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Fonterra Brands Lanka on massive expansion mode

27 January 2016 02:42 am - 0     - {{hitsCtrl.values.hits}}


  • Plans to open Rs.117mn farm in Pannala
  • Rs.380mn invested in last two years 
  • Three more farms and five chilling centres by 2017

The global dairy industry leader’s local subsidiary Fonterra Brands Sri Lanka will be opening a Rs.117 million demonstration and training farm in Pannala next month. “As we move forward, we see opportunities to increase our commitments here. We don’t want to just export our products here, but export our practices and expertise.

Sri Lanka is a very important market to us,” Fonterra Brands Sri Lanka Managing Director Leon Clement said. The facility is on a 20-acre land on a 25-year extendable lease. It will offer a 180-day training programme and train 2,000 farmers annually.

Fonterra Brands Sri Lanka Training and Partnerships Extension Head Mik Harford said that training would involve fodder management, advanced animal nutrition, animal welfare, milk quality management and farm business management.

“Sri Lankan farmers are innovative. If we show them a practice, they will adopt very fast,” Fonterra Brands Sri Lanka Operations Director Satish Karunakaran added.

He said that the farm would also provide facilities for academics to conduct research, would also offer to train interns and university students in a two-week programme.

Fonterra Brands is conducting a massive expansion programme. It already has five chilling centres in Sri Lanka to process milk from 7,000 farmers and two of the centres were opened last year.

Fonterra Brands Sri Lanka Local Dairy Development Programme Manager Saman Perera said that the company had invested Rs.380 million in Sri Lanka in the past two years, and would continue to do so, as it would open three other demonstration and training farms and five new chilling centres by 2017.

Karunakaran noted that the future projects might not be based on leases, as the company is seeking partnerships with government agencies to make projects even more successful.

“The government has intervened to create large dairy farms and help farmers. We also can help a lot towards that effort,” Perera added.

He added that the number of supply relationship officers, who advise all farmers supplying milk to the company, will be increased from the current 20 to 40 by 2017.

Fonterra Brands Sri Lanka is opening the factory after its pilot programme in 2013 resulted in a 42 percent increase in production and a 55 percent increase in income for the farmers who participated in it. The company has also set up a Rs.15 million grassroots fund, which has already been utilized to create water supplies, sanitation and other infrastructure in five dairy communities across the country.

Dairy demand outpaces local supply
Sri Lanka’s dairy consumption growth will continue to outpace the growth of domestic supply, leading to increased importation of milk powder, Fonterra Brands revealed.

This is despite economists and fast-moving consumer goods experts saying that consumer demand is likely to be sluggish this year.

“The demand for milk nutrition in Sri Lanka is growing by about 15-16 percent year-on-year, as more and more Sri Lankans have access to dairy nutrition,” Karunakaran said. Fonterra Brands Extension Manager Jagath Kankanamge noted that supply growth has been around 4-5 percent in contrast. “There are conflicting figures, but average is that there is a demand for around 741 million litres, while supply is just 258 million litres, which will increase to 358 million litres if buffalo milk is included,” 

Perera added.
He said that this would lead to Sri Lanka importing more milk powder to shore the gap in the short term.

A one kilogramme milk powder packet in Sri Lanka costs around Rs.975, as opposed to Rs.311 in the New Zealand dairy auction last week. This shows a need for action by Sri Lanka Customs and the Consumer Affairs Authority, who have in the past pointed fingers at each other for the shortcoming.

One kilogramme of powdered milk is equal to six litres of liquid milk and a litre of liquid milk is sold for Rs.200.

Perera said that liquid milk is more expensive than even imported milk powder because Sri Lanka has not achieved economies of scale and dairy companies like Fonterra Brands Sri Lanka have to pay farmers extra per litre to cover up for their lack of knowledge and expertise.

However, the current situation is likely to persist for a longer period. “With demand growth like that, even if the supply grows at the same rate, the gap remains constant. So closing the gap is a longer-term process,” Karunakaran said.

Perera added that Sri Lanka’s dairy cows produce an average of three to four litres daily, with cows in the hill country producing as much as 10 litres a day, and those across other parts of the country producing around two litres a day compared to the New Zealand cows, which produce 25 litres daily. The experts said that Sri Lanka’s supply growth could come through genetic enhancement and land management.

“We strongly believe that there is a lot of potential growth out there with the current genetic potential. 

There are lots of cows producing two to four litres, which have the ability to produce 10 plus litres with the right match up,” Harford said.

Kankanamge noted that feeding cows grass and other bushes before their flowers bloom could provide more nutrition, increasing the supply by one litre.
“There are lots of small things that can be done to increase supply,” he said.

Perera added that around 44 percent of Sri Lanka’s agriculture land is sparsely utilized, which could contribute greatly towards closing the gap.
He noted how there are commercial grass growers in other countries, while Sri Lankan dairy farmers spend four to five hours daily attempting to forage feed for their cows.

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