Do you know how huge and interesting the African milk market really is? You’re about to find out.
It is likely that more than 60 percent of you reading this article who live in urban areas had milk in their breakfast this morning. Very likely.
It’s very likely because milk is one of the richest sources of animal protein for humans and is contained in almost everything we love from powdered milk and cheese to ice cream and yoghurt.
On a continent where cows are abundant, it remains a shocking reality that Africa currently does not produce enough milk to meet its own needs.
Despite having more than 10 percent of the world’s cattle population, Africa contributes less than 3 percent to global milk production but spends more than $500 million every year on milk imports from Europe and North America, while thousands of its cattle farmers remain poor.
This article explores the huge potentials of milk in Africa and two inspiring success stories of a Senegalese entrepreneur and a Nigerian milk business that are already exploiting the opportunities in milk production on the continent.
I shall also reveal the 3 key ways to make money in Africa’s milk market and 5 things you must consider if you want to be successful in Africa’s milk industry.
The potential for milk in Africa is huge!
Yes, the potential for the milk business in Africa is huge and remains largely untapped.
For a food product as basic and vital to the human diet as milk, the consumption and demand potential for milk in Africa remains underexploited. On a continent with over one billion people, milk consumption in Africa is currently the lowest in the world.
According to the World Health Organisation (WHO), the average African consumes about 36kg of milk every year. This is very much below the WHO’s recommended annual consumption of 200kg of milk per person.
In fact, Africa’s milk consumption compares very poorly to the global average of 103kg of milk per person per year. These figures present a favourable picture of the interesting growth potential for milk consumption in Africa.
In spite of the huge local demand for milk in Africa, the continent produces less than 3 percent of milk worldwide. This is a shocking statistic for a continent with more than 10 percent of the world’s cattle population.
While the average annual milk production in developing countries stands at nearly 12,500 kg of milk per cow, in Africa, the average volume of milk produced by a cow in a single year averages just about 200kg in most areas.
Although these volumes are improving in some places on the continent, milk production is not growing fast enough to satisfy Africa’s expanding milk appetite.
As a result of the huge gap between Africa’s high and rising milk consumption demand and its terribly low milk production, many countries on the continent spend significant amounts to import milk from Europe and the Americas.
In fact, a country like Nigeria, with a population of over 170 million and an annual milk demand of roughly 1.5 billion litres, produces less than 5 percent of its milk locally.
As a result, Nigeria spends more than $200 million on milk imports from abroad every year. This doesn’t make any sense! Even the government knows it. Little wonder the Nigerian government is trying to place a ban on imported milk to encourage local production.
Other countries across the continent, like Niger and Mali, spend upwards of $20 million yearly on importation of pasteurized milk, a situation that negatively impacts the trade balances of these countries.
Although the challenges facing local milk production in Africa are huge, it presents a huge business opportunity for entrepreneurs who can solve the continent’s milk problem.
How can a continent with an abundant supply of cows be deficient in milk production?
The gap in the milk market is currently being plugged by importing milk products from outside Africa. While this may be working in the short term, it is definitely more expensive and not sustainable in the long term.
As income levels continue to rise across the continent and more people enter the middle class, the demand and consumption of milk will explode in the coming years.
Better still, over 300 million Africans will move to cities and urban centres over the next 20 years. As a result, the demand for milk and milk-based products such as cheese, yoghurt, ice cream and several others will increase.
A sustainable solution to milk production in Africa needs to be found. And fast!
Two of Africa’s Inspiring Milk Success Stories…
While many people prefer to focus on the difficulties and challenges facing milk production in Africa, there are already some interesting and inspiring success stories on the continent that prove the lucrative potentials of the milk business in Africa.
In this section, we shall look at two interesting initiatives from Senegal and Nigeria that are exploiting the potentials of local milk production in these respective countries.
- Bagoré Bathily, Senegal’s Leading Milk Entrepreneur
In 2004, when Bagoré Bathily told his friends that he wanted to start a dairy business in his country, they simply laughed at him.
