the development of the dairy industry. A major constraint to increasing the welfare of small holder dairy farmers is their inability to access markets. Enhancing the poor farmers to reach markets and actively engage in them is one of the most pressing development challenges. Remoteness results reduced farm-gate prices for dairy products. This leads to a reduction in the incentives to participate in dairy economic transactions and results in subsistence rather than market-oriented production. Transaction costs such as lack of access to information about markets, lack of negotiating skills and lack of collective organisations are other impediments to dairy sub-sector market access. For example, the existence of high marketing costs for fluid milk in Uganda, the prevalence of thinness in milk markets, and the risks of perishability of the dairy products especially with lack of cooling and refrigeration services mean that there is need to focus on revising the dairy sub sector marketing strategy. Marketing costs are high due to the fact that farmers sell milk in its primary state. Therefore, any additional marketing costs like the purchase of bicycles to take milk to town centres are cutting back on the expected

6

profits. The big question, therefore, is how to expand the market participation of both smallholder dairy producers and institutions in the dairy sub-sector. The purpose of this report is to develop a market Chain analysis of the dairy sub-sector in Uganda, giving an evaluation of the Dairy sub sector, giving a market value chain analysis and making recommendations on best marketing practices and business development services. CHAPTER ONE: INTRODUCTION 1.1 BACKGROUND TO THE STUDY FIT Uganda Ltd is a Business Development consulting company with a history of success is based on delivering sustainable business models that incorporate community development programs. FIT Uganda also provides capacity building for service providers to enable them provide services to their target client who are mainly the MSEs. The company has been coordinating the Access to Markets Capacity Building Program on behalf of CORDAID for some of its Ugandan partners. The Access to Markets Capacity Building Programme is a 3 year project that began in January 2005 and is being implemented by FIT Uganda. The overall objective of the programme is to develop the technical capacity of the partners to effectively facilitate access to market for their target beneficiaries. The specific objectives of the CBP are;

• To improve partner’s understanding and knowledge of market dynamics and related gender issues.

• To improve knowledge and skills of staff in sub sector market development with a gender, HIV/AIDS and Conflict perspective.

• To improve partners’ strategic plans with respect to ATM and related gender, HIV/AIDS and conflict situation concerns.

• To strengthen the organizational planning and management capacity for ATM of partner organizations within the first year of the CBP.

• To improve knowledge and skills of staff of partner organizations in market research with a gender perspective.

• To improve knowledge and skills of staff in market information sourcing, processing and dissemination.

• To improve the knowledge and skills of staff of partner organizations in development of market opportunities with a gender perspective.

7

• To improve the skills and knowledge of staff of partner organizations in business management.

• To strengthen the skills of staff of partner organizations in facilitating their target groups to access business financing.

• To strengthen the knowledge and skills of staff of partner organizations in lobby and advocacy for rural producers’ access to markets with a gender perspective.

• To have a well managed and monitored implementation process for the Capacity Building Plan (CBP).

FIT Uganda Ltd has other initiatives working in collaboration with Match Maker Associates of Tanzania to develop Value Chain Development Trainings, offers consulting services in project management, conceptual development, evaluation and customised training in Access to Markets. All these initiatives are designed to advance a Market Development Approach (MDA) to the delivery of support services to SMEs among the poor and marginalized people. The principles of a market-focus approach to BDS are in line with FIT Uganda’s core program area of strengthening institutional structures for poor people in order to eradicate poverty. Enhancing supporting the known millennium development goal of Eradication of extreme poverty and hunger (MDG-I). 1.1.2 Purpose and Objectives of the report The overall purpose of the report was to lead FIT Uganda in clearly understanding the analytical picture of all the firms, channels, markets and activities vertically related to the Dairy Sub Sector using a combination of both a rapid and in depth analysis. The study described and analyzed the structures of the Dairy sub sector within Uganda with a view of identifying the general marketing inefficiencies, constraints and opportunities, different relationships of the different actors (large and small), governance and geographical coverage extending to global trends (production, consumption and Uganda Industry profitability). This report will help FIT Uganda to better identify points of intervention along the Value Chains, and to choose appropriate partners at the different points of intervention. Suffice to this, the study will also bring out how MSMEs can play more lucrative roles in the value chain, and how the value chain structure or characteristics can be designed to better benefit and include MSMEs. The report looks at the market trends and projections, marketing and trading linkages and potential scale up ventures in the Dairy sub-sector.

8

In this regard, FIT Uganda procured the services of Kiziba Investments Limited to develop an expert sub-sector report for the Dairy sub sector. This report is based on the findings of the study and the recommendations thereof. 1.1.3 Objectives of the Study: Hence, in order to attain the purpose of this study the following objectives were addressed:

i. To study the general quantitative and qualitative data of the Dairy sub sector,

especially with respect to number of MSMEs

ii. To assess and understand the Product Markets and Market Trends for the

Dairy sub sector.

iii. To describe functions of the actors and assess their level of collaboration within

the value chain. This would include selling and buying and beyond (i.e.

beyond selling and buying), and the structure of transactions (e.g.

subcontracting)-using graphic presentations.

iv. To identify overall constraints and assess opportunities for growth nationally

and internationally including; technology and product development, market

access and development, organisation, policy, finance, input supply etc., for

the Dairy sub sector.

v. To demarcate the geographical coverage for the Dairy sub Sector.

vi. To assess the level of cooperation among participants within the value chain,

their degree of interaction including selling and buying and beyond, and the

structure of transactions (e.g. subcontracting).

vii. To analyse issues of management and organisation within the Dairy sub

sector; this would entail answering key questions like who determines what is

produced, how the rules are of trade determined, what associations they are

and who is charge of what in the production and marketing chain.

viii. To focus on understanding the market conditions, and within it place the

actors that assume market leadership. In most cases, the smallholders are not

the one dealing with the final market, hence in this report deliberate attempt

9

has been made to involve the strategic large-scale actors who may be the

market champions.

1.1.4 Scope of the Study:

The Expert Studies covered the major regions were the CORDAID partner

organizations operate, hence nationally. Specific to this report, the key CORDAID

areas were Teso in Eastern Uganda and Western Uganda.

1.1.5 Specific tasks of the consultancy

The prime deliverable of the assessment was a detailed sub sector study report

analyzing the structure and functioning of the Dairy sub sector in Uganda

consisting of recommendations on possible BDS and finance products to be

developed, market potentials that could enhanced, and appropriate influence on

policy and operating environment. The analysis provided:

i. A detailed structure of the sub sector operations in Uganda, by identifying;

• The channels through which the products flow from the categorized

producers to the market

• And including a typology of the different firms involved in the sub

sector

• And the linkages between them

ii. Identified key points of leverage and opportunities for stimulating the growth

of the sub sector, especially with respect to BDS and Finance products to be

development, markets and influencing policy and the operating environment.

iii. Identified contacts of individuals or organizations who would be willing to

promote market linkages.

iv. Identified potential service providers (based on technical knowledge) at the

different levels who will be able to undertake the interventions

v. Identified and prioritized constraints faced by the identified actors and service

providers.

1

vi. Proposed detailed action plan (time frame) for the respective interventions,

while clearly identifying the starting time.

vii. Proposed methods of measuring the impact of interventions suggested.

viii. Based on the above analysis, identify a niche area in the value chains

developed where FIT Uganda could advise the CORDAID partners to focus or

facilitate in the promotion of the sub sector.

ix. Proposed a detailed approach to information update with regard to the trends

in each the identified sectors.

1.1.6 KEY CONCEPTS A Market, Marketing and Marketing costs A market is where a buyer and seller exchange commodities for money. It can be located anywhere from the milking kraal to the markets. Marketing is when transactions between sellers and buyers are made involving commodities. It is the delivery of products and services to meet customer satisfaction at a profit. Marketing costs are expenses incurred in the process of finding and benefiting from the best price for a commodity. Therefore, suppliers need to know the demand in the market, where the supply is coming from and how much supply is needed to meet the demand. Market channels are the various distribution channels used to enable customers to get the product and at the same time maintain a desirable price, both for seller and buyer. Dairy Market chain The dairy market chain is the movement of commodities right from the dairy farmer’s home to the consumer. The dairy products, starting with milk, go through a chain, and generally at each stage, the quality improves and the price increases. In the marketing chain, there are many actors whose activities influence the value of the goods and services exchanged from producer to consumer. The market chain is interlinked right from milk production, farm-gate selling, processing, and marketing up to consumption.

1

Different stages of market chain Inputs (feeds, acaricides, etc) - Milk production – Farm Gate sales – Off-Lorry or delivery to the milk collection centre – Wholesale which includes value addition in form of pasteurization and packaging – milk processing and value addition to produce butter, cheese, ghee – Retail (offering the final milk products onto the market for sale). This description helps in understanding functions of different inter-linkages and opportunities that exist within the market chain. Producers should know at what point of the market chain they should enter the market and Farmers should know the location, prices paid and quantities bought at different markets in the marketing chain, so as to determine which ones to target. Group marketing is the best mode of attaining volumes that can enter big markets. By bulking produce, dairy farmers can sell to bigger markets and earn more money – they would even possess greater harnessed bargaining power! It is common for milk buyers to practice price discrimination on farmers. Therefore, if farmers grouped together, they would ensure a minimum sustainable amount of milk, and would access more stable prices. This is because of the continuity associated with sustainable milk supply. However, there are still smallholder farmers who will need to sell as individuals. But how much produce do they have to sell? Produce determines a market for a supplier. For example if a dairy farmer has a daily output of 10 litres, it is advisable for him to sell at farm gate or in the local sub-county market to avoid other marketing costs like transport, market dues and handling. 1.2 METHODOLOGY As per the Terms of Reference of this assignment, the methodology that was used in the collection of data, its analysis and recommendations thereafter was of an integrated nature so that a comprehensive analysis of the Dairy sub sector was possible. All the players in the sub sector were involved, including the Partner Organisations under the CORDAID umbrella. To address the objectives, a market chain approach was used which involved tracing the distribution channel from the farmers (milk producers) down to the final consumers. 1.2.1 Meeting with FIT Uganda The consultant had an inception meeting with FIT Uganda on which the Terms of Reference were agreed upon. Dates of submission of the prime deliverables of the assignments were agreed upon and FIT Uganda availed to the consultant relevant literature that would be reviewed to contribute to the comprehensiveness of the sub sector report. The consultant also agreed with FIT Uganda on the various

1

stakeholders, actors and players in the Dairy sub sector that would be consulted during the course of development of this report. This meeting was also used to iron out any gaps that were inherent in the first draft methodology draft submitted by the consultant. 1.2.2 Meeting with partner Organizations and data collection The consultant had planning meetings with FIT Uganda and the CORDAID Partners (SOCADIDO – Teso Fresh Dairies - and ADP Fort Portal) to agree on the importance and benefit of the report to them as Partner Organizations (POs). These meetings garnered support for the assignment and the POs contributed in information gathering. The consultant gathered information and hard copy literature for integration into the final report. Various research survey tools were used by the consultant to generate information on the market efficiency and competitiveness of the POs. A number of data collection methods were used in this endeavor, key of which is the face ft face interview with the POs. Other data collection methods used included:

• Field questionnaires, especially to the milk suppliers; • Extraction of data from existing databases; • Analysis of current documents on the subject; • Meetings with Dairy sub sector stakeholders.

