A growing number of quality conscious people are propelling a growth of 10-15 percent annually in Pakistan's milk processing industry and hence in the years ahead this vital sector has a bright future.
"The government support and a healthy regulatory environment, such as minimum pasteurisation law, would facilitate investment in the sector," observed Pakistan Dairy Association (PDA) Chairman and Haleeb Foods Chief Executive Officer (CEO) Faisal Imran Hussain Malik while talking to Business Recorder here on Friday about potential of Pakistan's dairy sector and turnaround of his company.
Faisal Malik said that the implementation of regulatory framework, that covers the entire dairy value chain and proving beneficial to all stakeholders, and providing level playing field to all can prove a game changer for the dairy sector of Pakistan.
"Milk production in Pakistan is huge and it is on the rise, making us the third largest country in the global market in terms of tradable milk. Loose milk is the most consumed form in Pakistan (about 95 percent of total consumption). However, with the support of media and promotional campaigns by packaged milk companies, consumers are becoming aware of benefits of the packaged UHT milk.
"Packaged milk is safe and pure compared to unhealthy loose milk, which is not tested for quality. Therefore, the consumption of packaged milk has increased over the last few years," he added.
According to him, a major challenge faced by the industry is procurement of quality milk at an affordable price. Packaging cost that constitutes approximately 35 percent of the total cost of the product also increases each year. Power and gas outages pose another challenge to the industry.
"Regulatory agencies around the world, such as the Centers for Disease Control and Prevention (CDC) and the Food and Drug Administration (FDA) in the United States, say that pathogens from raw milk, including potentially tuberculosis, diphtheria, typhoid and streptococcal infections, make it unsafe to consume," he pointed out. "The government must extend its support to the milk processing industry to produce and promote the packaged UHT milk at wider scale for safer, hygienic milk distribution countrywide at affordable price."
Faisal Imran is Managing Director and Chief Executive Officer in Haleeb Foods since July 2012. His arrival in the company when it was on the verge of bankruptcy; however, the new management set the company on a new path with a new vision and strategy. Its focus on operations brought about a turnaround and transformed the company from significant losses to healthy profits in just under a month, and since then the company has not looked back.
The company has gained recognition within the industry and holds a significant market share in the country within its chosen categories. Today, it sells more than a billion packs annually, an increase of over 100 percent in the last three years, beating the industry growth by significant margin and making it one of the top 30 customers in more than 160 countries where Tetra Pack operates.
On the challenges faced by the dairy sector, Faisal said lack of regulation was the biggest challenge they face today. He said only five percent of the milk produced in Pakistan adhere to the regulations set under the federal pure food rules and Pakistan Standards and Quality Control Authority.
"The rest is unprocessed," he said, adding "and is loose milk, and thus does not comply with any requirement and quality standards, and the informal sector gets away with it. Therefore, it is not a level-playing field. The organised dairy processing industry on the other hand conducts several tests and has quality assurance mechanisms in place. On the national level, deteriorating law and order situation, political instability and energy crisis makes it difficult to do business in the country. This results in the flight of capital, since capital shies away from instability," he added.
According to him, milk production in Pakistan is dominated by smallholders. More than 8.5 million families raise cattle and buffaloes and a vast majority (83 percent) of them has less than six animals (all ages) per household. Many of these smallholders are subsistence farmers and thus do not proactively seek to improve the productivity of their animals. Demand of dairy industry for raw milk is increasing annually. This demand, however, cannot be met by just emphasising improved milk production from smallholder dairy farmers. Hence, the role of corporate dairy farms is very important.
"The success of these corporate farms will depend upon the professional competence of the farm management; success of these large dairy farms will also be directly correlated to the degree of mechanisation at the farm, particularly in machine milking, fodder cutting and silage making," he said.
However, he pointed out, the dairy industry will have to bear higher prices to acquire better quality milk in sizeable quantity from a single source from these corporate dairy farms. "Hence, dairy companies maintain a mix between corporate dairy suppliers and direct milk collection muscle for a healthy balance of quality and quantity at reasonable cost," he said.
Talking about his vision, the PDA Chairman said the first thing that was immediately noticeable is the fact that nearly all of the industry is informal and vastly under-utilised, which can be reversed if it is formalised and regulated. "This is the overwhelming challenge that we face in the current market scenario. An inexcusable 95 percent of our dairy produce is consumed by private households through informal milk sellers. Hence, the government loses revenue in form of taxes and there is no standardisation of milk and the industry lack check-and-balances. On top of this, nearly 20 percent of our milk production is wasted on a daily basis, which is far too high for the world's third largest dairy producer," he said.
According to him, a lack of efficiency in processes involved in milk production and the failure to adopt best modern farming and livestock practices leads to failure of the dairy sector to address demands. For instance, high cost of the primitive production methodologies being used are affecting the price of milk negatively, while the lack of legal controls to stop contamination or adulteration are leading to substandard quality and illegal profiteering. In this scenario, our goal should be to enhance the Association's co-ordination with main stakeholders of the industry and government regulatory bodies so that they can collectively work towards the continued growth and betterment of our sector. In addition, the Association must work closely with provincial and federal investment boards to mobilise foreign and local investment for the dairy sector.
"As prevalent in other developing countries, vegetable fat dairy should also be accepted if it is being sold under the name of dairy liquid and not milk. We need to review our policy regarding import of exotic semen for breed improvement, as there is a dire need to draft a policy for it and to be made part of the Animal Breeding Act.
"Also, the farmers should be sensitised and trained on how and when to vaccinate their animals, which is very important for an animal health. There should be vaccine record card for this purpose. Moreover, dairy processing industry has a very serious issue of Sales Tax refund claims, which are not being refunded to the industry, resulting in cash flow problems," he said.
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