Reaping the rewards of supporting dairy farmers

T here’s a Polish proverb that goes: “If the farmer is poor, then so is the whole country”. It’s a problem that Tetra Pak is highly aware of – it recognizes the link and knows that for it to succeed and grow, it needs the markets in which it operates, to do the same.
Indeed, the food packaging company has always had a tradition of supporting sustainable development, says Ulla Holm, director of Tetra Laval Food for Development unit . With Food for Development’s Dairy Hub concept, operated through both Tetra Pak and its sister company DeLaval, this support is taken to a whole new level.
The idea stems from Tetra Pak’s role in pioneering national school milk programmes, setting up the very first school milk programme in Mexico as far back as 1962.
“Even in the 1960s our founder realized that helping our customers would lead to a profitable dairy industry which would ultimately benefit our business. Support for the dairy industry value chain is in our DNA,” Holm maintains.
Holm’s Food for Development unit, set up in 2000, was intended initially to develop a more systematic approach to advising governments on instigating national school milk programmes. It now goes further, examining the entire milk value chain to ensure that locally-sourced milk from small holder farmers is used and does not go to waste. “It’s about creating demand for locally produced, sustainable milk,” explains Holm.
“It’s a long term business development to create sustainability,” says Holm. “Good solutions for markets, good solutions for business. It’s good too to connect with communities. You need to build a sustainable milk value chain in order to build a base for sustainable future development.”
In many developing countries, smallholder dairy farmers find it difficult to collect, cool and transport their milk, particularly twice a day, so a lot of milk goes to waste.
“Milk has to be cooled very quickly after its been collected. At least within 4 hours and often farmers don’t have this facility,” explains Holm. And while cows have to be milked twice a day, many smallholders can only go to market once a day, so there’s that milk to potentially capture too.
An informal milk value chain where farmers sell milk directly to middle men who often dilute the milk to make it go further and also add chemicals to make it last longer, also presents an issue. “This opens up room for all kinds of health safety issues,” says Holm. “As a conequence, in many developing markets, milk is always boiled prior to use which means losing vital vitamins in the process.”
The creation of the hub was driven by the food crisis of 2008 when the world price of milk powder doubled. Developing markets found this time particularly hard and forced Tetra Pak to think of a new solution. “In developing markets, 80-90% of locally produced milk is through smallholder farmers, but there’s not really been the infrastructure to ensure a real process for collection,” says Holm.
The Dairy Hub concept requires Tetra Pak to work very closely with its customers, the dairy processing companies, as the concept is based on linking farmers in a specific area – covering a certain number of villages, smallholder farmers and cows – to a dedicated dairy processor. They then select an area, usually consisting of around 15-20 villages – home to around 10,000 cows. The processor sets up milk collection stations with cooling tanks where farmers deliver milk twice a day.
An advice centre is also set up which helps to train farmers in feeding techniques and hygiene. Tetra Pak, through Tetra Laval Food for Development Office, has been involved in setting up the training methodology and as a result of this training, farmers have seen the production of their cows double. “The focus of the training is about increasing the quantity of the local milk, as well improving its quality,” says Holm.
Farmers benefit from the transfer of knowledge and expertise – which leads to healthier animals and increased productivity and profit – as well as access to proper infrastructure and guaranteed twice-daily milk collections all year round. Processors are able to tap into a reliable supply of locally produced, high-quality milk and gain better control over the supply chain. And at the same time, public access to safe and affordable milk is increased.
Holm explains that the hub is about helping local entrepreneurs to grow a more commercial model. “It’s a way of growing the market as a whole,” she says. Adding, “It’s about moving these smallholder farmers to a more formal value chain and the Dairy Hub does just that – linking small producers to the formal chain.”
It also means that there’s a sustainable milk supply for the dairy processor which is a lot more economic than them investing in a large farm. By setting up a hub, processors give themselves the advantage of better control over the supply chain.
An important part to the success of a hub is building trust between partners. “The farmers are used to selling directly or to potentially unreliable middlemen, so the need for trust is vital. Once this is established, the farmer can concentrate purely on the hub and the quality of his milk,” says Holm.
Another vital element of the hub is data collection. In Bangladesh, statistics show that the collection costs of milk have reduced per litre over time and the production levels of the cows have increased.
The first dairy hub activities were set up in 2008 as a small pilot in Bangladesh with just 400 cows. “Over a short period of time, production doubled,” smiles Holm. In Bangladesh today, there are three hubs up and running involving several thousands of smallholder farmers. There are also hubs in Nicaragua, Sri Lanka, Kenya and Senegal. “We also see a huge potential in Asia, Pakistan, India and sub-Saharan Africa”, maintains Holm.
Other companies, in other sectors, are also now looking at this hub model. As Holm points out, if it works for dairy farmers it could work for other crops too, such as the fruit value chain.
Holm says there is lots of interest from customers, development agencies and governments. “The hub model represents a way of securing local business development which also helps create a sustainable food development chain.”
She believes that the initiative addresses many of the recently announced Sustainable Development Goals and that more public-private partnerships can help scale up these kinds of hubs. “Working together we can do so much more,” she insists.