1. Introduction
2. The market
3. Group organisational considerations
4. Strategies
Geofrey Burrel,
TECHNOSERVE, Arusha Tanzania
Abstract
The paper presents a summary of some observations and some of the lessons learnt from TechnoServe's experiences in small scale milk processing and marketing in Tanzania. Observations are made regarding the current market situation in the country, organisational aspects with particular reference to cooperatives and some development strategies for small scale processing.
TechnoServe is an NGO that focuses on the provision of management services and training for community based enterprises. An office was opened in Arusha, Tanzania in May 1991 and activities in small scale milk processing have been located in Arusha, Kilimanjaro and Tanga Regions.
TechnoServe's work is normally restricted to assisting groups rather than individuals. We have worked with several groups of farmers either in informal groups or cooperatives who have developed small milk collection and marketing enterprises. In most cases this involves the collection and marketing of raw milk but has also included two small scale processing enterprises producing cultured milk. Small scale cultured (mala) milk enterprises have been introduced to Nronga Women's Cooperative in Kilimanjaro Region and to Tanga Dairy Cooperative Union.
The observations presented below are based on our experiences in Tanzania and inevitably there are and will be exceptions to the generalisations that are presented.
2.1 Understanding of the market and the marketing process and function in Tanzania is generally poor. With the exception of a few examples such as Coke and Pepsi marketing is neglected and not actively pursued. This situation applies particularly to the milk industry. Small scale producers have tended to regard the distributor as profiteering middlemen rather than partners in the marketing process.
2.2 Tanzanian consumers are relatively poor and the relative price of milk compared to incomes and purchasing power is low. Consumers therefore tend to place greater weight on price considerations than on quality and most are not prepared (or able) to pay extra for higher quality or more healthy milk. The market for processed milk is therefore relatively small in the context of national consumption catering for the small proportion of the population that is prepared to pay extra for quality.
2.3 The regulations governing milk marketing are not generally enforced and as a result a very high proportion of milk is marketed raw with no attempt at preservation or consideration for health concerns. Much of it is adulterated.
2.4 While the majority of milk in the country appears to be sold to neighbours there comes a point when a local surplus of milk develops and this suppresses prices and farmers have difficulties in disposing of milk. This is the only reason for starting processing or marketing activities. The objective is to be able to take the milk (and milk products) from the surplus areas to market in deficit areas where the price is sufficiently high that it can cover transport costs. This may only be a collection and transportation operation such as has happened in Tanga where the sale of raw milk in Dar es Salaam has resulted in significantly higher prices for farmers in the Region.
We see this situation developing, for instance, in Kilimanjaro Region where there are indications that a local surplus is suppressing prices and making marketing more difficult for small holders. If a surplus can be shown to exist the solution may be to process the surplus so that it can be marketed in Dar es Salaam.
It needs to be noted however that a formalised marketing system is usually the market of last resort because of higher overhead costs and more difficult delivery and payment procedures.
We should take care in describing surplus and deficit situations since the market is relatively free it is often only a potential surplus or deficit at a particular price. The Dar es Salaam market provides the reference price for milk in Tanzania.
2.5 A simple small scale processing operation that packages milk and distributes it can be expected to roughly doubles the value of the milk. Packaging provides an assurance that the milk has not been adulterated.
2.6 European type of milk products such as cheese and yoghurt are not traditionally eaten in Tanzania. As a source of protein cheese costs roughly three times the price of an alternative piece of meat. The market is therefore small and generally confined to the expatriate community and the tourist trade. Quality has to be of consistently high which is difficult to achieve in small scale operations. Traditional milk type products such as cultured milk enjoy a much larger market and tend to be far less complex to manufacture.
3.1 Milk marketing tends to depend on the aggregation (or bulking) of milk from a number of farmers to create a quantity that is economical to transport and process. Often this function is carried out by farmers groups or cooperatives. Some sort of legal registration of these groups becomes necessary to handle financial and administrative matters.
3.2 Contrary to many perceptions we have found that cooperatives can be successful in Tanzania. The situation has improved with the new Cooperative Act of 1991.
