Challenges in milk processing and marketing among dairies in the semi-arid tropical Kenya

D M G Njarui, M Gatheru, J M Wambua, S N Nguluu, D M Mwangi* and G A Keya*

KARI-Katumani Research Centre, P.O. Box 340 – 90100, Machakos, Kenya
KARI Headquarters, P.O. Box 57811 - 0200, Nairobi, Kenya
donaldnjarui@yahoo.com

Abstract

Processing and marketing of milk are important levels of growth of dairy industry. A survey was conducted on 17 dairies based in 11 trading centres within the semi-arid region of Eastern Kenya using a structured questionnaire. The objective was to understand the functioning of the milk processing and marketing systems and identify appropriate interventions to enhance growth of dairy industry. Data collection techniques included direct questioning, informal discussion and review of kept records. The survey was carried out between July and September 2008.

Three categories of processing and marketing channels were identified. Of these channels, about 17.7% are dairy farmers’ co-operatives, 23.5% are self-help groups and 58.8% are individually owned milk shops or bars. Smallholder farmers were the only suppliers of raw milk to the dairies. Dairies are not specialized and processed a few product lines. Of the total milk handled by dairies, 71% was sold as raw milk, 22% was processed into fermented milk, 6.9% was boiled and a paltry 0.1% was processed into yoghurt. The largest markets outlets are individual households who absorbed over 80% of total dairy products marketed.

Lack of equipments and skills are greatest impediment in processing of milk while competition for market from other dairies is the greatest threat to growth of the industry in the region. For the dairies to remain competitive in the market, they need to diversify their product through value addition using simple and cost effective methods.

Keywords: Dairy cattle value chain, dairy farmers’ co-operatives, milk shops/bars, self-help groups

Introduction

Although dairy farming in the semi-arid region of Kenya is largely subsistence, the trend is gravitating towards commercialisation. A recent study indicates that close to 15% of dairy cattle farmers produce between 11 - 20 litres of milk/day (Njarui et al 2009) implying that there is surplus milk available for direct sale and for processing into other milk derivatives. Further the study revealed that 43% were unable to sell their milk during the milk glut period particularly in January and February.

Processing and marketing of milk are important levels of dairy development and growth of the industry. Kenya has one of the largest dairy industries in sub-Saharan Africa with a milk market share of 24% in the region (Karanja 2003). By the end of 2007, there were 52 licensed processors with an inbuilt capacity of 2.9 million litres a day but only 26 were active (MoLD 2008). They process a wide range of products including fluid, cultured and solid milk products such as cheese, ghee, condensed and evaporated milk, ice-cream and frozen desserts (EPZ 2005). On the other hand, marketing is important because it links consumers to the products. However, in spite of expanding dairy farming and improved milk production in the semi-arid Kenya, there is not even a single large commercial processor based in the region. The large milk processors are concentrated in Nairobi and the traditionally dairy regions of central highlands and Rift Valley region. As a result most of the milk products requirements for semi-arid are imported from these regions.

There is good market opportunity for different milk products due to expanding population and improved income in the rural urban trading centres within the region. In order to improve smallholder dairy production in the region, milk production must be accompanied by processing to produce a variety of products to meet market opportunities. Further milk is highly perishable thus there is need to process into products that have a longer self-life, easier to handle and transport to long distance market outlets. Processed milk products can also be stored and offloaded into the market when demand arises.

Information on functioning of the milk processing and marketing and linkages along the dairy cattle value chain is not available because no study has been carried out previously in the region. This can be achieved by obtaining baseline information on the level of processing and marketing in the region and constraints and opportunities for improvements. The objective was to understand the functioning of the milk processing and marketing systems and identify appropriate interventions to enhance growth of dairy industry.

Methodology 

Study site

The study was carried out in Mwala and Kangundo in the larger Machakos district, between longitude 37.35^o - 37.62^oE and latitude 1.32^o - 1.50^oS. These regions were considered representative of the semi-arid region of eastern Kenya. A report from the Ministry of Livestock and Fisheries Development indicates that they have high population of dairy cattle (MoL&FD 2007) and small holder milk production is important (Njarui et al 2009). Further, there are several dairies involved in processing and marketing of milk based within the trading centres in the region. Kangundo lies in Upper Midlands agro-ecological zone 4 (UM4) while Mwala fall within Lower Midlands agro-ecological zone 4 (LM4) (Jaetzold and Schmidt 1983). The altitude ranges from 1100 masl on the eastern side in LM4 to 1550 masl on the northern region in UM4. The regions receive bi-modal rainfall ranging from 700 - 900 mm/annum and mean temperature of between 17 - 24^oC. Population density varies with the agro-ecological zones, and ranges from 40 to 100 person/km² (Jaetzold and Schmidt 1983). In the hill masses it is estimated at between 130 - 760 persons/km² (Ndegwa and Kooijman 1999).

