Overall assessment
Some concluding observations and remarks on dairy marketing policies and impacts
Dairy marketing policies in sub-Saharan Africa: Implications for further research
4.01 A major objective of the dairy development policies in most countries of sub-Saharan Africa appears to be the promotion of local dairying in order to satisfy the basic requirements for dairy products by the population and hence to curb dairy imports which tend to place a heavy burden on the already scarce foreign exchange reserves. Within this broad objective which emphasizes the improvement of nutritional standards are such implicit goals as:
(i) improvement of incomes of rural dairy producers, through the provision of an assured and remunerative outlet for their dairy products;(ii) creation of gainful employment in rural areas, since dairying at smallholder level tends to be labour intensive; and
(iii) such marketing policy objectives as stabilization of farm incomes and consumer prices, provision of convenient services at prices the consumers can afford, provision of hygienic (wholesome) dairy products (particularly to urban consumers) at reasonable prices, and to ensure, on social welfare grounds, the supply of milk to vulnerable groups at subsidized prices (- see paragraphs 3.27, 3.34, 3.40, 3.52, and 3.66 for a discussion of these policies and objectives on a country basis, and especially paragraphs 3.14 and 3.15 for a summary of the major objectives which are often associated with dairy marketing policies and the instruments (measures) available to achieve certain desirable objectives).
Basically, points (i) and (ii) above aim at promoting an equitable distribution of the national income and a higher standard of living in the rural areas by improving rural employment and incomes through enhanced dairy production and marketing.
4.02 The pricing problem appears to be at the core of dairy development and marketing improvement programmes. Prices determine the attractiveness of investment in dairying. Yet many developing countries appear to encourage dairy development and marketing along the lines which make modern dairy plants high-cost operations, and this tends to erode the potentially high prices that could be paid to producers given the fact that the government policy is to ensure that urban milk consumer prices do not exceed certain upper limits. In the face of all these problems, many governments in developing countries have found it easier to ban the sales of raw milk to urban consumers (thus attempting to eradicate the more competitive traditional marketing system) in order to protect supplies of milk to the modern dairy plants. However, this line of attack raises some important and fundamental questions, which are subject of policy analysis. For instance, does the ban on raw milk sales solve the milk marketing problems of developing countries, such as those of sub-Saharan Africa? What other options are there? Should the private/traditional marketing channel be free to compete along with or complement the activities of the official marketing channel, and under what conditions? Clearly, there is no universal and direct answer to this problem, since the answer will have to depend on conditions in different countries.
4.03 A major goal of most development-oriented policies should be to try and achieve improvements in both operational (technical) and economic (pricing) efficiency of both the production and marketing systems. This proposition does not, in any way, neglect the importance of other goals which may be associated with any development programme, especially in the area of dairy development. If there are any significant seasonal supply fluctuations and differences in product quality, then a price which does not reflect supply variations or give a premium for quality differences can hardly be expected to enhance investments in the industry. There is some evidence that milk producers are responsive to the levels of producer price, and the low levels of milk deliveries to modern dairy processing firms that pay a producer price that is fixed by the government are often blamed on the unrealistically low levels of such fixed producer prices (see Kakunze, 1983; Kaluba, 1983). Both Kakunze (1983) and Kaluba (1933) cite dramatic increases in the daily intakes of milk by the Bujumbura dairy plant in Burundi and the Dairy Produce Board of Zambia respectively when - the milk producer prices were adjusted upwards following several years of fixed prices.
4.04 Modern dairy plants have often viewed milk producers as suppliers of raw material, which should be supplied at prices as low as possible, and little meaningful contacts or interactions exist between the milk processors (modern dairy plants) and the milk producers. This kind of sentiment has often been voiced by the critics of the Kenya Cooperative Creameries Limited (KCC), the modern dairy processing and marketing organisation in Kenya. Such critics have been individual milk producers, politicians or observers. Apart from the need to consider ways and means of reducing costs, for instance through simpler dairy processing and packaging methods, and pay more to the producers for their milk, the dairy plants must actively involve producers and also be involved in the collection of milk in the rural areas. If possible, producer price differentials based on differences in quantities of milk delivered by a given client (i.e. quantity premiums) could be considered. Such quantity premiums would probably encourage large-group or cooperative participation in dairy marketing, and the move might even stimulate large-scale dairying.