1.2.3 Interview administration The field survey instrument was designed with diligence and was intended to cover CORDAID's POs and bring out all the key issues in the diary market chain. The interviews were undertaken on site at the premises of the POs so that there was comprehensiveness in the on-site analysis that was part of this evaluation. Discussions were held with the task holders on the market chain, the constraints therein, the preferred solutions and recommendations thereafter. 1.2.3.1 Field interviews and survey A sample selection was done in such a way that the areas selected were representative of their respective regions. This selection was based on several factors including demand, income, position in the country, and potential market. Focus was on Western Uganda, eastern Uganda and Central Uganda as the key Dairy areas in the country. Interviews were held with various officials at the Ministry of Agriculture, Animal Industry and fisheries (MAAIF), Plan for Modernisation of Agriculture (PMA), National Agricultural Advisory Center (NAADS), NAADS, etc. Meetings were held with among others players like the

1

Uganda Dairy Association, Dairy corporation and Dairy development Authority. Meetings were held with milk vendors in Kampala, among other things, the source of milk they offer for sale, the consumption capacity of the market, the willingness to pay of the end-consumers, etc. 1.3. LITERATURE REVIEW The consultant collected information from CORDAID POs and other stakeholders on the dairy sub-sector. This was analysed in related to the Dairy sub sector market chain. Key documents were annual reports, marketing statistics, among others. 1.3.1 Analysis of the retail market A total of 422 interviews were done in up country stations and in Kampala. In Kampala alone, 10 sampling points were identified and 25 dairy outlets were visited. The names of the Dairy retailers are appended to this report in the annex section. These sampling points were chosen based on population density and skewed towards areas with a high concentration of people. In order to avoid crowding of interviews in one location, the researchers skipped 4 outlets after each outlet where the interview was conducted. Only one interview was conducted per outlet and eligible respondents were either the owners of the outlet or people in charge of purchasing and sales. A structured questionnaire was designed and it had questions that were adequate to meet the outlined objectives of the study. The data collection instrument focused on collecting information on the following:

• Brands/type of milk and milk products in stock • Brands/type of milk and milk products out of stock • Monthly averages (stocks, sales volumes, purchase patterns, pricing of

various • Brands/type of milk and milk products) • Pack trends (stocks, preference) • Sources of the products in stock – local, imported, etc., • Presence of processor promotional activities at the retail outlets. These

could include flyers, leaflets and other product promotional packages. • Perception towards the recent processor promotion activities at the retail

outlets. • Availability of cold chain facilities such as coolers, freezers, and fridges

used to cool • The capacity (in litres) of the cold chain facilities; • The amount bought per day on average; • The Amount of milk the outlets forecasted to sale;

1

Qualified well-trained and experienced interviewers administered the structured questionnaires to identified respondents. These were face-to-face interviews conducted at workplace with the respondents. The main dairy sub-sectors products looked at included the following:

• Farm Fresh milk • Boiled unpacked milk • Pasteurised milk • Yoghurt • Flavoured milk (ultra heat treated) • Ghee • Butter • Ice cream • Cheese • Cream

The study team found out that farm fresh milk is the most commonly dealt in product, especially before value addition. Most consumers buy milk when it has left the producer's farm gate because it is still relatively cheap. More so, there are a number of milk producers without a steady market who would be willing to sell at low prices. Institutional companies like Teso Fresh Dairies under SOCADIDO buy farm fresh milk and pasteurise it before packing it for resale. This product is also put on the market for sale. It is worth noting that although there are milk producing goats in the area, the vast dairy products are cow milk products. This is because milk production from goats has not developed to reach a commercial scale. 1.3.2 A brief consumer survey as a way to understanding their demand side

perception of the market for Dairy products The consumer survey focused on understanding of the purchase decision and what influences it. Therefore, milk consumers were interviewed at the point of purchase. A total of 103 interviews were done with household consumers and 81 with institutional consumers – these are appended to this report. The interviews were conducted near a broad spectrum of outlets such as supermarkets, groceries, markets, etc. Researchers positioned themselves near outlets selling milk and milk products. They then waited for a consumer to buy milk. The person interviewed was screened to ensure that they made the decision on the brand of milk to buy. A

1

screening questionnaire was used to eliminate those who were sent by others and do not make the decision on the brand. On determining the appropriate person, the researcher then proceeded with the interview, using the predetermined data collection instrument. The data collected from the consumers focused on:

• Brands bought and reasons for this preference • Key influencers to purchase • Dairy products ever tried • Reasons for not trying other dairy products • Who consumes the product • Problems with the current supply chains • recommendations for better marketing;

1.3 FIELD STUDY, MARKET AND INSTITUTIONAL ANALYSIS 1.3.1 Major farming activities The 2002 household census holds that up to 77% of the total employment is provided by the agricultural sector for persons aged 10 years and above. The 2004 census estimates give population as being 26 million with an average household population of 4.7 (UBOS, 2004). However, women provide the bulk of farm-labour. Table 2: Focus on livestock and dairy farming Type of livestock farming Rating Poultry 1 Goats 2 Cattle 3 Pigs 4 Sheep 5 Source: Field survey It is very clear that families do not undertake any specialized farming. The consulting team noted that most of the production is for subsistence consumption, with the excess taken to the market. This largely explains why the marketable surplus is not massive. The consulting team also noted that both the Chicken and cattle kept are of a traditional nature and do not need any inputs. The chicken are provided with a shelter and cows are only provided with natural grass. Inputs for cattle like lick blocks, maize feeds, bran, etc., are not considered because the cattle and/or dairy farming undertaken is largely not commercial.

1

The cows kept also do not produce a lot of milk, but they are said to produce high quality milk, with a high fat content. This is because the traditional zebu cows are lean and do not have a lot of body fat. Inasmuch as the cattle is of a local breed, the quality of milk produced is outstanding. This is because the amount of body fat possessed by the animals is quite low and the local breed does not consume a lot of water on a daily basis. Milk Production The traditional dairy sub sector forms an important source of milk for human consumption. This is especially true when one considers the distribution of traditional herds in the up country regions as compared to improved and pure bred animals. The latter group is confined to high rainfall areas where wet weather conditions favour dairy production. Zebu cattle are small, hardy and well adapted to local conditions, but milk yields are relatively low. Therefore, milk off-take from this sub-sector is very small. Small scale dairy farmers are concentrated in high rainfall areas. Of recent, institutions like Teso Fresh Dairies are trying to introduce newer breeds of cattle to the area, through the establishment of village artificial insemination points. Milk Marketing and Processing Collection and marketing of milk in the North-eastern region is the responsibility of both the producers and the milk-buying institutions. The milk producers are tasked with the responsibility of marketing their milk, first at their farm gates, and then later on at the milk collection centres or other clients like hotels. Milk collection centres like SOCADIDO's Teso Fresh Dairies look for milk suppliers, add value to their milk and then offer it for sale. They have a secondary level marketing role in the marketing of milk and milk products. 1.3.2 Simple marketing attributes

There is still a large information gap between the milk producer (farmers) and milk processors and end-users. Some farmers do not have access to agricultural extension workers, and others are so individualistic in their operations, do not belong to any dairy farmers’ groups. This translates into the fact that these farmers do not get information on newer and better farming options including inputs, market prices and/or better technologies. The poorest get their information from other farmers and radio. Dairy producers sell their milk by two methods. The first one is the farm sales methods where people walk in to the home of the milk producer and they buy at his gate after the milking process. This sells very little milk and the bulk of it remains.

1

The second and more popular sale method is the delivery of milk to the town centre, either to a milk collection centre or to clients like hotels, schools, hospitals and individual clients. It is a common phenomenon to see a milk producer riding a bicycle with milk can headed for the town centre every morning and evening. It must be noted that most poor farmers do not offer their products in the market for sale because they do not know where to take their products for sale. This is worse in the rainy season when the quantity of milk produced exponentially rises. Respondents tell tales of milk producers not only offering it at a huge discount (with an additional free litre) but also tell of milk producers pouring the milk in rivers and ditches because they have run out of marketing options. In a baseline survey undertaken by NAADS in Soroti, the poor marketing trends are clearly highlighted as in the figure below:

1= Poorest 2=Poor 3= Least poor Source: NAADS Soroti Baseline Survey

1.3.3 Dairy marketing information management in the region

A number of issues stand out when analyzing the availability of marketing information and resources to facilitate marketing. To begin with, there are expanses of land for agricultural development in Uganda. This land is both under traditional free hold systems, under the local governments and the central governments, and also under the holding of cultural institutions.

1

To note also is the fact that this land is relatively flat and is ideal for mechanization and commercialization. Ugandans have been involved in dairy farming for a long time. In western Uganda, the cultural institutions in place over 7 centuries ago all largely had dairy farming systems. In the Karamoja region, nomadic pastoralism has always been in place, both for dairy and beef (blood) production. The key feature across the range is that there was always a small commercialization and production for the market component in the dairy farming. The cooperative societies that were in place before their abolishment by the NRM Government were responsible for providing farmers with information on markets and market prices. In the extreme cases, these societies acted as buffer and stabilization funds under the direct backing of the central government. This mean that farmers were always assured of good prices and a market for their dairy products. With the removal of the Cooperative System, farmers became individual again and lost the harmonious marketing that they had under the cooperative arrangement. Much as the local council system is supposed to have a system for keeping records for farmers, this is terribly lacking. Government policy to attract young graduates as Community Development Officers to help in agri-business have not fully taken off as graduate prefer white-collar jobs based in the major cities and municipals of Uganda. The removal of the Cooperative system further affected farmers as the Cooperatives were in charge of information generation and record keeping. Nowadays, rural dairy farmers have no record keeping skills. The development of Information and Communication Technologies (ICTs) has not trickled down beyond the basics to help farmers benefit from e-commerce tools. Information options The current local government set-up has inbuilt structures for generating and disbursing information to the farmers. The District Trade departments are mandated to develop databases of market information in the district. Under the Investment Act 1991 and the Uganda Communications Act, Districts can and should take promotional activities to attract investments into their districts. Part of this is done through the collection of investment opportunities in the district and the collection of market information. This information can be availed to dairy farmers to boost their market understanding. The District Planning Units have statistical units which collect market information and also undertake market forecasts based on this information. In this regard, the

1

District Planning Units have potential to improve the marketing option of Dairy sub-sector players. Civil Society players in agricultural promotion and agri-business value addition have increased. These should harness their partnership with agricultural extension workers so that they have an enhanced capacity for dairy market information collection and dissemination. A partnership in this range could also provide dairy-advisory services to the players along the value chain.