Sampling method and data collection

Only established dairies that had been operating for at least one year prior to the commencement of the survey period were selected. Although middlemen or hawkers commonly referred to as vendors have been identified as important channels in marketing of milk, they were not included in this survey. Eighteen dairies were identified in 11 trading centres. Four trading centres were located in UM4 and seven in LM4. One dairy declined to participate in the survey. Eight of the dairies that were interviewed were located in LM4 and nine in UM4.

The questionnaire was pre-tested in the study area and the necessary changes incorporated before being administered. Information collected included; organisation background, milk supply, milk processing, distribution and marketing and constraints in processing and marketing of milk and milk products.

The survey was carried out between July and September 2008. During the survey, the most senior staff member of the diary was interviewed only once. Data collection techniques included direct questioning, informal discussion and review of kept records. The survey team comprised of animal production scientists, a biometrician, a social scientist and an extension officer.

Data analysis and presentation

Data was coded and entered in a spreadsheet and analysis was carried out using the Statistical Procedures for Social Sciences (SPSS) version 13 for Windows (SPSS 2004).The results are presented using descriptive statistics, tables and graphs.

Results and discussion 

Organisation background

Three categories of dairies that were involved in processing and marketing of milk and milk products were distinguished. These were dairy co-operatives, self-help groups and individually owned milk shops or bars. Out of the 17 dairies surveyed, three (17.7%) are farmers co-operatives, four (23.5%) are self-help groups and 10 (58.8%) are individually owned milk shops or bars. All the three dairy co-operatives are located in LM4 while three self-help groups are located in UM4 and one in LM4. In the traditionally dairy region of the country, co-operatives and self-help groups are key players in processing and marketing of milk. Thirteen (76.5%) dairies were involved in both processing and marketing of milk and milk products while four (23.5%) were involved in marketing of raw milk only. The number of years the dairies have been in operation averaged 6.9 (range 1 - 29 years). Twelve (70.6%) dairies have been operation for between 1 - 5 years, two (11.8%) for between 5 - 10 years and three (17.6%) for over 20 years. However these dairies are young when comparing with dairies in central and Rift Valley region of Kenya.

Supply of milk

Smallholder farmers were the only suppliers of raw milk to the dairies. This is consistent with the rest of the country where the majority of milk is supplied by individual farmers (Karanja 2003). The number of farmers who supplied to self-helps groups and individual milk shops averaged 46 (range 10 - 70 farmers). Conversely, each of the two largest dairy co-operatives received milk from an average of 320 smallholder farmers. Milk deliveries averaged 105 litres/day to each self-help group and individual milk shops while two of largest dairy co-operatives received an average of 1700 litres/day. The average distance farmers traveled to deliver milk to the dairies was 4.7 km (range 0.2 - 20 km). Only one dairy had organized milk collection points to reduce distance that farmers traveled to deliver milk but had only two collection points. However, these collection points did not have cooling facilities. This implies that milk was subject to rapid deterioration under ambient temperature as it is highly perishable. The collection points were in LM4 where the distance to delivery point was relatively larger than in UM4.

All the dairies surveyed reported variation in the quantity of milk supplied and availability from farmers. Supply of milk was dictated by rainfall pattern as this influence feed resources production and availability of feeds for livestock. As a result, higher milk supply was experienced following the rains and low milk supply was reported during the dry season. Over supply (surplus of marketable) of milk was highest in January, May and December although only about 40% of the dairies reported that they received excess milk during this period (Figure 1).

Milk supply declined from July to September with about 50% of dairies reporting scarce milk during these months. No dairy reported over-supply of milk in September and October and highest proportion of dairies (31%) experienced very scarce (below market demand) milk supply during these months.

As shown in Figure 2, inadequate supply of milk was the most pressing problem and was reported by 47% of the dairies. About 29.4% of the dairies reported that farmers deliver milk to their premises after agreed time (late delivery). Late delivery disrupted onward transfer of milk and other dairy products to markets.