4.05 Governments are often sensitive to the level of food prices, particularly for the urban poor. Therefore, governments often fix and maintain producer prices of the staple food commodities at certain levels in most cases in order to ensure that in turn urban consumer prices do not exceed certain upper limits, and governments may prefer large-scale parastatal enterprises precisely because it is easier to ensure their adherence to fixed prices than that of a multitude of small-scale private traders. Generally, it is understandable why governments tend to be sensitive to the level of food prices, particularly for the poor groups within urban dwellers. However, the urban poor may be unable to afford to buy dairy products even at low fixed consumer prices and the fixed price system may really favour better-off urban consumers at the expense of poor producers in particular and of economic development in general. This is because low consumer prices encourage domestic consumption while simultaneously discouraging domestic production. The consequence is that imports are sucked in and foreign exchange needed for investment programmes is diverted to finance current consumption. Rather than perpetually depress producer prices in order to ensure cheap milk supplies to the urban dwellers, such options as the variation of the quality of the products offered for sale, whereby prices charged are based on the quality of the products being sold to different consumers, could help achieve certain desirable objectives of marketing policies, for instance, ensuring the supply of milk to different sectors of the population. Once again, India offers a good example of a country where some progress has been made in this direction: the introduction of TONED (more expensive) and DOUBLE-TONED (less expensive) liquid milk in the country has made it possible to sell pasteurized milk to both high-income and low-income groups of consumers in the metropolitan areas of India. The model of dairy development in India has been relatively successful in achieving its major objectives over a relatively short period (about one decade), and it would appear worthwhile for the countries of sub-Saharan Africa to try and evaluate that model and assess if there are some aspects which could prove applicable to the development of the dairy industry in sub-Saharan Africa. In particular, the Indian dairy industry has been able to integrate milk petty traders (pedlars or hawkers) into the overall milk collection and distribution system, thus enhancing a complementary rather than competitive relationship among the marketing intermediaries in the dairy industry in the country. Introduction of cheaper marketing technologies such as mobile vending machines in India has also ensured that liquid milk- reaches consumers at reasonable prices.
4.06 This review has suggested that marketing policies will not only influence the functions undertaken in marketing but also the structure and performance of a marketing system. Even though the types of policy instruments used and their precise effects on the marketing system may be expected to vary between countries and regions, the following general observations appear to be pertinent to the situation regarding the impact of dairy marketing policies in sub-Saharan Africa:
(i) Many countries have a regulated dairy industry, whereby large-scale enterprises with modern dairy plants dominate the formal marketing channel. Such enterprises operate on government-fixed prices. Despite the fact that such firms are given a monopoly they often face illegal competition from private traders, and they usually cannot compete with such traders for raw milk supplies - private traders often offer higher prices to producers. Therefore, governments have in most cases not succeeded in providing higher and more stable prices to producers; the stable prices have been achieved at the expense of plant capacity utilisation, since the dairy plants have been unable to attract raw milk supplies at the government-fixed producer prices.(ii) Governments have in some cases succeeded in ensuring reliable urban milk supplies at low consumer prices at the expense of offering remunerative producer prices. Depressed producer prices are probably responsible for low levels of local milk production in many countries, even though firm evidence of this is scanty. The maintenance of milk supply levels to urban consumers has often been achieved through dairy imports.
(iii) Most countries cannot strictly enforce hygiene and quality standards for dairy products, since most of the internal trade in dairy products occurs in informal channels, where rules and regulations are rarely observed. However, in most cases, governments have been able to ensure proper hygiene and quality standards for those products that flow through large-scale marketing enterprises,
(iv) One could argue that the large-scale marketing enterprises have often provided convenient services to consumers of dairy products, for instance by presenting the products in attractive packages; but these enterprises often incur high costs, which often are borne by producers who have to settle for low prices.
(v) There is little evidence that many governments have succeeded in ensuring a reasonable degree of access to dairy product? to vulnerable groups of the population, who often are the ones with least purchasing power. Perhaps an exception to this would be the Government of Kenya which has mounted a school milk-feeding scheme for primary school children since May 1979, although little is yet known of the nutritional impact of the programme.