Information needs The study identified an urgent need for information about all aspects of Milk production and marketing at the district, sub-county and household levels. There is need for setting up an information system that can help farmers access information on outputs per season (especially creating a link between the dry and rainy season), production costs, markets for all major agricultural enterprises. There is need to ensure market information reaches the producer level and market opportunities are available. This would ensure that the producers make informed decisions on what product enterprises to undertake. Dairy and livestock productivity Item Cattle Goats Price of animal 120,000 12,000 – 25,000 Price of milk 200 – 500/litre Not marketed at the moment The consultants found out that farmers have very small scale units, with very little external input except for acaricides for cattle. The livestock kept were mostly local breeds, with cattle providing an average of only one to two litres of milk per animal, totalling approximately 240 - 480 liters per cow per year. Due to missing and/or unrecorded data, the consultant was not able to fully analyse the productivity of these animals. 1.3.5 The lead Dairy market and its trends This section takes a closer look into the demographics of consumers of dairy products in Kampala, Jinja, Entebbe and Mbarara where over 70% of the milk produced nationally is consumed (DDA, 2005). The study was undertaken over all the divisions of Kampala, with the districts of Mbarara, Entebbe and Jinja being marginally analysed. Mbarara produces the biggest amount of milk in Uganda and milk consumption is very high. Prices in Mbarara are also very low, for both raw and processed milk. The GBK Dairy plant in Mbarara has a capacity of 90,000 litres and this in itself is more than enough for the area. However, most of the

2

milk consumed in Mbarara is directly bought from the farmers who supply it to the end-users directly. Alternatively, milk is purchased by the processing firms from the farmers and end-users just buy it from the processing firms prior to processing. Questions on dairy products were loaded on the questionnaire and the data analysed to provide the profile of the users and usage patterns of various dairy products. Consumers were asked which dairy products they buy and how often they use the dairy products. Jinja and Entebbe, as commercial and business areas also have a booming dairy business but the market is largely composed of packaged milk and unprocessed milk bought in cooling plants (retailers). Milk production is very low in the two market areas. 1.3.5.1 Overview of the Kampala’s population Kampala District has population of about 1.2 million persons. The distribution of population by divisions is given below. It is noted that the population size for the different divisions vary with Rubaga, Kawempe and Makindye divisions having the highest population. This is a clear indication that the two divisions have the highest household sizes. The population density across the divisions has notable reflection on some of the key findings of this study. Population by Division

The social economic conditions of a population are determined through their sources of income, household monthly income and household expenditure. Data based on the 1999/2000 Uganda national household surveys indicates that Kawempe and Makindye have the highest monthly household expenditure and the highest per capita expenditure. Likewise, the same divisions i.e. Makindye, Nakawa and Rubaga have the largest administrative units overall, with population sizes of children in the ages of 0-4 and 5-9 years, and that of (20-44), superseding that of the rest of the other divisions. The former are main consumers of milk and milk products while the latter make the purchasing decisions. In addition, data available from the Uganda All Media Products Survey 2004 has been used to provide insights into the population demographics and gauge usage patterns of dairy sub sector products.

2

Respondents were selected at random in this household survey and were spread across different ages between fifteen and forty-five. The population in Kampala has an almost equal split across male- female, a reflection of the national population. There are more men in Central; Kawempe and Nakawa divisions while the rest have slightly more women. In Kawempe and Makindye, there is a slightly higher number of people in the 25-34 years age cluster than the rest of the divisions. Usage of Dairy Products The dairy products that had high levels of awareness also have high consumption levels. 94% of the consumers interviewed have ever bought pasteurised milk while 82% use it more than any other dairy product. While some of the respondents have ever bought powder milk, milk shake, flavoured milk and cream, only a few of them buy it use these products on a regular basis. There is low knowledge and consequently low usage of these products. Yoghurt is one of the milk products commonly purchased, especially in peri-urban areas. In Kampala, are like Nakawa and Makerere have a high yoghurt purchase rate. This is attributed to the large university and other college students. Yoghurt is largely bought in these areas because it is ready to drink and is very hygienic. Post-harvest losses in milk and milk products Studies by the DDA under the FAO Post Harvest Losses project indicates that up to 5.8% of milk is wasted at farm level, while along the marketing chain, 11%is spilt and 10% undergoes spoilage. This translates into an average daily loss of 27% of the milk produced and 21% of the marketable milk. Market level % loss Cost of Loss

(Ushs/Lt) Value of loss Ushs ‘000,000

Value of loss US$ ‘000

Farm 5.8 200 10,400 5.8 Primary collector 2.5 250 3,473 1,920 Secondary collector 0.6 300 975 542 Transporter 5 350 9,426 5,236 Bulk milk pasteurizer/small scale processors

4 400 8,187 4,548

Wholesaler/retailer 2.7 450 5,968 3,316 Retailer 4 500 13,382 7,435 Total 41,412 23,007 Source: DDA, 2004

2

CHAPTER II 2.1 Background to the Dairy Sector

Between 1997/98 and 2001/02 the agricultural sector grew by 22.5 per cent that is an average of 5.2 per cent per annum. Over the same period the composition of agriculture in the total GDP reduced marginally from 42.2 to 41 per cent (UIA, 2005). The food processing industry in Uganda (comprising of soft drinks, dairy products, milling fish and meat processing) contributes approximately 4.3 % to the national GDP and the dairy industry accounts for an estimated 20 per cent of this. The output from the livestock sector has grown at an average rate of 2.8 per cent per annum since 1995, with most of the growth coming from the dairy industry (UBOS and DDA). According to the Dairy Development Authority, cattle population has increased steadily from 5.50 million in 1996 to 6.15 million in 2001. This is due to a number of factors including general improved animal health as result of the nation wide disease control, improved breeding programmes and better management practices. The establishment of milk processing plants and Government intervention in form of the importation of improved animal breeds has also had a positive impact. The Government programme under the first Poverty Eradication Project PAPSCA where Government trained families and then distributed zero grazing cows also helped increase the animal population and the quality. The total cattle population is comprised of non traditional indigenous cows and improved breeds. This report notes that improved breeds are mostly kept for commercial milk production e.g. Jesa farm and indigenous animals are mostly owned by families. Families own a few cows, both for subsistence milk production, income generation through the sale of animals and also for household prestige. The cattle population in Uganda today is 6.15 million with the indigenous lot accounting for 95 percent (5.85 million) while the exotic and crosses accounting for the balance (0.3 million) (UIA, 2005). Because of the high productivity associated with intensive dairy farming methods such as zero grazing of improved breeds, most farmers have adopted modern farming techniques at various levels of production. The population of goats has also increased by an average of 3.0 per cent from 5.8 million in 1997 to over 6.6 million by end of 2001 (UIA, 2005). 2.1.1 Developments in the Industry: Policy Regulations and Plans The Dairy Corporation, a public company, monopolised the formal market for pasteurised milk and other dairy products, for many years. Liberalisation and the

2

divestiture of the public enterprises in the dairy sector has led to substantial growth and increased private sector participation. DCL has consequently been taken over by Sameer Agriculture and Livestock Limited. This is under the favoured Public-Private partnerships (PPPs), an arrangement that is favoured by Government. 2.1.2 Legal framework The Dairy Development Authority (DDA) Prior to 1997, the dairy sub sector’s framework was based on the Dairy industry Act of 1967. The Dairy Act of 1998 reformed the organisational, institutional and policy framework of the sub-sector. The DDA was established by the Dairy Industry Act of 1998 and is mandated to take up regulatory and developmental functions of the Dairy sector. The DDA’s overall objective is to provide proper coordination and efficient implementation of all government policies which are designed to achieve and maintain self-sufficiency in the production of milk in Uganda by promoting production and competition in the dairy industry, monitoring the market for milk and dairy products and carrying out regulatory functions in the sector (DDA, 2004). The DDA is mandated to: • Improve the quality of milk and milk products; • Promote increased milk production: • Increase processing and improve marketing of milk and milk products; • Strengthen linkages with the various stakeholders in development at national

and local government levels; Strengthen the capacity of dairy stakeholders. 2.2 Trends and Performance of the Dairy Industry 2.2.1 Contribution of the Dairy Sector According to data and statistics by the Uganda Investment Authority (UIA), the dairy sector currently contributes about 20% to the food processing industry. The food industry in turn contributes about 4.3% to the national GDP. Though small, this contribution to the GDP is steadily increasing. Table 4 shows the index of industrial production of food processing and dairy processing for the period 1997-2001. It should be noted that the declining trend in the performance of the dairy sector is a result of the adjustment period due to the active involvement of the DDA in dairy activities, which now requires industry players to observe best practices as well as the tense competition introduced in the industry forcing some companies to edge out.

2

Table 4: Index of industrial production for food processing and dairy processing Year Index of dairy processing Index for food processing 1997 93.9 100 1998 109.5 110 1999 99.4 123.6 2000 95 118.2 2001 88 135.9 Source: UBOS, Statistical Abstract 2002 2.2.2 Cattle population The national cattle population over the last ten years has experienced steady growth. The growth has been attributed to the increasing demand for milk by consumers and milk processing plants, better herd management, adoption of improved breeds and improved animal health and support services. An average growth rate of 3.1 per cent has been experienced over the last five years as shown in Table 5. In terms of milk production, it is cattle that are of economic value in this regard. Table 5: Livestock numbers (‘000 animals): 1997-2001

2.2.3 Dairy Farming and Milk Supply Uganda, with a population of 26 million, people has about 6.5 million head of cattle, according to recent surveys (UNFFE), 2003). However, UNFFE is encouraging farmers to work harder and increase the national herd for both milk and meat production ends. The exotics and cross-breeds proportion of the dairy herd countrywide increased to about 300,000 in 2002 from an estimated 220,000 in 1995, representing 5% of the total dairy herd. The exotic breeds include the Jersey, Holstein, Friesians, Guernsey, Ashyire and the Brown Swiss. Consequently, the national milk production levels have increased as shown in figure 5 from less than 600 million litres in 1994 to over 900 million litres by end of 2001.