In Senegal, a West African country of just over 14 million people, more than 30 percent of the population make their living from livestock. However, Bathily noticed that despite his country’s huge potential and capacity for milk production, over 90 percent of milk consumed in Senegal is made from imported powder milk.
As a result, the Senegalese economy was losing millions of dollars every year importing milk which could be sourced from local herdsmen; many of who live in poverty. This didn’t make any sense to Bagoré!
Seeing the huge gap and opportunity in the market, Bagoré decided to set up a company to develop and market milk produced in Senegal. By partnering with skilled people in the dairy industry and with venture capital he received from Credit Agricole in France, he started his company, La Laiterie du Berger, in 2006.
His simple business model involves collecting milk from local milk producers and processing it into high-value dairy products like cheese, pasteurized milk and yoghurt. His company provides a steady market (and income) for local milk producers while enjoying the profits made from the value-added products it makes and sells.
In addition to a steady market, La Laiterie du Berger also provides technical support to local herdsmen through veterinary services, education and awareness programs.
Bagoré is a veterinarian by training who studied in Belgium and worked for several years with dairy farmers in France and Mauritania to gain experience before returning to Senegal. Today, his company has set up an efficient network that collects nearly 3,000 litres of milk a day from over 950 semi-nomadic dairy farmers, which he processes into his now popular milk product brands.
Since 2006 when the company started, production has grown from 500kg of finished products a day to over 4,000kg per day and currently employs over a hundred people.
In 2012, at the Africa Awards for Entrepreneurship organized by the Africa Leadership Network, Bathily emerged winner of the Outstanding Small and Growing Business Award for his brilliant business concept.
He plans to replicate the success of his milk business model in other countries across West Africa which offer the same challenges and lucrative potentials.
- FrieslandCampinaWAMCO – The Nigerian Milk Giant That’s Opening Business For Local Producers
FrieslandCampinaWAMCO is one of Nigeria’s largest milk companies and produces some of the most popular milk brands in the country (like Peak, Three Crowns and Friso).
For decades, the company, like many others across Africa, imports milk powder from Europe to meet its supply needs for milk production in Nigeria.
However, since 2011, the company noticed steep increases in the prices of dairy commodities on the international market (especially milk powder) due to growing global demand for milk (especially from China), droughts, and weakening of the Euro currency.
Faced with this challenge, FrieslandCampina turned to local milk producers to reduce the quantity of milk it imports and reduce its dependence on European milk.
Like in many parts of Africa, milk production in Nigeria is dominated by smallholder pastoral farmers in rural areas who usually milk their cows for their family’s nutrition needs and sell the remainder in local markets.
Because raw milk cannot last for very long without proper treatment and storage, only very little volumes of locally produced milk are ever used for commercial production in Nigeria.
Poor hygiene during milking, bad transportation infrastructure, inadequate refrigerated storage and low awareness about market opportunities are just a few of the factors that affect the local milk supply chain in Nigeria.
To solve these problems, FrieslandCampinaWAMCO has built milk collection centres in different regions of the country. Small-scale milk suppliers, especially the Fulani, supply fresh milk to these collection centres every day in 10-litre buckets provided by the company in place of the traditional calabashes which often contaminate the milk.
These centres are equipped with cooling facilities from where the company collects the milk in vehicles installed with cooling equipment and transports to its main factories for commercial milk production.
The company has also started providing training to livestock farmers on how to maximize milk production from cattle while milking cows and improving the hygiene quality of the milk. This way, smallholder farmers in Nigeria are now able to sell their milk (indirectly) to urban consumers who trust FrieslandCampinaWAMCO to deliver on quality.
As a result, the company has begun to cut down on its raw milk and powder milk imports from Europe.
Can you imagine the volume of opportunities that are now open in Nigeria for both big and small scale businesses if more milk production companies like FrieslandCampinaWAMCO source more of their milk locally?
With its large population and rising consumption, Nigeria’s milk production market will certainly be interesting to watch over the coming years.
The 3 Major Ways To Make Money In The African Milk Market
So, you’re probably interested in the impressive potentials of the milk business in Africa and inspired by the successes of Bagoré’s simple business model in Senegal and the opportunities that are opening up in Nigeria as large milk companies focus on sourcing their milk locally.