Close to 12% of dairies reported that high number of small suppliers was a constraint in that a lot of time was wasted in receiving, recording and testing little quantities of milk. Surprisingly only one dairy (5.9%) reported poor quality of raw milk. Perhaps the low number of dairies that reported poor quality of milk is due to fact that all of them had limited equipments for testing thus are not able to screen thoroughly all the milk for cell count and antibiotic content. The poor quality of raw milk they usually reported was due to adulteration by adding water, flour and margarine.

Processing of milk

The dairies were not specialized and processed a few product lines. These included boiled milk, fermented milk (mala), and yoghurt. Approximately 76.5% of the dairies processed fermented and boiled milk. Only 2 (11.8%) dairies were involved in processing yoghurt. Unlike the large processors from central and Rift Valley region where fermented milk is made from skim milk, the dairy in the region used whole milk. As already mentioned in the section on milk supply, the amount of milk delivered to the dairies by farmers was relatively low. Subsequently the processing capacity of the dairies is generally low with 88.2% of dairies handling an average of 105 litres of milk a day. Two of the largest co-operatives had the highest working capacity and each handled an average of 1700 litres daily. This amount is low compared with the large commercial processors located in central and Rift Valley region of which some handle over 50,000 litres daily (MoLD 2008). The proportion of products processed is given in Figure 3.

About 71% of milk received by dairies was not processed but was sold as raw milk, while 22% was fermented, 6.9% was boiled and only a paltry 0.1% was processed into yoghurt. In Kenya, over 75% of milk is sold raw (Ngigi 2004)

Dairies experienced several constraints which hindered them from processing various milk products (Table 1).

Overall, slightly over a third (36.3%) of the dairies reported that lack of equipments was the greatest impediment in processing. About a quarter (24.6%) of the dairies cited lack of skilled employees and 21.7% experienced limited supply of raw milk. Insufficient quantity of milk delivered mean the dairies cannot benefit from economies of scale when dealing with small quantities.

Lack of skilled employees was mainly due to the fact that majority of dairies were small and operation were restricted to family members and capital outlay was not sufficient to hire professional. Ability of dairies to process advanced milk products such as ultra high temperature treated (UHT) and powdered milk was beyond their capacity due to technical skills and expensive equipments and thus the results are not reported here.

Distribution and marketing of milk

Figure 4 shows a simplified sub-sector map on channels for marketed milk which is complex in reality.

The smallholder dairy farmers are the backbone of the sector map and supply all the raw milk. About 5% of the milk is consumed on-farm by the household and 12% is sold to neighbours. The farmers’ co-operatives, self-help group dairies and individually owned milk shops absorb 65% of milk produced. They are important intermediaries who link the smallholder dairy farmers to market.

The largest market outlet for the dairy products is within the local trading centres. Out of the dairies surveyed, only nine (52.9%) distributed their products directly to the market while eight (47.1%) sold their products across the counter within their premises. Of those that were involved in distribution, six dairies sold their products within a radius of 20 km to their neighbourhood trading centres. Two of the largest dairies transported the raw milk over 100 km away to large processors in Nairobi while one of the dairy distributed their milk 60 km away. Nevertheless, this was mainly confined to the months of January and May when they received excess milk from farmers and were not able to dispose through the local markets. The milk received from farmers was usually bulked for 2 days and cooled before transportation. The quantity sold to these markets ranged between 200 - 400 litres after every two days for each dairy. This is less profitable considering the high transportation cost and other overheads. However, it would have been more profitable if processed into storable products such as ghee and salted cheese. Raw milk was normally transported to market in aluminum containers. Two dairy co-operatives had their own pick-ups vehicle for transporting milk while the rest relied on public transport and bicycles to take their products to sale locations.

The products were sold directly to individuals, middlemen, catering services, and institutions such as school and hospitals. The largest markets outlets are individuals who absorbed over 80% overall of marketed milk and milk products (Table 2). Middlemen, retail shops and institution bought a combined total of less than 5% of marketed milk and milk products.

There was variation in price of all the products between seasons. Price is normally high between July and September and in January and February, when it is dry and declines during the rest of the months. For example the average price of raw milk was Ksh. 32.27/litre (US $ 0.43) (range Ksh. 25.00 - 36.00) during the dry season and declined to Ksh. 29.10/litre (US $ 0.39) (range Ksh. 24.00 - 34.00) during the wet season. The higher price was due to scarcity of milk during the dry season. This was as result of inadequate feeds for dairy cattle as farmers depend on rains to grow fodders and pastures for their livestock. The dairies bought raw milk from farmers at average of Ksh. 20.00 (US$ 0.27) and Ksh. 28.00 (US$ 0.37)/litre during the wet and dry season, respectively. Thus, for every litre sold the dairies gained an average of Ksh. 9.10 (US $ 0.12) and Ksh. 4.27 (US $ 0.06) during the wet and dry season, respectively.

