Dairy: The mirage of self-sufficiency
Sri Lanka’s dependence on imported milk is a phenomenon that evolved during the time frame of my lifetime. I well remember as a child, a man used to bring a cow and its small calf to our house – we lived in a Government quarters bungalow in Colombo – and milk the cow, in the presence of my mother, and give her the fresh milk in containers provided by her, for the family’s daily consumption.
At our ancestral place in a village in the Kandyan Provinces, there were domesticated cows and a cattle keeper who provided the service. The latter was more trusted, but I once remember watching him diluting the milk as he crossed the nearby stream to reach the kitchen to deliver his daily quota.
In all our communities in the late 1940s and the early 1950s this was the system which prevailed. In both urban and rural areas, a local dairy was operated by an entrepreneur. How this was transformed into a system highly dependent on imported milk powder, supported by a fiercely competitive marketing campaign, telling the gullible consumer the virtues on the New Zealand’s or Switzerland’s climate and its cows, is a story in itself.
The fact is that the Government’s Milk Board confined itself to a limited production of milk powder and grandiose projects such as the condensed milk tins with Parakramabahu the Great on the label (or is it the sage Agasthaya? But that is another story) and limited quantities of fat free milk, yoghurt and other items for niche, segmented and elitist markets.
Another contributing factor was the Land Reform of the early 1970s which completely dismembered some large efficient and productive dairy farms in the Coconut Triangle, like the famous St. Martin’s Farm, near Chilaw, which resulted in a huge drop in milk production.
There are currently serious pricing and cost of production and capacity issues affecting the sector. Recently milk farmers in Nuwara Eliya took their milk containers to town and emptied them on the streets to protest the alleged inability of the collecting companies to purchase their output.
We are consuming our dairy cattle
However there is the proverbial unmentioned elephant in the room, which nobody talks about; the fact that we are, certainly the beef eaters among us at least, consuming our dairy cattle.
Cattle bones are exported, small quantities of beef are also exported. Cattle hides are used in the leather industry. The value of the buffalo for traditional rice farming has declined with increasing mechanisation. The famed inventor of the two-wheel tractor, the late Vidyajothi Ray Wijewardene, has said that he was told at a seminar that all he had really done was to make the buffalo redundant for rice faming, plowing, threshing and transport, etc.
The supply chain for beef consumption and the related exports and industries leads directly to the dairy herd. Statistically beef consumption is slowly but surely increasing, but there is no commercially organised production of beef for the market, so what happens in reality is that the dairy herd is being consumed. Whenever a cow stops producing milk, the local butcher makes an offer the owner cannot refuse for an unproductive animal, which costs time and money to maintain.
A colleague once confided in me that he had to visit Pakistan on a regular basis on official work some time ago, and almost every time he was there, there was also a visiting Sri Lanka delegation from the Department of Animal Husbandry, the Mahaweli Livestock Authority, National Livestock Board or some other State venture, purchasing Sindh cattle and Murrah buffalo.
These high value animals are handed out to so-called dairy farmers, nominated by politicians, by the Government authorities. Back in Sri Lanka, whenever he used to view the overwhelming publicity for New Zealand and Swiss milk powder, he wondered, where did all the Pakistani cattle and buffalo go?
The dairy farmers and the cattle farms in the highlands of the Central Province also have animals imported from New Zealand and Australia. Until and unless there is planned commercial production of beef for those who wish to consume it and for the connected businesses and industries or until beef consumption is banned, for which I understand there has been legislation (a private members bill) gazetted, we will continue to import milk powder.
Whether the ban on consumption of beef will be as ineffective as the Penal Code is, in stopping crime and preventing rape and murder, is a moot point. The decrease in population growth, increased urbanisation, increased female participation in the work force, etc. created a ‘convenience’ demand for powered milk, which importers stepped into supply.
Powdered milk has a long shelf life, unlike fresh milk, which was not publicised as a nutritious and valued commodity. This has had tragic consequences for our children’s nutrition.
Pure fresh milk is something which nourishes a child and Sri Lanka’s unacceptably high malnutrition among children has long been a concern among policy makers. Analysts estimate that 21.6% of children are underweight and malnourished. A minister of health has gone on record saying that “policy makers are baffled, as they cannot pin point the cause of the weak nutritional levels of pregnant and lactating mothers and children”.
The local Chief of UNICEF has said: “Unless attention is paid to addressing causes of child and maternal nutrition today, the costs will be considerable higher tomorrow.”
Possible model
A possible model for developing Sri Lanka’s small scale dairy industry and having fresh milk available for mothers and children in their community itself is found just across he Palk Strait in India. Sri Lankan consumers know well the Amul band of milk products. But little do we know that the Amul brand represents a three million strong collective of small scale dairy farmers resident in India’s innumerable village communities.
