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​Dairy development
and dairy hubs

The demand for milk and other liquid dairy products is expected to increase by around 30% from 2010 to 2020, meeting the demands of a growing population. Tetra Pak® is committed to increase local milk production in developing countries by working together with small holder farmers and processors.

Turning a crisis into an increase
In 2008, the world faced a food crisis paradox. On the one hand, a limited supply of milk powder on global markets pressuring dairy processors and causing prices to double. On the other, substantial quantities of milk being produced by smallholder farmers in developing countries, but production was scattered and quality was mixed.

Pioneering in Pakistan
There had to be a way to link the two. With the idea of helping our customers to get access to more and better milk, the idea of the ‘dairy hub’ was born – a way of linking smallholder farmers to processors as a cost-effective alternative to building large commercial farms. Building on a concept first developed by Tetra Pak Egypt, Pakistan was the perfect place to try it out.

The third largest milk producer in the world, Pakistan has some 56 million cows and an annual milk production of around 37 billion litres. Dairy contributes 11 percent of GDP. Yet yield is typically low, quality varies, and opportunities to run a profitable dairy farming business are limited. At the time, only 3-5% of locally produced milk was being collected, processed and packaged.

So in June 2009, Engro Foods, in partnership with Tetra Pak Pakistan, set up the Kassowal community dairy hub as part of a ‘cow to consumer’ value chain approach. In 2012, a total of six dairy hubs are in operation in Pakistan in cooperation with Engro Foods, Nestlé Pakistan and Haleeb Foods. The latest dairy hub was set up by Engro Foundation with support of Tetra Pak in a model village where they have built homes for displaced flood affected farming families.

The Dairy Hub model builds on the one herd concept and typically covers 20 villages with maybe 800 – 1000 small holder farmers and up to 10,000 cows that work in close cooperation with dedicated dairy processors to create economies of scale which focus of feeding, animal health, training and breeding.

Among the benefits to local farmers are healthier animals, regular income and education. By introducing international best practice standards to milk production and handling, quality and quantity are increased, making public access to safe and affordable milk easier in local markets.

It’s a real life example of ‘agriculture-for-development’ in action. By improving smallholder farmers’ access to markets, subsistence livelihoods are boosted and skills enhanced – a key driver for achieving the Millennium Development Goal of reducing poverty by half by 2015.

The Bangladesh success story
Smallholder milk is a hidden resource in Bangladesh, yet to be fully utilised in the growing market for milk and dairy products. Milk produced by smallholder farmers could potentially replace milk powder imports. The introduction of dairy hubs is one way of reaching this goal. In an effort to increase the collection of locally produced milk for industrial processing, Tetra Pak and its sister company DeLaval joined forces to support PRAN Dairy Ltd, part of the PRAN-RFL Group food processing conglomerate, in expanding its collection network by setting up dairy hubs.

The first hub in Bangladesh opened in September 2010 in Chatmohar in Pabna district, and the second in September 2011 in Sirajgonj district. The plan is to establish many more in the coming years.

PRAN’s first dairy hub showed that their investment was justified and collection costs for each litre of milk have gone down. Intake of local milk has also increased. In the Chatmohar district it went up from 2,000 litres to 24,000 litres a day during the first 15 months, resulting in a more cost-efficient milk collection for PRAN. Benefits of increased milk production and expansion of cattle farming will go beyond PRAN and the whole country will be benefited. Cattle farming can help create more jobs in rural areas.

Farmers connected to the first hub increased their monthly incomes from an average 100 to 133 USD between October 2010 and January 2012. During the same period, milk yields increased from just under 6 to almost 8 litres per cow per day, compared to the average in Bangladesh of around 3.6 litres.

Scaling up
Experience in Pakistan and Bangladesh shows that strong partnerships and an integrated value chain approach can help turn a crisis into an increase – strengthening local production, improving livelihoods and boosting nutritional outcomes along the way. Moreover, by twinning this model with school feeding programmes, the societal benefits can be amplified.

We support export of the model to other countries and is leading outreach to potential donors for technical assistance to train dairy hub employees.

Other regions with significant milk production that would benefit from such an approach are East Africa, India and South America. A number of new dairy hub projects are under development in these regions.


View video where Ulla Holm, director of Tetra Pak’s Food for Development Office, explains about the Dairy Hubs programme​.