The major constraints with respect to distribution and marketing of milk and milk products in order of importance are; competition for market from other processors, poor road infrastructure, irregular payments and unstable prices (Figure 5).

Competition for market was reported by 40% of the dairies surveyed. A third (33.3%) of the dairies reported that poor road infrastructure was a major constraint. Poor road infrastructure does not allow quick transportation of milk and this increase cost and lowers the profit margin of the dairies. Poor condition of rural roads has also been cited as major constraint in milk marketing by Kenya dairy Board (EPZ 2005). Irregular payments and unstable prices were each reported by less 15% of the dairies. Others constraints were scattered markets and high fuel cost. However, there are periods when the dairies returns unsold milk to their suppliers during glut period particularly in January and May. This clearly shows potential of converting the excess milk to other milk products through value addition.

Competition and product differentiations

As already mentioned in the previous section, all the dairies felt threatened by their competitors. The main competition was experienced from other dairies based within the same region. Individual farmers and middlemen offered competition particularly on marketing of raw milk. Large and well established processors from other geographical region mainly in central highlands, Rift Valley region and Nairobi offered intense competition especially in the pasteurized milk, fermented milk and yoghurt market. However, the dairies felt that they had an upper hand in selling raw milk because of its superior quality. Unlike pasteurized milk in which the cream is removed (most valuable part of milk) leading to lower butter fat content, in raw milk nothing is removed. In Kenya, most households usually boil raw milk before consumption either alone or in tea. Boiling normally achieves higher temperatures and duration than those attained during pasteurization thus removes the risks of contracting zoonotic diseases (Kang’ethe et al 2000). Nevertheless, they felt that they can remain competitive by adding value to their products i.e. by selling different type of products, improve packaging and develop new products (Figure 6).

Developing new product was ranked first and was reported by 25% of the dairies while selling different sizes of product was lowly ranked. Improved quality (24%) and marketing which was reported by 18.8% of dairies are also important strategies to remain competitive in the market.
 

Conclusions 

• The study provided baseline information on the dairy cattle value chain at processing and marketing level. Three categories of processing and marketing channels for milk were identified. Individually owned milk shops or bars are the majority followed by farmers self-help groups milk shops or bars and dairy co-operatives. The capacity of the dairies was relatively low. On average each of the self-help groups’ dairy and individually owned milk bars or shops handled 105 litres of milk daily while each of the two of largest co-operatives received an average of 1700 litres daily. Dairies are only limited to processing a few products line which have a short shelf-life and these are primarily fermented milk and boiled milk. The largest markets outlets are individuals and accounted for over 80% of milk marketed. Lack of equipments and inadequate human skills were the major bottleneck to milk processing while competition from other dairies and poor road infrastructure were the major threats to marketing of dairy products.

Recommendations 

For the dairies to remain competitive, they need to diversify their products through value addition by using simple and cost-effective methods of processing milk. Consideration should be given to processing of storable products such as ghee and cheese as these are processed and successfully marketed by dairies in other areas of Kenya. The dairies need to establish strategically positioned milk collection centres with cold storage facilities to increase the quantity of milk they handle.

Acknowledgements 

Special thanks go to the management of the dairies and provincial administrative staff for their assistance during the survey. The support provided by Ministry of Livestock Development in Kangundo and Mwala districts is gratefully acknowledged. The authors recognise the effort of Mr. Mutuoki of KARI-Katumani for his assistance in data entry. Our gratitude is extended to the Director, Kenya Agricultural Research Institute (KARI) - Headquarters and Centre Director, KARI - Katumani for their support. The office of Assistant Director (AD), Animal Production, KARI Headquarters under leadership of Dr D M Mwangi facilitated in flow of funds and logistical support during the period of study. The office of AD, Social Economic, KARI Headquarters provided useful suggestions in the development of the questionnaire and sampling procedures. We thank all the staff in these offices for their support. This study was funded by the European Union and KARI through the Kenya Arid and Semi-Arid Land programme.

References 

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Received 12 November 2009; Accepted 27 December 2009; Published 7 February 2010

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