Amul is the nation’s biggest dairy products company with revenues in excess of US$ 2.5 billion. Analysts say that it sits at the nexus of the modernising, globalised new India and the old Gandhian ideal of Khadi and the spinning wheel.
Amul is the sponsor of the Indian team to the London 2012 Olympic Games. It links cooperative based rural production with today’s 21st century emerging economic powerhouse of BRICS fame. India is the ‘I’ in the emerging economically powerful nations of Brazil, Russia, India, China and South Africa.
Rama Bijapurkar, a market research expert, says: “It’s a brand that belongs in the canvas of life here – and I cannot think of any other brand that does that. It deals with my life, my country, my family, it understands the local idiom – so it’s beyond simple marketing.”
Gurcharan Das, a former Chief Executive of the Indian operations of Procter & Gamble, who was recently in Colombo as keynote speaker at the Sri Lanka Economic Summit 2012, organised by the Ceylon Chamber of Commerce, echoes this view: “The values Amul represents are modern liberal values, it’s not just selling a product – it’s actually selling ideas about things that are right and wrong with our country.”
The enduring success of Amul is best understood through its marketing strategy. Though Amul just spends only 1% of its annual turnover on advertising its campaigns built around the Amul girl, the brand’s moppet mascot has made the brand a part of the ongoing national discourse among India’s chattering classes and its vast number of dairy villages.
Amul’s success
According to R.S. Sodhi, the Managing Director of the Gujarat Co-operative Milk Marketing Federation, Amul’s parent company, “Amul’s success is owed to its business model, in which more than 16,000 village cooperative societies, nearly 3.2 million farmers, 5,600 distributors and a network of more than one million retailers works, because the production, processing and marketing is owned by the dairy farmers.”
The organisation was founded as the Kaira District Co-operative Milk Producers Union in 1946. This was at a time that Indian farmers, inspired by the ‘Quit India’ campaign of Mahatma Gandhi and his small scale village production model, were seeking to escape from Britain’s colonial dominance of the dairy milk production sector and from the control of middlemen in the distribution of fresh milk.
The farmers sought the assistance of freedom fighter and Gandhian leader Sardar Patel, the right hand of Pandit Nehru, in India’s freedom struggle. Patel proposed a model of professional management of a union of local village co-operatives through which farmers control the procurement, production and marketing for the Mumbai Milk Scheme which the Maharashtra State Government managed at that time. This basic model remains in place for Amul, today.
The Amul brand itself, the shortened form for Anand Milk Union Ltd., was launched in 1957 by Verghese Kurien, a Syrian Christian from Kerala who had studied nuclear physics. Over the next few decades, Kurien’s model was exported to other Indian states, thereby creating a network of linked dairy development co-operatives that underpin the Indian dairy industry to date. Kurien visited Sri Lanka twice, with a view to introducing the Amul model for the Sri Lanka State-owned and often mismanaged Milco, but the vicissitudes of Sri Lanka’s convoluted politics thwarted his best efforts.
The President of the International Co-operative Alliance, Pauline Green has said on Amul: “In terms of a country rapidly coming out of poverty and with a growing middle class, that kind of structure is ideal because it has enormous trust and confidence within the subcontinent, and it has been supporting livelihoods of many small scale dairy farmers, for many, many decades.”
That model has also made it difficult for the big international food groups, the Nestlés, the Fonterras and the Anchors, that we Sri Lankans know so well, to gain a foothold in the Indian dairy market.
Sodhi, MD of the Gujarat Milk Marketing Cooperative, says: “Amul is a very reputed brand if you talk to India as a nation, all are State dairy cooperatives which have their own brands, all are number one in their states – and that is why still in India no private brand is able to emerge as a leader, because at national level Amul is there to compete and at State level, regional brands are there to compete.”
Powerful defence
Amul’s reliance on a diffuse network of milk procurement centers because poor Indian dairy farmers cannot afford to travel far to sell their milk, has also proved a powerful defence against foreign competitors.
Where most commercial dairy ventures might require big contracts with industrial scale dairy farms to increase margins in order to comply with shareholder demands, Amul’s suppliers can choose to sell their milk in whatever volume they can produce on that particular day. The Amul model allows the company more flexibility than any other international rival that may enter the Indian market may have.
With a multitude of small scale suppliers on which to call, even if on a given day, thousands of their suppliers may be unable to deliver, Amul would not struggle to meet consumer demand, as they have large number of other small scale suppliers.
Arvind Singhal, Head of Technopak, an Indian retail consultancy, points out: “This is an extremely efficient company when it comes to supply, their co-operative model gives them incredible options.”
The gurus of import substitution lament on the huge import bill for milk powder, which distorts our terms of trade and results in trade deficits, taken together with other imports. They say that in the case of the dairy products there is a possibility of a local milk production capacity potential which is unexploited.