2

The leading districts in dairy production are Mbarara, Moroto, Bushenyi, Kotido, Masaka, Mbale, Kabarole, Mukono, Ntungamo, Kamuli, in that order (UIA, 2005). The DDA has thus far registered more than 1,002 raw milk dealers and processors, 239 coolers and categorised 763 (DDA, 2003). Table 7: Per capita consumption of fluid milk over the last three years

The demand for milk in Uganda comes from households, schools, hospitals, catering institutions, food and dairy processing plants. The demand for processed milk is estimated at 400 million litres per year. The demand for milk from processing plants and other consumers is expected to increase. Table 8: Production of processed fluid milk (1994 - 2001) Year 1998 1999 2000 2001 ‘000 litres 162,025 132,470 385,000 400,000 Source: UBOS, Statistical Abstract, 2002

2

2.3 Milk Products Uganda produces a variety of milk products but a substantial amount of processed milk products is also imported indicating that the domestic production is not sufficient to meet market demands – the absorption capacity of the Ugandan market is not yet being targeted to full capacity as one goes up to the complex levels of the value chain. It was noticed that most of the milk products imported are complex processed products with focus on milk powder, a big component of which is infant powdered milk. Examples include NIDO, NAN, SMA and its varieties, S26, among others, most of which come from the Scandinavian countries and South Africa. This is largely attributed to the fact that the local milk producers and processors lack the capacity, both technically and financially, to process milk to milk powder and yet to be able to favourably compete with these imported varieties. This is also because consumers purchase milk powder products largely due to their proven quality and reputation. Of the local milk produced, a portion of both fresh and pasteurised milk is exported to the regional markets, with Rwanda and the Democratic Republic of Congo being the leading destinations. Pasteurised milk The production of pasteurised milk is the largest processing activity in the dairy Industry. About 80 per cent of processed milk goes into the production of pasteurised milk. Currently, over 12 firms, which are spread all over the country, are involved in the production of pasteurised milk. UHT Milk Sameer Agriculture and Livestock Limited, together with GBK Dairies produce a combined capacity of an estimated 150,000 litres of UHT per day. Most of this milk is consumed by the elite class, because it is relatively expensive due to the advanced technology packaging. Table 9: Dairy processing companies in Uganda Dairy company Location Installed capacity(‘000

litres) 1. Sameer Agriculture and Livestock Ltd. Kampala 130 2. GBK Dairies Mbarara 90 3. Alpha Dairies Mbarara 50 4. Country taste Mbarara 30 5. Jesa Dairies Busunju 20 6. Mona Foods Kampala 20

2

Dairy company Location Installed capacity(‘000 litres)

7. Kaisa Dairies Kamuli 10 8. Sunshine Dairies Kampala 10 9. White Nile Dairies Jinja 10 10. Birunga Dairy Kisoro 8 11. Anifarm Entebbe 6 12. East African foods Kampala 6 13. Gouda Gold Kampala 5 14. Paramount Dairy Mbarara 3 15. Teso Fresh Dairy Soroti 3 16. Maddo Dairies Masaka 2

Source: Dairy Development Authority, Annual Report 2004. Cheese Although cheese is produced locally, Uganda still continues to import this product. Sameer Agriculture and Livestock Limited produces 3.0 metric tonnes/year while other firms, especially Paramount Dairies and Gouda Gold are also involved in cheese production. Though consumption levels are still low, the key producing companies have embarked on vigorous public awareness campaigns and consumption levels are rising arithmetically. This are poses a good investment opportunity as there is still a high consumption gap. Cream and Ice cream A few firms produce cream but this is mainly an input product. Sameer Agriculture and Livestock produces substantial amounts of cream, which it uses in the production of ice cream. A few other private dairy processors produce cream for sale on the market. Many firms in urban areas including multi-national fast food chains produce and market ice cream. It should be note that the demand for ice cream has exponentially increased largely due to the realisation of its nutritional and refreshing functions, but also due to the trendsetting attachment by the youth. Ice cream is normally marketed and sold in supermarket chains among others. Yoghurt The yoghurt produced in the country is mainly the set and drinking type. Jesa Farm and Sameer Agriculture and Livestock are the leading producers but the production of yoghurt has continued to increase due to the growing market for this product. A number of small and medium scale dairy processors have started producing and marketing yoghurt. It is then packed in polythene bags in a ready-

2

to-drink state. In the central region, yoghurt is sold in supermarket chains and other stores, especially in areas where there are high population densities, especially areas that have universities, colleges and schools. This is the case because most of the yoghurt produced locally by SMEs does not have a long shelf life. Cultured Milk This is a relatively unknown product as its supply and marketing largely depends on an existing niche market. Commercial cultured milk is newly developed from indigenous cultured milks and is largely consumed by those persons that have known it for a long time. Despite this, its market is also rising and with marketing of opportunities associated with is production, the market will further open and widen. Butter and Ghee Production is led by the Sameer Agriculture and Livestock with a capacity of 1.5 metric tonnes/year (DDA, Annual report, 2004). Jesa Dairy Farm Ltd. and other private companies have started producing butter. The butter demand and production is expected to increase. Farmers produce ghee mainly on a small scale which for domestic consumption and sale. This is common in the western cattle corridor and eastern Uganda where ghee has always been a traditional product. 2.4 Marketing Structure of Dairy Products The production, distribution and marketing of milk and milk products is now being attended to by a number of players including the Uganda National Dairy Farmers’ Association, the Uganda National Dairy Traders’ Association, and the Uganda Dairy Processors’ Association. These groups influence standards as well as market conditions in terms of supply and demand for the products. Due to liberalisation of the markets in Uganda, the prices of milk and therefore its marketing are largely determined by the forces of demand and supply. 2.4.1 Pricing of Milk and Milk Products This information was generated during the field market study by the consultants. Further information on prices was accessed from DDA, Sameer Agriculture and Livestock Limited and retailers, epically supermarket chains. The prices are responsive and tend to an average. At the farm level, the western region of Uganda continues to remain a low cost-producing region of the country reflected in relatively low prices of the final products. In terms of input costs, the cost of packaging material for UHT milk is seen to be a significant cost factor, especially for processing firms.

2

Table 9: Milk products and prices Milk product Western Eastern Central

urban Central rural

Raw milk in wet season 150 242 367 312 Raw milk in dry season 346 338 433 400 UHT milk per litre 600 650 700 - Pasteurised milk/litre 350 550 600 550 Ghee per kilogram 2,000 4,500 3,500 4,000 Yoghurt per litre 700 900 700 800 Cream per kg 890 900 700 800 Favoured milk per litre - - 650 - Butter per kg 5,500 - 7,000 - Cheese per kg 6,000 - 7,000 - Source: Land O’Lakes, Dairy Sector report, 2001 Table 10: National milk sales estimates Year Estimated National

production (in million litres)

Processed milk

Total milk sales (million litres)

2000 700 98 490 2001 900 126 630 2002 1,000 140 700 2003 1,100 154 770 Source: Dairy Development Authority 2.4.2 Marketing systems of Small Scale Dairy producers Informal Market The informal market presents the following arguments in its favour: • It creates income for many people. • It provides an alternative outlet for milk that cannot enter the formal market. • It brings milk is closer to the consumer. • It provides consumers with affordable milk. In Soroti for example, it was observed that farmers boil their milk by the roadsides and sell it the whole day. This ensures that those buying it can drink it on the spot. On the farmers’ side, post-harvest losses are reduced because any milk that remains can not go bad, at least in the short run, because it was boiled already. The argument posted here is that a milk vendor can stay on the open market for a full day, after which the remaining milk is taken home and boiled again. If the milk is not boiled in the morning prior to going to the market area, the chances of

3

it going bad after 7 hours in the open are pretty high. In this regard, farmers prefer to first boil it prior to marketing. Those opposed to the informal market claim that it is responsible for the constricted milk market due to the fact that a large proportion of the milk sold in the informal market is diluted, which has been added to increase profit margins. Moreover, most categories of milk vendors incur very little overheads as no value is added to the milk, and no taxes are paid. The worst and most serious scenario is that raw milk vendors interfere with the milk’s compositional integrity, which could endanger the safety of the consumer. In her report “A Review of the Small Scale Dairy Sector – Uganda” Dr. Florence N. Masembe Kasirye (June 2003), identifies three tiers in the informal sector; primary, secondary and tertiary vendors. The primary vendor buys milk from a farmer and sells it directly to the consumer or to another vendor at roadside pooling centers or to a milk collection center. Secondary vendors buy milk from roadside milk pooling centers. The pooling centers are quite often under a tree, which provides shade for the vendors and their milk while waiting for secondary vendors from urban areas, mainly Kampala. This is the case in Eastern Uganda where is lack of milk collection centres. Using open vans and pick-ups, milk is collected in 20-liter plastic jerry cans from various centers until the van is full. The most commonly used vans have varying capacity of 80-120 twenty-liter jerry cans each. Tertiary vendors on the other hand are in urban areas; they buy milk from secondary vendors, boil it and sell it at various “candlelit” nightspots after boiling and chilling or while still warm. Some secondary vendors also boil and /or cool milk and operate retail outlets. It is difficult to estimate with certainty the amount of milk that is traded through the informal market sector nationally. The Formal Market These are at a more complex level along the value chain. These are bulk milk pasteurizers and/or small scale/large scale processors. These entities normally have centrally located milk collection units and enforce a strict standards policy. Not only do these produce value added milk that has been pasteurized but they may also produce other milk products like butte, ghee, cream, ice cream, etc. 2.4.3 Milk and milk products consumption patterns In Uganda, the most commonly consumed types of milk are: • Unprocessed raw milk, • Domestically processed packaged milk (pasteurized and UHT), • Boiled unpackaged milk.

3

The most commonly consumed dairy products include: • Yoghurt and indigenous fermented milks • Ghee • Butter • Cheese • Ice cream • Sweet and sour cream The most frequently consumed milk products

Source: FAO, 2003 As mentioned before, yoghurt has a big market, followed by ice cream. Cream and Fermented milk enjoy the lowest market. Table 12: National consumption and forecast rates of milk and milk products Region Year

1999 2000 2005 2010 Northern 66.000 75.51 84.74 Eastern 154.17 175.93 201.71 Central 564.42 621.91 688.12 Western 319.18 363.23 415.55 Total (national)

1,012 1,103.77 1,236.58 1,390.16

Source: Land O’Lakes Dairy Sector Study 2000.

