Bogor Agricultural University (IPB)

Value Chain Report: West Java

Bogor, 9 October 2018

Dr. Sahara

IndoDairy Project

Background

Indonesia’s domestic milk demand was 3.7 million ton (fresh milk equivalent) with 4.1% growth per year from 2017 to 2020 (Ministry of Agriculture 2016).

The growth of national milk production is about 3% each year.

The dairy market in Indonesia is still heavily reliant on imported milk products: 79% imported from overseas.

Overview

• The milk production is concentrated in Java Island which the population of cattle reached 99% of the total population in Indonesia.

Overview

• Milk production has also increased in 2013-2016, by 8,4 percent to reach 852.951 tons in 2016. West Java Province is the second highest milk producers.

VALUE CHAIN STUDY

17 respondents:1. Input shops1. Input shop of KPS

Cianjur Utara2. Input shop of KPS Bogor

2. Cooperatives1. KPS Bogor2. KUD Giri Tani3. KPS Cianjur Utara4. KPGS Cikajang5. KPBS Pangalengan

Value Chain

West Java (Jan-Feb 2018)

Value ChainWest Java (Jan-Feb 2018)

3. Milk Processors 1. Cimory2. Frisian Flag Indonesia3. Indolakto4. Fonterra

4. Milk processors and retailers1. Susu Mbok Darmi2. Momo Milk

5. Retailers1. Ranin Coffee2. Narma Toserba

6. Modern retailers:Hypermart

7. GKSI

Value Chain in West Java

Value Chain Actors in West JavaValue Chain Actor Role

Input Supplier Farm input suppliers provide feed, equipment and veterinary care for cattle. Raw materials of feed mostly are obtained from suppliers near the input shop location.

Farmers The roles of farmers in the value chain are maintaining thecattle and selling fresh milk. Most of the farmers are classified as smallholder which they mostly have on average 2-3 cattle. For most farmers producing milk, dairy production is the primary source of income (80%).

Dairy Co-operatives Linking farmers to milk processors. A cooperative gives technical and managerial skills for farmers, financial support, and market access.

Milk processors Milk processors transform fresh milk into some milkproducts such as pasteurized milk, Ultra High Temperature milk, yoghurt, cheese, and others

Retailers Retailers sell the milk products to end consumers

Opportunities in West Java

Respondents are optimist about the future of dairy industry

Demand increase as income increase and health awareness

Demand for derived products of milk increase yoghurt, liquid milk with taste,

ice cream, etc.

Coop’s perception on the future of their dairy business & the national dairy sector

6 6

4

55 55

6

5 55.2

5.4

0

1

2

3

4

5

6

Dairy Business Dairy Sector

Perc

epti

on

Sco

re

KPBS Pangalengan

KPGS Cikajang

KPS Bogor

KPS Cianjur Utara

KUD Giri Tani

Average

6: Very positive 5: Fairly positive4: Neutral3: Fairly negative 2: Very negative1: Unsure

MPI’s perception on the future of their dairy business & the national dairy sector

5 5

6

55

66

5

5.55.25

0

1

2

3

4

5

6

Dairy Business Dairy Sector

Perc

epti

on

Sco

re

Cimory

FFI

Fonterra

Indolakto

Average

6: Very positive 5: Fairly positive4: Neutral3: Fairly negative 2: Very negative1: Unsure

SME’s & Retailer’s perception on the future of their dairy business & the national dairy sector

6

5

6

55 5

0

1

2

3

4

5

6

Dairy Business Dairy Sector

Perc

epti

on

Sco

re

Momo Milk

Susu Mbok Darmi

Hypermart

6: Very positive 5: Fairly positive4: Neutral3: Fairly negative 2: Very negative1: Unsure

Challenges in West JavaActors Challenges

Farm Input Suppliers • Quality, availability, and price• Limited land for forage

Farmers Farmers regeneration, farmers capabilities, cattle ownership, milk quality, milk quantity and productivity.

• Land and cow ownership scale. The size of cow/cattle house is small and located next to farmer’s house.

• Dairy farming is mostly not inherited to or followed by the farmers’ second generation.

Cooperatives • Technical skills (milk quality and milk supply) • Managerial skills (human resources development and

organizational management).• Price fluctuation

Milk Processors • Price and fluctuating supply from cooperatives• Lack of infrastructure (SMEs MPI)

Retailers • Price, and logistics (cold chain system). • The competition is still dominated by large companies,

Milk Price (Rp/L)

Cooperatives Price Level Lowest Average Highest

KPGS CikajangMPI 5200 5400 5800Farmers 3900 4350 4600

KPBS PangalenganMPI 5500 5800 6500Farmers MCP 4600 4800 5200Farmers non-MCP 4000 4500 4700

KPS Bogor

MPI Kunak 5400 - 5800MPI non-Kunak 5100 - 5400Farmers Kunak 4900 - 5300Farmers non-Kunak 4400 - 4800

KUD Giri TaniMPI 5000 - 6000Farmers 4400 - 4600

KPS Canjur UtaraMPI 5600 - 5700Farmers 4300 4500 4700

Value Chain Priorities and Recommended actions

Actors Recommended actions

Farm InputSuppliers

• Availability of forages through procurement of land for forages. • Subsidy for raw material for feed.

Farmers • Dairy farming should be interesting, especially for young generation.• Procurement of land for forages.• Capacity building of farmers to increase their skill in dairy farming.• Increasing dairy cattle population• Improving local breed (genetic).

Cooperatives • Increasing managerial skills.• Modern and lean organization.

Milk Processors • Investment in equipment (pasteurizer, freezer) as the pasteurization is still manual (boiled).

• Creating Standard Operational Procedure (SOP) in production unit.

Retailers • Direct selling using online trade.• Developing product diversification.• Educating consumers and farmers through advertising.

Government • Government policies should be synergized with the relevant stakeholders. Creating a government policy to increase drinking milk awareness.

Bogor Agricultural University (IPB)

Thank you

IndoDairy Project

Standard requirement of fresh milk