In this section, we’ll look at the key segments of the milk business to help you decide exactly where you plan to fit in.
#1 Milk Producers
The first guys in the milk production supply chain are the milk producers. Of course, as you may have guessed, to produce milk, you need to own one or several cows.
In many parts of Africa, milk is produced by small holder farmers who typically milk their cows manually (by hand); a time-consuming and labour intensive process.
However, in developed countries, milk production is dominated by large farms which use machines to milk their cows.
Milk producers are generally involved in the business of breeding, birthing, milking and general care of cattle. Depending on the size of the herd and complexity of operations, the largest proportions of capital in the milk production business will be dedicated to feeding, labour and veterinary care.
Producers make money by selling the milk they produce from their cows. And when cows no longer produce sufficient milk that makes them economically viable, they can be sold on the market or slaughtered and sold as beef.
Either way, producers make money from their cattle as either beef or milk. In my opinion, the biggest benefit of being in the production business is the opportunity to make money from both milk and beef.
Nevertheless, producers bear most of the risk in the milk production process (due to the large capital requirements and risk of diseases or loss).
In addition to these, some technical skills are required to succeed in this area. We shall look at a couple of the important success factors in the next section of this article.
#2 Processors and Value-Added Products
Milk, in its fresh and natural form, is just a simple product and raw material. Although fresh milk can be consumed directly by humans, not very many people can enjoy the privilege (except you live close to a dairy farm).
To extend its shelf life and quality, milk is usually processed into other products and is also used as an ingredient in several different products in the food industry.
Some of the most popular dairy (milk-based) products that sell huge volumes in Africa include:
- Powdered milk (or milk powder) is produced by removing water from milk. It is the most common type of milk in African markets and is preferred because it is compact and long lasting.
- Pasteurized milk – usually available in liquid form as ordinary (non-sweetened), evaporated or condensed (sweetened) milk.
- Ice cream – this frozen dessert is very popular especially in Africa’s urban areas. There’s a wide variety of ice cream on the market made from several different ingredients and flavours.
- Yoghurt – Is definitely the most popular dessert in Africa after ice cream. It is a fermented milk product produced by the bacterial fermentation of milk.
- Infant formula (baby food) – Another major product produced from dried milk powder with specific additives for feeding human infants. In a previous article on baby products, we looked at the huge potentials of infant formula in Africa’s lucrative baby boom market.
- Cheese – is one of the world’s most popular milk products. There are over 100 types of cheese in a wide range of flavors, textures, and forms.
Milk processors tend to make more money than producers because they add value to ‘ordinary’ milk, and transform it into products that are more attractive to consumers in a variety of ways.
However, processing milk (depending on the size of the business and end product) may require a significant investment in machinery and labour.
#3 Supporting Products and Services
The businesses in this category do not produce or process any milk but they provide products and services that help milk producers and processors succeed in their businesses.
These products and services vary quite widely and include everything from manufacturing and supplying machinery that are used by dairy farmers (like milking machines) and milk processing equipment.
Other common items in this category include veterinary products and services, training programs and technical consultancy services.
5 Things African Entrepreneurs Should Know Before Entering The Milk Business
Knowledge always holds the key to success. Although we have established the huge opportunities in Africa’s milk market, there are a couple of factors that are very critical to success in the milk business.
In this section, we shall take a look at five key things every entrepreneur should know and consider before entering the milk business in Africa.
#1 The breed of cattle matters…
Before you start, you must know there are essentially two types of cattle; beef cattle (grown for meat) and dairy cattle (grown for milk).
Holstein-Fresians, Ayrshire, Guernsey, Jerseys and Fleckvieh are some of the popular, exotic and highly demanded dairy cattle breeds.
Don’t get me wrong, every cow (whether beef or dairy cattle) produces milk. It’s just that some breeds of cattle produce more milk than others and vice-versa. And there are also ‘dual purpose’ cattle breeds that do well as both beef and dairy producers.
This is one of the reasons why one cow breed can produce up to 12,000kg of milk in a year while another breed produces less than 500kg. Yes, starting with the right breed is very important if you plan to be successful.