3

The above table shows forecasts for milk and milk products consumption. It can be seen that total national consumption is rising and this should be met with an increase in production and an improvement in the quality of the products. 2.5 Challenges of the Dairy sub sector The Dairy sub-0sector, like any sector under agriculture is faced with a number if challenges and these include: Small markets: Markets for milk and milk products are mainly in urban areas where 15% of the Ugandan population lives. For example, much of the yoghurt is consumed in urban areas. This makes the target market small, which may result in stiff competition which may stifle growth of the sub-sector Low purchasing power: Most consumers complain of lack of money to purchase milk due a low disposable income. In other cases, consumers do not actually know the nutritional values of the milk products. This means that awareness building is one of the much needed activities to boost the dairy sub-sector. Poor and inadequate infrastructure: The infrastructure for transporting, cooling, and distributing produced milk from rural to major consumer centers in urban areas is greatly lacking. For example, moving milk from Kisoro to Kampala is not easy because of the bad murram road from Kisoro. In some areas, both secondary and transports of milk do not have cold storage systems, which increase on the losses. Low levels of training, extension and credit services: There is lack of extension/advisory services. On the supply side, most farmers do not have access to credit because they lack collateral and credit institutions regard agriculture as a risky business. This is compounded by the fact that most farmers do not keep records on whose basis the performance of their milk production businesses could be gauged. Inadequate market information: The performance of any firm or individual largely depends on the market information they have. This is in turn determines there supply planning processes. In Uganda, there is inadequate knowledge and information about both the local and distant markets. Suppliers do not also access information on markets abroad, apart form big institutions that have the capacity to undertake foreign market searches on their own. Lack of strong farmers’ organizations: With the abolition of the here is lack of farmer and supplier organization for collective marketing of milk and milk

3

products. The lack of producer marketing groups makes it difficult for the dairy farmers to make unified strategies, to achieve a higher bargaining power and to receive certain services which they can not access as individual farmers. This is being reversed with even Government supporting the revamp of the cooperative societies. Milk imports: Imports of milk in Uganda are mainly in form of UHT milk, powdered milk and cheese. Ugandan products cannot compete with these products on quality, even if their (imports) prices may be higher. Lack of Credit and High cost of borrowing Most players along milk value chain lack access to cheap lines of credit. Where such credit lines are available, the terms attached to them impinge greatly on the returns of the milk investors. This means that players in the sub sector find it too expensive to access better technology like milk coolers, pasteurizers, etc. This also necessitates the need for BDS services, especially in the areas of business planning and marketing. The introduction of cost-sharing BDS schemes in the development of business and marketing plan prior to accessing lines of credit would go along way in solving this challenge. Increasing urban farming Intensive farming is carried out in the urban and peri-urban areas on very small plots, where there are limited facilities for manure disposal. This needs to be planned for; otherwise it can cause an environmental problem in the future. CHAPTER III: SECTOR DYNAMICS

3

3.0. THE DAIRY SUB SECTOR DYNAMICS

3.1 MARKET ANALYSIS Market opportunities in form of demand are very high. In Uganda, consumption of milk has risen to an average of 30 litres of milk (the World Health organizations recommends 200 litres per year). With the start of the East African Community (Rwanda and Burundi inclusive), the market widens tremendously. The East African market has about 85 million people and tariffs across the region have been removed. The inclusion of the COMESA market stretches the market to over 367 million people, covering over 20 countries. This presents a great market opportunity before one even thinks of production for a market in Europe or the Caribbean. 3.2 National Dairy Sub sector analysis 3.2.1 Market Access The various players along the value chain have needs in form of information on markets and market entry points. It is imperative that these players be given information but also be trained in ways of using this information to harness their market potential. Ugandan dairy producers do lack machinery for the processing and packaging of this to increase its shelf life. One of the reasons why the marketing chain is not conducive to milk vendors is because they market a primary product with a high perishability ratio. Dairy sub sector players are faced with a need for Business Development Services in form of advisory and financial support services. Dairy players and actors along the value chain, however, have opportunities they can take up. The study realized the following: • There are many players along the value chain, right from milk producers to

processors. Especially, the supply side of milk is assured with good market envisioning.

• There is an availability of land in which both the milk production and

processing can be undertaken. • Milk and milk products have potential for being marketed. This is coupled

with the fact the per capita consumption rates are rising. This gives an extra incentive to the players in the value chain;

3

• There is a good policy environment in Uganda and players in the chain can come together seeking better market shares and other collective advantages. The current traders and producers associations are an exhibit of this. The establishment of the Dairy Development Authority is also an indication of Government’s efforts to put in place an investment climate and an incentive framework that promotes Public-Private Partnerships (PPPs).

• The quality of milk produced is of good quality, largely due the fact that there

is a combination of local and exotic breeds. The grasslands structure in both Western and eastern Uganda is also suitable for Dairy production.

3

Table 13: Milk ingredient INGREDIENTS COW MILK GOAT MILK Water 87.40 87.54 Solids 0.75 0.85 Casein 3.00 3.00 Albumen 0.40 1.00 Fats 3.75 4.50 Sugar 4.70 4.50 Source: UNBS and supplemented by data from DDA It is worth noting that key players in the dairy sub sector are not regularly involved in undertaking promotional activities, both mass media and community outreach campaigns. The study found out that most dairy players and actors believe that milk consumption decisions cannot be marginally affected by advertising. However, leading player like Jesa and DCL are starting to advertise, largely due to the competition that is coming up and also due to the narrowness of the current market. 3.2.2 Technology traits The study on the sub sector identified the following as the key technology traits: • There is a prevalence of us of old machines or total lack of processing

machines. This affects the role of small scale milk processors. • Related to the above is the fact that there is a poor chain of technology transfer.

This is when small scale milk processors do not have the capacity to undertake regular servicing and the repair of the milk processing machinery. One of the POs, SOCADIDO (Teso Fresh dairies) has had its pasteurising machine not working for some time. Inasmuch as the have a technical person on site, he does not possess enough capacity to maintain the machine. This has led to the company having to transport the machinery to Kyambogo University for overhauls.

• The current power outage in the country is also affecting the processing

function of small scale milk processors. This is because the overhead costs involved with processing milk have risen. This is due to the must-procurement of 3-phase diesel generators by the processing companies. SOCADIDO, for example, powers the milk processing complex using a 3-phase diesel generator.

3

• There is a challenge of lack of facilities in terms of milk collection centres and other cooling outlets. This basically means that processing houses are never full to capacity due to poor milk collection facilities. This means that their absorptive capacities are below capacity and yet the overheads are the same. This deja vu also affects the marketing chain as the aggressiveness in it is lost.

• The milk suppliers lack facilities for milk collection. It is common knowledge

for the farmers to take milk to milk collection centres or other end-users in jerrycans. Apart from the fact that this is not hygiene, the practice has been banned by the Dairy Development Authority. There is need for more cooperation and partnership along the market chain so that processors provide an extra incentive in form of milk cans to milk suppliers. This will ensure good quality milk but will also ensure continuity in the supply as the suppliers will have a sense of belonging, partnership and a sense of responsibility towards the processors.

All players and actors in the market agree that there is irregular supply of milk to the processors. The irregularity of milk supply is attributed to a number of factors:

i. Milk suppliers sometimes don’t trust processors who pay after a period of time and not on a daily basis;

ii. Some milk suppliers depend on milk for their household incomes. This

means that when these people need money, they can get it by just supplying to the processors. In such cases, they choose to supply other institutions like hotels that will pay on delivery. More so, milk suppliers may supply diluted milk to institutions like hotels since the end-users do not have the capacity to test the quality of milk.

The milk processors identify the problem of poor record keeping as a hindrance to the process of milk estimation. Milk suppliers do not regularly keep details of the amounts of milk they produce. 3.3 Key market players As mentioned earlier, the key players in the processing of milk and milk products are:

a. Sameer Agriculture and Livestock Limited

b. GBK Dairies

c. Alpha Dairies

d. Country taste

3

e. Jesa Dairies

f. Mona Foods

g. Kaisa Dairies

h. Sunshine Dairies

i. White Nile Dairies

j. Birunga Dairy

k. Anifarm

l. East African foods

m. Gouda Gold

n. Paramount Dairy

o. Teso Fresh Dairy

p. Maddo Dairies These are also bulk milk processors. Sameer Agriculture and Livestock and GBK are the market leaders in milk processing while Paramount Dairies and Gouda Gold are the leading players in the production of cheese. These are institutions that buy milk from farmers or from secondary players and add value to it. They are at a level above the milk production level. After value addition, the above firms are largely identified with wholesaling as they will sale the milk products to retailers. However, the players also have distribution areas where they may offer retail products to the public. There are key institutions that are players in the dairy sub sector and these include:

i. Uganda Export Promotion Board This is the statutory body charged with promoting exports to the outside world. They offer both advisory and facilitatory services to legal entities in Uganda who are interested ion production for the export market. UEPB also collects and collates information on market opportunities outside of Uganda for local entrepreneurs.

ii. Uganda National Bureau of Standards This is a body set up to check the standards of product produced in Uganda and those imported into the country. UNBS follows the various International Standards Organisation series. In the dairy sub sector, UNBS is responsible for maintaining quality assurance in the production of milk and milk products.

iii. Uganda Manufacturer’s Association

3

This is a body that brings together manufacturers in Uganda. UMA is the apex body for manufacturers where they get to network and lobby with Government and other foreign entities. Private Sector Foundation Uganda

iv. Uganda National Farmers Federation (UNFFE) This is the apex body for farmers in Uganda. It was formally the Uganda National Farmers Association (UNFA). UNFFE is involved in advocacy, lobbying and networking on behalf of the farmers. Other institutional support institutions for the sub-sector include:

v. Dairy Development Authority vi. Uganda Small Scale Industries Association

vii. Land O’Lakes viii. Uganda Dairy Processors Association

ix. Uganda National Dairy Farmers Association x. Uganda National Dairy traders association

xi. Uganda Dairy Stakeholders Association

These institutions are targets for networking and lobbying, or undertaking general advocacy for the improvement of the Dairy sector. The advocacy is both for improving the sector and for the provision of Business Development Services. For example, the Private Sector Foundation 3.3.1. Processing, packaging and handling of the Dairy sub sector The manufacturing process for Dairy milk is started with the milking cows by hand (at small scale) & milking cows by machine (at large scale commercial farms like at Jesa Farm Dairies). The process below is undertaken by all small scale milk processors in Uganda. Milking The profitable operation of a dairy herd depends in a large part upon how well you milk your cows. Over 90% of the milk suppliers use their hands to milk cows and goats. This causes low production, mastitis, & poor quality milk. An important part of milking cows is to produce the cleanest possible milk. Although machine milking is rapidly gaining reputation, it is very expensive, and many dairymen still use their hands. In milking by hand, cows must be carefully prepared to produce high quality milk. Cooling and milk storage