In this context, I recall the words of a visiting expert, at a time when I was a young public servant. I was extolling to him the very great latent developmental potential in Sri Lanka, and his dry response was: “Yes young man, your country has a huge potential, I do not for a moment doubt that – but the problem is the way you people behave. I fear that it is destined to remain mere potential, forever!”
In South Asia’s rural villages small scale milk production units are an important economic activity. But if the micro level industry is to survive, producers must be able to control the process up to the point of sale to the consumer. Even in Britain today there is a huge dispute among dairy farmers and the big super market chains like Tesco, Sainsbury, Marks & Spencer and Waitrose, which are pushing down to the procurement price to a level that only large scale dairy operations will be viable.
Sri Lanka
During the time of the Janasaviya Trust Fund, (JTF) a poverty alleviation project funded by the Government of Sri Lanka, the World Bank, UNDP and Germany’s KFW, an attempt was made to introduce the Amul model to Sri Lanka.
The JTF worked through partner organisations funding, community projects, nutrition programs, micro credit and social mobilisation. One of the most successful partners was the Women’s Development Federation (WDF) of Hambantota and its Janashakthi Banks. Hambantota has an extensive dairy industry, which almost 100% is processed into curd and sold.
The cattle are not penned and allowed to forage. They are milked in the morning and return to the homestead to be milked in the evening, after a day’s foraging. Many are crop raiders – creeping into paddy fields and chenas, causing many disputes with farmers. The worst offenders have a long pole fixed to their neck on a rope collar – to prevent them creeping through fences.
A group of active office bearers, all women of the Janashakthi Banks, were selected and sent on a visit to Amul in Gujarat. The plan was to let them see the advantage of stall fed dairy cattle, and give them an idea of collection, delivery and marketing of fresh milk.
Amul at that time was experimenting with mini pasteurisation units at the community level, and packaging in tetra packs and marketing in the community and only selling the surplus milk out in bulk. The JTF and the WDF felt that if this model could be replicated at Hambantota if would have a positive effect on the viability of the local dairy industry and improve the nutrition of pregnant and lactating mothers and on infants and children.
The visit was a great success. The participants came back full of enthusiasm, they wanted micro loan to build stalls for their cattle and to start an enterprise with purchased, mini pasteurisation and tetra pack machines. Amul had promised technical assistance. They declared that the days of their cows foraging were over. They would stall feed them with nutritious feed and maximise the milk output. The JTF requested them to send a financing proposal.
One lady stayed back, after the others left and told the JTF executives: “Sir please don’t fund this, we don’t know how to treat our cattle. In Gujarat, if the buffalo cow and a child of the family both fall sick, they take care of the buffalo better. Here it will not work.”
Unfortunately or may be fortunately, depending on how you judge the lady’s comment, the Government changed and the JTF and WDF had to shelve the project. But this goes to show how much culture affects an entrepreneurial activity.
One more example shows the importance of a dairy culture. A planter friend of mine told me that when he was a young assistant superintendent (SD), he noticed that some hot water, a by-product of the factory, was going waste into a stream. The line rooms of the factory division were nearby, and he suggested to his superintendent (PD) that they divert the hot water to the line rooms, as he had seen mothers having to warm water over open fires to bathe small children. This was done.
One evening the PD said to the SD: “Let’s go and see how your brilliant idea of a hot water supply is working.” When they went to the factory division line rooms, the Kangany was bathing his cow with the hot water! He confessed to the irate PD that the cow gave much more milk, if she was bathed with hot water before milking!
Aravind Adiga of the Gaya District in Bihar, India, author of the novel ‘The White Tiger,’ which won the 2008 Man Booker prize, in his hero’s imaginary letter to Wen Jaibao, China’s Prime Minister, describes his family’s water buffalo, in these terms: “At the doorway of my house, you’ll see the most important member of my family. The water buffalo. She was the fattest thing in our family; this was true of every house in the village. All day long the women fed her fresh grass; feeding her was the main thing in their lives. All their hopes were concentrated in her fatness, sir. If she gave enough milk, the women could sell some of it and there might be a little more money at the end of the day. She was a glossy skinned creature, with a vein the size of a boy’s penis sticking out over her hairy snout, and long thick pearly spittle suspended from the edge of her mouth: she sat all day in her stupendous crap. She was the dictator of our house.”
These are the cultural challenges we face when trying to build a local dairy industry. It is good to have grand theories on import substitution, but a reality check is also needed. A mirage is ‘a hope or wish that you cannot make happen, because it is not realistic’.
(The writer is a lawyer, who has over 30 years experience as a CEO in both government and private sectors. He retired from the office of Secretary, Ministry of Finance and currently is the Managing Director of the Sri Lanka Business Development Centre.)