Apart from good milk production abilities, you also need dairy breeds that are easy to handle, can withstand the climatic conditions in your region and resistant to the prevalent cattle diseases in your local area.
#2 – Capital – How much do you really need?
Well, the simple answer is: it depends on how big or small you plan to start. You may only start big if you have good experience in raising dairy cattle and managing a large farm.
If you don’t have this experience, it’s best for you to start small and expand gradually as you learn from your successes and mistakes.
You could start a small dairy farm with one cow or a large herd of cows. It all depends on your experience and technical skills in dairy farming and your ability to raise finance for the business. You will also need to consider the costs of buying the cows and providing shelter, water, feeding , equipment, veterinary services and any labour that may be hired to take care of the cows.
It is also possible to become a producer of value-added milk products like powdered and liquid milk, cheese, ice cream and yoghurt. Powdered and liquid milk will require a higher capital investment than ice cream which can be produced with basic kitchen utensils in the home.
Some capital may also be required to provide proper, sanitary and attractive packaging for the milk in order to increase its chances of success in the market.
#3 – Knowledge and Technical Skills Are Very Important
Farming dairy cattle is not the same as growing cassava or raising poultry. To achieve any success in milk production, you will need to apply the essential knowledge and skills required to grow, breed, feed and take care of cattle.
For example, Bagoré Bathily, the Senegalese milk entrepreneur had to learn from and partner with skilled dairy farmers in Europe and Senegal for nearly two years before he started his now successful business – La Laiterie du Berger.
How can you get the knowledge and skills you need to start your own dairy business?
Well, you’re already taking a very good first step by reading this article. Next, you will have to do some more reading and research. It would also be a great strategy to contact existing dairy cattle farmers in your area or visit the relevant government agriculture office/agency for very useful information and advice.
For processors, knowledge and skills are also important. Processing milk involves certain techniques and procedures that help to ensure that milk products are safe and without contaminants.
#4 Feed and Water Can Make or Break This Business
Unfortunately, in many parts of Sub-Saharan Africa, milk production is highly dependent on rain-grown fodder (grass). As a result, the market experiences sharp fluctuations in milk production and supply throughout the year.
Surplus milk is often produced during the rainy season while in the dry seasons, milk production can be very low.
Feed and water require special mention here because of their importance in dairy farming.
In order to remain healthy, strong and achieve good milk production levels, an average cow may consume up to 15 gallons of water and eat up to 4 percent of its body weight in food every single day.
A cow which consumes smaller quantities of water and feed than it requires will produce small volumes of milk and vice versa. In fact, feed and water (especially feed) usually make up the largest proportion of running costs for a dairy farm.
The quality of feed is also very important and must provide adequate nutrition for the cows in order to promote milk production, good health and reproductive performance. Cereal grains and forage (green grass, hay, straw etc) are very good sources of energy for cattle.
Feed concentrates that contain fat and protein supplements are also fed to cows to provide adequate body fat that is essential for milk production.
#5 Infrastructure Remains A Huge Challenge
Whether you plan to become a producer who sells milk to milk processing companies or a small company that makes delicious milk products like ice cream and yoghurt, the poor state of infrastructure in many parts of Africa can be a huge challenge.
Broken roads, poor electricity supply, inadequate clean water and lack of suitable transportation, storage and cooling systems for milk still remain obstacles that most entrepreneurs and companies in the milk business will face.
As you may already know, while these challenges are the reason many people are yet to exploit the potentials of Africa’s milk business, some entrepreneurs and businesses are already thriving and achieving successes in spite of these challenges.
Who wants to milk a cow?
Milking a cow must be a strange and awkward experience. I just realized that many of you reading this (including me) have never seen a cow getting milked by hand.
So, I searched and found a short, funny and interesting video that shows the process of milking in action. Although modern farms use machines nowadays (because they take less time and labour), the manual method of ‘handmilking’ is still very common across Africa’s rural areas. Enjoy!
By John-Paul Iwuoha. Posted on 9th July 2014 on Small Starter.