4

The careless handling of milk between milking and delivering to the plant causes high bacteria counts to develop in the milk. Whole milk should be stored at 50oF to prevent spoilage. Storage Tanks made of stainless steel are employed for storing the raw milk. The problem in Uganda is that small scale processors lack the funds to establish community milk collection and cooling centres. Suppliers have just started forming marketing groups and thus don’t yet have the capacity to set up these structures. All small scale processing firms have shown that they filter the milk before it is stored in cooling machines. In the informal market, it is common to find foreign matters or undesired materials in milk due to non-filtration. Pasteurisation In this process, the milk is fed to pasteurizer and heated to the required temperature & held there during the holding period (usually at 145oF and for at least 30 minutes). In this process, excessive heating of any part of the milk & a consequent "cooked” flavour is prevented. At the end of the holding period, cold water is circulated through the jacket or coil of the pasteurizer, Temperature of the milk may be quickly lowered 10o to 15oC. At this point the heated flavour will not continue to develop. This is done to destroy all pathogenic bacteria. Refrigeration or cooling system After the complete processing of milk it is to be stored in a cold up-to-chilling condition so that no unwanted micro-organisms/pathogenic organism can be developed in the processed milk. It is stored until delivered for packing in Sachets or pouches. Testing The testing of milk is an essential for the quality control purposes. However, testing may be done prior to storage under freezing conditions. When product is cleared from testing or quality control section, then it is ready for packing & distribution & send to packing section. Packaging The most common method for packing milk, both pasteurized and UHT milk is through the plastic pouches of capacity 1/2 kg, 1 kg, and 2 kgs packs. These may be plastic pouches but tetra packs are now preferred because they even have a longer shelf life and are hard to be tampered with. Most companies like DCL, Jesa Farm Dairies, Alpha Dairies all have Automatic pouch making, milk filling & pouch sealing machines with a printing provision. Milk filled and sealed in pouches is now ready for dispatch & distribution for marketing 3.4 Dairy sub sector business development and support 3.4.1 Access to finance

4

Like any business, investments in the Dairy sub sector need capital investments which are normally over and above what a normal average Uganda can put up from their individual savings. This needs that investors must always try to access lines of credit from financial institutions. However, because of little experience in business planning, long breakeven points and other factors, it is normally very hard for such entrepreneurs to access lines of credit. Teso Fresh Dairies under SOCADIDO could not access a line of credit from a certain financial institution when they wanted to expand their processing plant! This was partly because, among others, they did not have information on their suppliers. So they could not guarantee that they would be collecting milk every day over and above a certain margin, which they could also not guarantee to sale. The same institution also lacked a bankable business plan that would justify accessing a line of credit. These are examples of hindrances for the acquisition of lines of credit. 3.4.2 Business Development support Lack of inexpensive and competent business development consultants is also a problem to the Dairy sub sector players. Yet these service providers would go along way in improving the image and internal processes of dairy sector players. There is also lack of affordable and practical training courses for the dairy players. This could be in form of farmer sensitization, organizational development for dairy marketing groups, capacity building for staff of dairy players, quality assurance and management, among others. Land O’Lakes has provided support to many dairy players but there is need for intervention in this area. The Enterprise Uganda, an institution that offers capacity building services in enterprise development could be targeted under this component. There is also a problem of lack of qualified production experts, especially in the areas of milk processing and packaging. The challenge always makes the players’ costs rise overriding their competitiveness. The study has also analysed the players in the market and it has found that they lack testing laboratories for the milk and milk products. The Uganda National bureau of Standards (UNBS) and DDA do not have testing laboratories spread over the country and yet dairy processors are spread over the country. There is need for marketing groups and produce associations to pool resources to develop these units as part of improving the quality of milk and milk products so that it is easier to market. One of the biggest challenges faced by the sub sector is the lack of BDS services across the range. The Private Sector Foundation Uganda is running the biggest

4

scale BDS scheme, the Business Uganda Development Scheme (BUDS). This is a cost-share grant support targeting all SMEs and offers advisory as well as financial support. Under the BUDS scheme, players in the dairy sector can get cumulative grants of up to US$50,000 each for consultancy services and value addition. Under BUDS, there is a Technology Acquisition Fund (TAF) where dairy sub sector players can get grants of up to US$50,000 for the acquisition of better and improved technology. Firms can get grants for the acquisition of processing and packaging machinery under TAF. The TAF scheme, however, promotes exporting and this is on of the eligibility criteria for accessing funding. There are other facilities like Strengthening the Competitiveness of Private Enterprises (SCOPE), Rural SPEED, among others. There is need to fully use the services offered by these BDS services providers to increase the capacity of players in the dairy market chain. 3.4.3 The role of and bias against Commercial service providers Commercial service providers (consultants) appear too expensive to dairy actors. Most actors spoken too express the view that consultants charge too much money due their time rate charges. The portfolio of small scale dairy actors is not very large thus there is always hesitancy in procuring the services of independent contracts to develop strategies like a marketing plan or a comprehensive bankable business plans. However, consultants spoken too also say that dairy small scale actors pay poor professional fees, or in some instances, do not pay at all! This dilemma needs to be solved by publicizing information on the existing BDS services that can benefit small scale actors who want to utilize the services of independent service providers (annexed is a list of competent service providers who have undertaken research in business development and planning in the dairy sub sector). Key of the identified service providers include:

i. UMACIS Uganda Manufacturers Association Communications and Information Service provide consultancy services in business developing in the manufacturing industry. UMACIS can develop project reports and also provide information on accessing lines of credit and machinery.

ii. Premium Consulting Premium Consulting is an established business development firm thqat has implemented a number of BDS projecs in Uganda. The firm also provides BDS services in business development, marketing, among others.

4

iii. The Ssemwanga Centre Under the Ssemwanga Group of Companies, the Ssemwanga Centre has a specialized BDS unit focusing on agricultural improvement, of which the dairy sub-sector is a major component.

iv. Kiziba Investments Limited Kiziba Investments provides business development services in the agricultural sector in areas like business planning, access to finance, development of market strategies, etc.

v. Entrep Uganda Entrep Uganda is an entrepreneurship development consulting group that provides BDS services in idea selection, business planning, business to business matchmaking, investment and trade promotion, etc. Entrep Uganda can assist POs in accessing joint venture partners, sourcing for machinery, product launches, market development, among others.

vi. Enterprise Uganda Enterprise Uganda is a national body that promotes entrepreneurship and SMEs in Uganda. The institution provides BDS services under the consulting component but also provides capacity building services in business planning and management, record keeping, etc. A full list of competent service providers is appended to this expert report.

4

CHAPTER IV: DAIRY SECTOR VALUE CHAIN ANALYSIS 4.1. THE VALUE CHAIN ANALYSIS The term ‘Value Chain’ was used by Michael Porter in his book "Competitive Advantage: Creating and Sustaining superior Performance" (1985). The value chain analysis describes the activities the organization performs and links them to the organizations competitive position. Value chain analysis describes the activities within and around an organization, and relates them to an analysis of the competitive strength of the organization. Therefore, it evaluates which value each particular activity adds to the organizations products or services. This idea was built upon the insight that an organization is more than a random compilation of machinery, equipment, people and money. Only if these things are arranged into systems and systematic activates it will become possible to produce something for which customers are willing to pay a price. Porter argues that the ability to perform particular activities and to manage the linkages between these activities is a source of competitive advantage. A single company, however, can not perform all activities from milk production, farm-gate sale, wholesale (milk collection centres), value addition (processing and marketing), and final sale (retail sale) to the final user by itself. Therefore, value chain analysis covers the whole value system in which a milk and milk products farmer operates. Within the whole dairy value system, there is only a certain value of profit margin available. This is the difference of the final price the customer pays and the sum of all costs incurred with the production and delivery of the milk product/. It depends on the structure of the value system, how this margin spreads across the suppliers, processors, distributors, customers, and other elements of the value system. Each member of the system will use its market position and negotiating power to get a higher proportion of this margin. Nevertheless, members of a value system can cooperate to improve their efficiency and to reduce their costs in order to achieve a higher total margin to the benefit of all of them.

4

4.1.2 The Dairy Market chain The market chain is the movement of milk and milk products right from the farmer’s home to the consumer. A milk product goes through a chain, and generally at each stage, the quality improves and the price increases. In the marketing chain, there are many actors whose activities influence the value of the goods and services exchanged from producer to consumer. The market chain is interlinked right from production, post-harvesting, processing, and marketing up to consumption. 4.2. The dairy Sector value chain In the context of the dairy sub sector analysis, the market value chain segment is composed of Dairy Milk Production, milk collection and cooling, processing into various products and the offering of the processed milk and other milk products for sale to the final end-user.

46

4.2.1 Dairy Market Value Chain Factor Strengths Critical Concerns Interventions Targeted

Beneficiaries Expected Impact

Value chain segment

Input supply

The state of dairy production in Uganda. The good weather and the tendency to commercial farming. Availability of other ingredients like fruits, flavourings and sugar for niche market production.

The supply of milk is affected by poor marketing outlets, infrastructure and lack of cooling points for small-scale dairy farmers, leading to high level of wastage of unprocessed milk.

Improve infrastructure, strengthen cooperatives and support small-scale dairy processors through incentives. Provide information on market entry points. Encourage development of local collection and cooling points

Dairy farmers, small scale dairy processors, NGOs.

Increased incomes for dairy farmers, especially small-scale farmers. Increased milk production, and improved quality of marketed milk.

Dairy processing

The liberalisation of the dairy sector has led to an increase in the private dairy processors in Uganda

Small size of operation. Inability to collect milk from producers in all the milk producing zones – lack of

Investment in cooling plants in milk producing areas. Strengthen cooperatives. Provision of business

Dairy farmers, private dairy processors.

Increased milk production and processing. Increased production of high value dairy products.

47

community milk collection centres. Most small processors cannot afford cooling plants in milk producing areas, reducing their collection capacity. This also affects milk quality. Concentration on a few dairy products.

development services by the state and dairy promotion agencies. Availability of financial services through lines of credit targeting dairy processing. Incentives for more private dairy processors and diversification of dairy products.

Source: UNIDO and other dairy sources

48

4.2.2 Recommended interventions Factor Strengths Critical Concerns Interventions Target

Beneficiaries Expected Impact

Systems of support

Innovation and learning system

Relevant training opportunities at universities and higher-level agricultural colleges. Agricultural research institutions also provide additional strength in the learning systems

Lack of financial support for research institutions. Lack of extension system to link research and farmers.

Strengthen the link between research and farmers through extension. Improve training opportunities for processors

Farmers Small scale processors

Higher returns for farmers and private processors. Higher quality dairy products

Support organizations

Relevant government ministries and departments

Poor infrastructure for milk marketing

Improvement on infrastructure, and milk marketing. Incentives for

Farmers and Private milk processors.

Higher returns for farmers and private processors

49

private milk processors out in place.

Industrial governance

In Uganda, the ministry of agriculture, livestock and Animal industry is the main supporter of the sector. To some extent, other dairy development agencies and research institutes are also involved

Apparent limited coordination with other relevant ministries.

Improve coordination with other relevant ministries and players in the sector.

Farmers and processors

Reduced duplication of effort

Policy and strategy

Existence of government ministries and line agencies dealing with dairy production.

Poor implementation of policies

Improve policy implementation

Farmers, and processors and the general economy

Increased incomes in the dairy sector and the economy.