4.07 Given the above observations, it is evident that the setting-up of rnonopsonistic and/or monopolistic marketing organisations may have achieved improvements in product hygiene and quality but not economies of scale. The enforcement of licensing and inspection of competing firms or traders in most cases has tended to favour and protect the few already established firms or traders in the industry, at the expense of encouraging market competition and the expected improvements in marketing efficiency.
4.08 This review of dairy marketing in individual countries has clearly indicated that hardly any detailed dairy marketing studies have been undertaken in sub-Saharan Africa. Alternative dairy marketing systems will most likely differ in their efficacy in terms of achieving alternative objectives of dairy marketing policies, yet little is known about the merits and demerits of alternative dairy marketing systems in sub-Saharan Africa. Nevertheless, many dairy development projects in the region in the past have been launched prior to detailed evaluations of the types of marketing systems which would best handle the marketable surplus of dairy products which would accrue to such projects. Such projects have usually been accompanied by the establishment of government marketing organisations that have been given responsibility over collection, processing and marketing of dairy products. In some countries, such government marketing organisations have also been given responsibility for handling factors of production, such as animal feedstuffs, over and above their other responsibilities. The setting-up of government marketing organisations has usually been regarded as the best means of ensuring that the interests of both producers and consumers will be safeguarded, even though the performance of parastatal organisations in most cases does not appear to support this view.
4.09 The above expositions support the proposition that the types of dairy marketing systems that sub-Saharan African governments should adopt is and will continue to be an important policy issue. The review also indicates that there is a need to undertake dairy marketing studies in some individual countries of sub-Saharan Africa in order to determine the relative efficiency of alternative dairy marketing systems in terms of their contribution to the attainment of the desired objectives of dairy marketing policies. Even though there is some evidence that the private marketing organisations do often offer stiff competition to government marketing organisations in the procurement of raw milk supplies by offering higher prices to producers, the fact remains that not much is known about the operating costs and efficiency of either the private dairy marketing systems relative to the ones that are owned by the government or the small-scale enterprises relative to large-scale ones. ILCA is already involved in field research on dairy production in Ethiopia and, to a lesser extent, in Nigeria, and has been involved in modelling work relative to the choice of dairy or beef production in Botswana. The work in Ethiopia has already involved some preliminary studies of dairy marketing, but there is a need to undertake more comprehensive and detailed dairy marketing studies both in Ethiopia and other countries, on a case study basis, in order to generate details which would be useful to decision-makers as an aid when deciding on what types of dairy marketing systems to establish to accompany dairy development projects under different sets of circumstances or conditions.
4.10 Ideally, the study of dairy marketing systems should focus on the marketing structures and evaluate them in terms of their contribution to marketing efficiency. The relative efficiency of different marketing systems can be examined and evaluated in terms of various criteria, which may include:
(i) reliability and stability of the services offered to consumers;(ii) level of marketing costs;
(iii) convenience and responsiveness to consumer demand;
(iv) contribution to the improvement of producers' incomes; and
(v) contribution to the attainment of certain (specified or stated) goals of the marketing policies.
The study should also aim at analysing the relative suitability of different marketing systems for different sets of circumstances.
4.11 When considering differences in marketing systems, the following are some of the important factors which should be considered:
(i) the types of organisations involved in marketing (individuals, cooperatives, commercial companies, parastatals etc.);(ii) the services provided by different organisations in marketing (e.g. credit; production support systems; extension; collection; processing; delivery at wholesale or retail outlets, or door steps etc.);
(iii) single-product (e.g. raw. milk) versus multiple-product (e.g. milk, butter and cheese) marketing systems; competitive versus monopolistic and/or monopsonistic marketing environment etc.
4.12 The terms "marketing systems" and structures" have generally been used in this paper to refer to the network of competitive and complementary marketing chains or channels between producers (at farm-gate) and ultimate consumers, the main focus being on the various types of intermediaries who are involved in executing marketing functions. The paper has laid emphasis on the analysis of marketing systems, but a comprehensive marketing study would, ideally, not only focus on the analysis of marketing systems but also on supply, demand and price analyses. Prices and the conditions of supply and demand influence the overall performance of a marketing system, and an analysis of supply, demand and prices, including their outlook (future developments), should constitute an important aspect of research in marketing.