3.3 If new cooperatives, or indeed any farmers organisation, are to succeed and be sustainable we have found that in most cases long term business and management training is essential and must be coupled with strong and committed leadership and participant cohesion. Training needs to first focus on basic financial management and controls. The cooperatives department is not well equipped to provide this input.
3.4 A culture needs to be engendered where the cooperative is seen primarily as a private sector business entity and not as a service organisation catering for social and community needs as has been the tendency in the past. The formation and operation of a cooperative has to be based on business and financial criteria if it is going to succeed and be sustained.
3.5 In general cooperatives have been more successful at operating milk collection systems and providing some services to farmers while they have proved less successful at the distribution and marketing function. We have found that distribution is generally better handled by individual wholesalers and middlemen.
4.1 Too often we have seen milk marketing and processing efforts have been initiated because there is a local surplus of milk and then come to a halt because the market has not been considered. A near by town that already has an adequate arid competitively priced supply of milk is not necessarily a suitable market just by virtue of having a large population. The identification of a market has to be one of the first considerations when developing milk marketing enterprises.
4.2 Formal processing and marketing operations will only succeed where they are used to move milk from a surplus area to a deficit area where prices are significantly higher. This is because the market for processed milk is relatively small and on the local level the processor is competing with informal operators with normally much lower overheads and cost structures.
4.3 Transport is potentially such a high proportion of marketing costs that it is essential that sufficient milk be collected to form an economical load, the size of which tends to become larger as distances increase.
4.4 We have found it is important that small scale processors learn the basics of the business first before attempting complex technologies and systems. A sequence of development might be to start with the collection and transport of fresh and naturally soured milk. This can then be followed with the installation of a cooler or simple processing of cultured milk. Pasteurisation of fresh milk should come later because of the higher capital costs in maintaining a cold chain and then finally the preparation of more complex and higher value products such as cheeses.
4.5 The effect and reaction to price changes can be more complex than is often anticipated. The short term response to a processor raising prices in the expectation that more milk will be diverted from the informal market can be very small because the processor or formal market very often merely acts as the "price setter" and the informal market with cheap overheads then only adjusts or raise prices to the same relative levels. By the same token if the processor is able to raise prices the impact is felt by all farmers in the area. Information about the milk price in Dar es Salaam is not readily available in upcountry areas and it would be helpful if it were published regularly in the press.
4.6 We have concerns about the widespread use of imported equipment from Europe, some of it very cheap second hand equipment such as coolers, designed for European conditions and environments. Maintenance becomes a problem particularly with second hand equipment and much of which is not designed to handle the electricity problems experienced in Tanzania. Equipment designed to handle bulk milk for large scale European producers is not always suitable for collecting smallholder milk where a few individuals with poor quality can ruin a sample produced by many hundred producers.
We would like to encourage, for instance, the reintroduction of water bath coolers where milk is kept in cans in a water bath with an ice bank. Such equipment was common 40 years ago. With a sufficiently large ice bank prolonged power cuts can be withstood. This eliminating the need for backup generators and limits losses due to bad milk samples to the can in which they are contained. We think these consideration would compensate for the reduced cooling efficiency. Robust and simple cooling equipment that is easily maintained in Tanzania should be selected.
4.7 We would like to encourage the further investigation into small scale milk pasteurisation in plastic bags initiated by SUA some years ago. We believe the technique would potentially offer significant advantages to the smaller milk processors.
DISCUSSION
Q. Prof. Kurwijila
You mentioned that before we can encourage processing we have to consider the market demand. Can the same be said of promotion of milk production?
Response: Burrel
Yes, demand is important. As soon as you start producing above domestic demand one has to think about demand.
Q. Dr. Gary Mullins
Dar es Salaam is considered to be the ultimate market, but if the infrastructure deteriorates then what does that imply for the dairy sector development?
Response:
It certainly means problems and the probable solution is to go back to peri-urban and perhaps urban production systems.
Q. Jorgen Henriksen
What kind of information are you talking about when you say that more market information is needed?
Response:
All kinds of information on market demand for various products in different markets, urban centres, price fluctuations, seasonal variation in consumption. This information could be provided by a department in the Ministry of Agriculture.