50

Context

History and general characteristics

Experience in dairy production, high potential agricultural land for milk production

Poor storage and marketing infrastructure, leading to high wastage in milk.

Improve rural infrastructure in the form of roads and cooling plants for milk.

Private processors, farmers and consumers

Low cost of milk transport, low wastage, high incomes for producers.

Institutional framework

The necessary supportive institutional framework for the sector is present in the form of government ministries, DDA and research institutions.

The problems affecting the development of cooperatives. Poor government ability to implement policies.

Efforts to revive cooperative societies. Improve coordination between the relevant ministries and other players like NGOs.

Processors, farmers

Increased dairy production and value addition in the sector

51

CHAPTER 5: CONCLUSIONS AND RECOMMENDATIONS 5.1. Conclusions Where as it is seen that the dairy sub sector has developed over the last decade, there is needfor further market-oriented interventions so as to increase the level of market participation bythe dairy sector players along the value chain. This will not only involve regular provision of information on marketing opportunities butwill also involve provision of capacity building and organisational development support todairy sub sector actors. This will in the end boost the quality of the products put on themarket. On the part of the CORDAID POs, there is need to organise the suppliers, provide them withincentive and ensure a steady supply of good quality milk. The partner organisations alsoneed to be availed with industry best practices information so that they can better packagetheir milk and milk products. Technology transfer According to FAO, the market in Uganda is small and fragmented. Poverty and weakpurchasing power prevails in the country. For most consumers, choice of the product isdictated by price not quality. There is need therefore to explore use of low-cost production,processing and packaging alternatives that can be afforded by the majority of the population. Partnerships with Civil Society institutions should be promoted so that services are availableat the grassroots. There should be promotion of small-scale rural-based dairy processing plants. This will help inprolonging the shelf life of milk. Farmers should be advised to take advantage of the variousrefinance schemes available. An example is the recently launched DFCU credit facility thatpromotes value addition at very subsidized rates. This is partnership with DANIDA under theAgriculture Sector Programme Support (ASPS) With farmers and small scale milk processors having problems accessing lines of credit,localization of processing plants should be promoted. Setting up a processing plant in WesternUganda for example, is relatively cheaper than setting up in central Uganda since there are lesstransportation costs attached to milk collection. Support institutions like DDA, UDPA should train stakeholders at various levels to create aharmoniously operating system along the entire chain from primary production toconsumption. At the farm level, there is need for training in management of dairy farms asbusiness enterprises. This will enable farmers take farming seriously in order to be able to reapmore from the enterprise.

52

In order to address the poor quality of raw milk there is need to integrate quality assuranceacross the entire production chain. The DDA should be more vigilant in monitoring quality ofmilk and dairy products and the culprits should be reprimanded accordingly. The DDA hasbeen doing quality assurance and reports for quality assurance and products are regularlysubmitted to its laboratories. Local products’ samples are still collected and tested forcompliance with standards and reports on results are made for stakeholders. This activity’sscope should be widened so that a bigger area is covered under quality assurance andstandards. Information delivery Most of the operators in the small-scale and to a large extent the large-scale processors,especially those making ice cream, butter and yoghurt, operate with very little capital andhave no access to reasonably cheap credit facilities. Government and NGOs should consideravailing credit facilities for to the abovementioned because they are instrumental for accessingmarkets in the dairy sub-sector. Periodic market assessments and needs-based analyses should be undertaken by stakeholdersincluding DDA, NGOs and the private sector at large. Such surveys may focus on each regioneach region (since all have their different levels of competitiveness), what the stakeholders’demands are, why there is demand, and what price and packaging is required. There should be milk promotion and awareness campaigns, not only by the value chainplayers, but also by support institutions like DDA. Campaigns to educate consumers on thebenefits of consuming milk and the various dairy products such as a Milk Consumption Week,mass media campaigns and community outreach campaigns should be undertaken. 5.2 Recommendations 5.2.1 Generic Recommendations Government agencies The Ministry of Agriculture and the Dairy Development Authority are mandated to improvethe dairy sub sector. In this regard, the following are recommended: Government has played a big role in the establishment of supportive infrastructure for thedairy sectors. This could also be in partnership with the private sector. For example, with e-Commerce, the provision of telephony or community telecentres helps in providinginformation on milk prices such that over head costs are cut. The government also has toimprove on the quality of infrastructure like roads so that transporting milk does not take longtime leading to en-route spoilage.

53

There should be regular testing on the quality of milk produced in the rural outside of thenormal player’s’ tests. This would further improve the quality of milk produced; There is need for the attainment of an internationally recognized quality certifications for alldairy processing companies and the development of a national quality standards for all dairyfarmers, small scale processors and traders in Uganda; Boost the processing of milk and milk products so that the productivity of farmers and theincomes of dairy farmers are increased. This hinges on the provision of marketing informationand the provision of capacity building on the use of this information and analyse markets. Thisshould also include the improvement of domestic markets, better target regional and globalmarkets. An example is the planned website by the East African Export Promotion Council’swebsite on market information on regional and global markets. Investment promotion agencies like the Uganda Investment Authority should assist existingdairy processing plants in searches for joint venture partners. This should boost the portfoliosof the parent companies and make them more competitive. It would also boost their abilities toeven procure machinery for the processing of milk and milk products. Lead government agencies and line ministries should undertake a capacity building review ofdairy subs sector players and come up with a capacity building plan. This plan would be usedas a benchmark in the provision of capacity building services for dairy sub sector players. As part of government incentives supporting local investors, government should put in placetariffs on imported milk products from Europe. This would further give the opportunity tolocal dairy processors into additional dairy value addition. The DDA, partnership with local or municipal councils should regularly register and licensemilk traders and processors to ensure quality. The DDA should also produce literature onproduction guidelines, hygiene standards and quality information for end-users. Marketing groups Farmers should collate together and form competent marketing groups (cooperatives) whichcan be used as bargaining blocks. These entities would ensure better prices for the milksuppliers and would also ensure continuity in the supply of the milk. The marketing groups and trading blocks should also lobby government for the provision ofbusiness development services, including the provision of cost sharing grants. Such facilitiescan be managed by the DDA or any other independent entity. This will ensure that dairyactors have both advisory and financial support for the development of marketing chain. Groups should also lobby service providers like Land O’Lakes for the provision of capacitybuilding services in milk collection, financial accounting, forecasting, among others.

54

Dairy subs sector players Dairy subs sector players owe themselves the obligation to improve their market conditions. Inthis regard, dairy processors should provide milk cans to milk producers on a diminishingpayment rate so that farmers do not fail to pay due to high up front costs. An arrangement canalso be worked out such that farmers give one litre per day in lieu of payment for the milkcans. In addition to this, processors should provide milk producers with milk collection andcooling facilities that are near the farmers’ homes. All these incentives will make the supplierproduce more milk and ensure that the milk is maintained in one market chain. The Dairy traders, collection centres and processing houses should develop databases ofmarket information that can be updated regularly so that they do not always have to rely onanother entity for this information. Part of this can be done by getting access to the WorldWide Web. 5.2.2 Recommendations to CORDAID Partners This is focusing on CORDAID partners, including SOCADIDO, ADP Kyenjonjo, KADPMoroto, among others. The above recommendations also do apply to them. Additionally, thepartners could undertake the following as specific interventions: Teso Fresh Dairies (SOCADIDO) Teso Fresh Dairies is under SOCADIDO and yet SOCADIDO is a registered NGO under theSoroti Catholic Diocese. Teso Fresh Dairies is one of the income generating projects underSOCADIDO. One wonder whether this set up is good for the development of the privatesector or if Teso Fresh Dairies may in the process stifle other dairy players in the region due toits set up as the “baby” of an NGO. The recommendations here are specific to Teso FreshDairies because of its advanced state in milk collection and processing, but also apply to otherPOs involved in the dairy sub-sector, especially KADP Moroto and ADP Fort Portal. In this regard, Teso Fresh Dairies should be registered and incorporated with the Registrar ofCompanies so that it has the independence of a liability company. This means that decisionswill be made on that basis and this will promote competitiveness. It is also recommended that Teso Fresh dairies encourages farmers to be members of thecompany to be formed as this will generate a spirit of belonging and will lead to sustainedmilk supply. Teso Fresh Dairy covers a large area of Teso and thus its milk suppliers travel long distances todeliver milk twice everyday. In this regard, Teso fresh Dairies should put in place Parish milkcollection centres that so that farmers do not have to traveling distances to deliver milk. Thisadded incentive will inevitably increase the number of milk suppliers to Teso Fresh dairies.

55

Related to the above, Teso Fresh Dairies should develop a bankable business plan for theabove expansionary plan for the accessing of funds to implement the activity. Discussions onthis with Teso Fresh Dairies have led to Teso Fresh Dairies approaching Land O’Lakes forfunding to engage the consultant to develop the business plan. The request has since beenapproved and work has started. Teso region relies on indigenous cows for the production of milk. Yet indigenous cows do not

produce a lot of milk. Therefore, Teso Fresh dairies should undertake a serious campaignpromoting Artificial Insemination so that the suppliers of milk (farmers) cross breed andimprove the quality of their animals. This component should also be incorporated into theexpansionary business plan. Due to the low per capita income in Teso region, farmers transport milk in jerry cans and yetthese were banned by the DDA as being unhygienic. It is, therefore, recommended that TesoFresh Dairies procures milk cans and offers then to farmers, either on pre-arranged creditterms or as a concession. This will also boost the morale of the farmers and will in the long runalso target other farmers. Teso Fresh Dairies should also provide market information to its farmers, both on prices andavailable marketing options. This diligence will mean that farmers will have the chance toexplore their options and make production decisions based on this. Teso Fresh Dairies should also, under its capacity building programme, build the capacity ofits farmers in book keeping, especially production records. This information will not onlyguide farmers in making production planning and marketing decision but will also help TesoFresh Dairies in planning for production increases or reductions. ADP Fort Portal and KADP Moroto ADP Fort Portal has not yet started a fully fledged dairy unit but is distributing improvedgoats to farmers. In addition to the above recommendations, ADP Moroto and ADP Fort Portal should put inplace a dairy market information database, information that dairy farmers can easily access.This information should be updated regularly. ADP Fort Portal and KADP Moroto should boost the capacity of farmers in terms of theirneeds as dairy farmers in terms of the quality of animals kept, the inputs needed to boost milkproduction, the role of book keeping, etc. This could also include lobbying the districtveterinary departments to set up artificial insemination points in the districts. All Partner Organisations should also promote the formation of marketing blocks among theirsuppliers. The resurgence of cooperative groups would go along way in increasing theproduction abilities of communities as far as milk production is concerned.

56

ANNEX 1: Service providers SOME UGANDAN DAIRY SUB-SECTOR CONSULTANTS Service provider Address Phone Email address

UMA Consulting and Information Services (UMACIS) P.O. Box 0113 Kampala Tel: 041 234 879 umaci@starcom.co.ug

1 M & E Asociates P.O. Box 4052 Kampala. Susie house, Ggaba road, Kampala

Tel:041 501894, Fax: 041 501893

meassoc@utlonline.co.ug

2 E3G P.O Box 3342 Kampala

4 Baguma Zachary P.O. Box 9 Entebbe Tel: 041320559, 077650998 Fax: 041320364

zacharybaguma@hotmail.com

5 Andama Godfrey P.O Box 6438 Kampala Tel: 041340824/5, Fax: 041340826 draco@infocom.co.ug

6 Komakech Hans Charles P.O. Box 796 Kampala Tel: 077601544/077602829

7 Mugisha Denis P.O. Box 22-74 Kampala Tel: 077624479/077412905

8 Kamoga Vincent De Paul P.O. Box 20172 Kampala Tel: 075875818

9 Kiiza John Sunday P.O. Box 9048 Kampala Tel:

041230755/236838/259356

10

Mark Erastus Ejangu Renewable Energy Development Center, P.O. Box 994 Kampala

Tel:071524500/041285679 markejangu@hotmail.com or arthur@infocom.co.ug

12

GMAK-BWC Engineering Enterpises

Station Road 5, Entebbe, P.O. Box 889 Entebbe

Tel: 077461251

57

14 Barigye Maurice P.O. Box 4778 Kampala Tel: 077518329

15 Allen Nansubuga Luyima P.O. Box 70997 Kampala Tel: 077362373 allenluyima@hotmail.com

17

Elisha Gimei Wasukira

C/O/ Rank Consult, Plot 12 Ternan Avenue, P.O. Box 4059 Kampala

Tel: 041 259424, 031260740/1, Mob:

077454974 wasulira@rankconsult.co.ug

Kakinda Danile Lugudde P.O. Box 70997 Kampala Tel: 077820167 dkakinda@yahoo.com or

18 dkakinda@schoolnetuganda.sc.ug

19 Sigma Consult (William S. Kalema) P.O. Box 4483 Kampala

Tel: 041220373, Fax:041505041 wskalema@utlonline.co.ug

20 Charles Ntale P.O. Box 4483 Kampala 21 Timothy Kabaza P.O. Box 9833 Kampala Tel: 071 747811 tkabaza@hotmaill.com 23 Martin S. Ssekibala P.O. box 33469 Kampala Tel: 077446171 /231928

27 Ferdsult Engineering Services P.O. Box 30956 Tel: 041342198 /041346456 ferdsult@utlonline.co.ug

28 Rural Energy and Business Consult Ltd. P.O. Box 35938 Kampala Tel: 077670110 /041348279 revenuemonitors@yahoo.com

30

J.K.B. Finance and Management Consultants P.O. Box 9524 Kampala Tel: 041234467 /077402691 beijuka@infocom.co.ug

33 Margaret Banga P.O. Box 7062 Kampala Tel:071860367 /041541558 mjbanga@hotmail.com 34 Asiimwe Loy P.O. Box 23203 Kampala Tel: 077428079 /077503837

35

Business Development Consults international Ltd.

Plot 1031 Kanyange Road, P.O. Box 29883 Kampala

Tel: 077482334, or 0774623978, Fax: 041567159 budecointug5414@yahoo.com

58

42 Premium Consulting

4th Floor Impala House, 13/15 Kimathi Avenue, P.O. Box 3068 Kampala

Tel: 077731496, or 077899109, or 041253783 premium@spacenet.co.ug

43 Wasikye George

Ambassador house, Plot 56/60 Kampala Road, P.O. Box 29972 Kampala Tel: 077461116

44

Technology Consult Africa Limited

Suite 22, Ambassador House, plot 56/60, Kampala road, P.O. Box 6344 Kampala

Tel: 077889049 or 041261713 secomi2001@yahoo.com

45 The Ssemwanga Center Ltd

Plot 47b, Upper Kololo Terrace - Kampala

346246/077518806

46 Tamp Consultants Limited

Plot 240/241 - Sir Albert Cook Rd. - Kampala.

230207/077425980

47 Rank Consult Limited 10 Hannington Road,

Kampala. 343846/259424

49 Eng. Francis Kazinduki MTN Uganda

50

Elisha Gimei Wasukira Plot 12 Ternan Avenue, P.O. Box 4059 Kampala

52 Benjamin M. Turyatemba

P.O. Box 3925 Kampala 077430731/075348800

54 Kaggwa Ronald B.S.K. P.O. Box 3027 Kampala 077461828 / 077428801 ronaldkaggwa@hotmail.com

55 Anitah Katiti-Zikusoka P.O. Box 9453 77448606 56 Andrew Ntegeka Bugolobi, Block 25 C5 220705/223715

57 Robie Kakonge Business Support/Consultant 348151

58 Arthur Jovan Niwagaba P.O. Box 12305 Kampala 071457048/077457048 arthurjn@techemail.com

59

59 Rachel Kadama P.O. Box 28483 kampala 41540360 rka@metrocomia.co.ug

60 Kisembo Moses Richard P.O Box 4410 Kampala 71772262 kmr@metrocomia.co.ug

61

MGS Financial Services Plot 58 Ambassador House, P.O. Box 4389 Kampala 077752277/041221079

62 Charles Opio Owalu 14th Floor, Uganda House 530632

64 Eng. John Eric Mugyenzi P.O Box 1101 Kampala 254071 65 Eng. F. N. Kazinduki P.O. Box 40389 Kampala

66 Eng. Kyomuhendo David Turahi P.O Box 7062 Kampala 77552316 turahi@hotmail.com

67 Eng. Dr. Izael Pereira da Silva P.O. Box 7062 Kampala 77505792 bugala@afsat.com

69 Dr. F. Tusubira P.O. Box 11193 Kampala 41543959 tusu@mak.co.ug 70 Eng. Karekaho Tobias P.O Box 7020 Kampala 71 Ferdinard Mugisha P.O. Box 11193 Kampala 71555600 ferdsult@utlonline.co.ug

74 Wrehikhe Khauka Godfrey P.O. Box 27893 Kampala 77419552

76 Keizire Blackie Boaz P.O. Box 7422 Kampala O77402 234 blackiesq@yahoo.com 77 Fred Zake Esq. P.O. Box

78

Herment A. Mrema

P.O. Box 7267 Kampala O77402 234 mrema@ugandacoffee.org, hmrema@hotmail.com

79 Jane Nakintu P.O. Box 16473 Kampala O77962 836 eai@utlonline.co.ug 84 Blyth Fred Walekwa P.O. Box 2233 Kampala O77881127

85

Godwin Edward Jjuko Kayondo P.O. Box 1923 Kampala O71812431

naganaka@operamail.com, gotare@hotmail.com

60

106

Maviggo Development Consult (U) Ltd. P.O. Box 26446 O77484652

maviggo@infocom.co.ug, mat_kasule@yahoo.com

Beta Consultants P.O. Box 7328 Kampala 349 845, Fax: 234 168 Serefaco Consultants P.O. Box 6916 Kampala 0772 405 347 serefaco@imul.com

Nordic Consulting Group P.O. Box 22960 Kampala Tel: 346 261 Fax: 346 262 ncgug@starcom.co.ug

61

ANNEX 2: Key Dairy sub-sector players

1) Sameer Agriculture and Livestock Limited

2) GBK Dairies

3) Alpha Dairies

4) Country taste

5) Jesa Dairies

6) Mona Foods

7) Kaisa Dairies

8) Sunshine Dairies

9) White Nile Dairies

10) Birunga Dairy

11) Anifarm

12) East African foods

13) Gouda Gold

14) Paramount Dairy

15) Teso Fresh Dairy

16) Maddo Dairies

62

ANNEX 3: Some small scale milk providers interviewed COMPANY:

TEL: EMAIL: POST OFFICE:

Alpha Dairy Products Kampala Depot 041 345802 Not Provided PO Box 40271 Kampala

COMPANY: TEL: EMAIL: POST OFFICE: LOCATION:

Bulangiti Farm Ltd 041 236276 Not Provided PO Box 2186 Kampala Plot 9 to 11 Parliament Avenue Embassy House

COMPANY: TEL: EMAIL: POST OFFICE:

Dairy Bell Ltd 0483 22459 Not Provided PO Box 902 Fort Portal

COMPANY: TEL: EMAIL: POST OFFICE: LOCATION:

Dairy Bell Ltd 041 346001 Not Provided PO Box 10241 Kampala Plot 5 Nyondo Close

COMPANY: TEL: EMAIL: POST OFFICE: LOCATION:

Lwentale Ranchers Ltd 0481 20291 Not Provided PO Box 454 Masaka Not Provided

COMPANY: TEL: EMAIL: POST OFFICE:

Malaika Dairy Products 041 232306 Not Provided PO Box 11503 Kampala

COMPANY: TEL: EMAIL: POST OFFICE: LOCATION:

Masaka United Dairy Farmers Ltd Not Provided Not Provided PO Box 1853 Masaka Plot 50 Ddiba Street

63

COMPANY: TEL: EMAIL: POST OFFICE: LOCATION:

Mityana Mwera Livestock Co-op Society 046 2054 Not Provided PO Box 203 Mityana Nalubowo Building

COMPANY: TEL: EMAIL: POST OFFICE: LOCATION:

Nerika Traders 041 20635 Not Provided PO Box 25 Rushere Not Provided

COMPANY: TEL: EMAIL: POST OFFICE:

Ngoobe Zero Grazing Farm 0485 21644 Not Provided PO Box 780 Mbarara

COMPANY: TEL: EMAIL: POST OFFICE:

Paramount Dairies Ltd 0485 21048 Not Provided PO Box 1062 Mbarara

COMPANY: TEL: EMAIL: POST OFFICE: LOCATION:

Paramount Dairies Ltd 041 540383 anglin@spacenetuganda.com PO Box 8414 Kampala Plot 535 Kisasi

COMPANY: TEL: EMAIL: POST OFFICE: LOCATION:

Ra Milk Ltd Not Provided ram@imul.com PO Box 10116 Kampala Plot 13B Kampala Road

COMPANY: TEL: EMAIL: POST OFFICE: LOCATION:

Sure Dairy Farm Ltd 077 501012 Not Provided PO Box 23992 Kampala Nakulabye

COMPANY: TEL:

Toro Dairy Co-operative Society 0483 22571

64

EMAIL: POST OFFICE: LOCATION:

Not Provided PO Box 303 Fort Portal Plot 16E Rukiidi III Street

COMPANY: TEL: EMAIL: POST OFFICE:

Karo Karungi Milk Farm Not provided Not Provided Not provided