The business in packaged milk
What you need to know:
- One business opportunity is in milk ATM, which is easy to start and operate.
- Advances in processing and packaging technologies have improved the quality, safety and shelf-life of milk.
Packaged milk is not very popular with consumers, particularly because of its high cost as compared to raw produce or that sold through vending machines.
However, there are many factors that now favour packaged milk enhancing its competitiveness in the market.
These include the limitation and opportunities of the automatic milk dispensing machine, expanded market, availability of processing capacity and advances in packaging technology.
Limitations of the automatic milk dispensing machines
The milk vending machines popularly known as ATMs are an innovation that raised consumer confidence in produce that is not packaged.
The milk is popular because of its low price (about half that of packaged milk), constant availability, traceability and absence of odour found in some forms of packaged milk.
Other motivations include the fact that the milk is homogenised (thus fat globules are evenly distributed) and
it is pasteurised. The heat treatment reduces the level of micro-organisms that cause diseases and spoilage to acceptable levels, thus converting the raw milk to a ready-to-take drink. Further, milk ATM business is easy to start and operate hence attracting a wide range of investors that include retail shops, farms, cooperative societies, self-help groups, supermarkets and milk bars. Certainly, the milk ATM is a game changer in milk marketing. However, recent studies have shown that in future, consumer might shift to packaged milk.
One study that explored the consumer perception of produce sold through ATMs showed that the general consumer imagination is that such milk is safer than raw and is as safe as that which is packaged. However, field observations on the same issue displayed evidence of intentional non-compliant behaviour that exposes consumers to serious health hazards.
This include sale of raw milk contrary to the regulatory requirement of pasteurised produce. Contributing factors to this scenario include the high cost of servicing the ATMs, coupled with costly licensing fees (58.4 per cent and 24 per cent respectively of the operating costs) and negligence.
Irregular electricity supply contributes to inadequate milk cooling enhancing its spoilage. The research thus concluded that the ATM milk retailing does not guarantee quality and safety to consumers. It is thus recommended that the milk is boiled to enhance safety.
Adulteration of milk with chemicals, water and other ingredients has also been identified as a malpractice in the trade especially when the milk is not sold. Instead, it is stored and dispensed from aluminum milk cans that are placed inside an ATM to improve consumer confidence. These safety and quality regulation concerns are endearing the consumer to packaged milk.
Another issue with the ATMs is that the technology is projected to grow at a steady rate and could hit a saturation point sooner. The growth curve of the business that started in 2005 will thus flatten, making it unable to handle increased milk whose production is projected to surge from the 5.2 billion litres in 2019 to 12 billion litres per annum by 2030.
Although homogenisation has been a plus for the ATMs, consumer preference is changing to fat-free milk (skimmed), or standardised milk with known quantities of fat.
Importation of ATM machines is falling and they are being replaced by locally fabricated ones with some imported components. Concerns around the locally assembled machines include their compliance with food safety specifications, calibration accuracy, automation and flow sensors and monitors of required parameters such as temperature. This raises fears especially when regulatory gaps such as in licensing have been observed.
For example, the 2019 study that examined ATMs in highly populated areas of Nairobi, Kiambu, Nakuru, Kajiado, Machakos and Uasin Gishu found out of the 162 sampled, 24 per cent of them had not been registered by the Kenya Dairy Board (KDB), the regulatory agent.
It is projected that ATMs will have a countrywide distribution thus the marketing infrastructure that has the premises, personnel and cooling equipment should be taken advantage of to sell packaged milk as well. However, ATMs’ milk competitive prices will always prevail as long as the consumer is assured of its quality and safety.
County governments in high dairy potential areas have in the recent past promoted dairy through artificial insemination (AI) and milk preservation through distribution of coolers to organised farmer groups.
By 2019, over 500 coolers had been issued out. AI leads to increased milk production through improved breeds while coolers reduce post-harvest spoilage.
The involvement of county governments is made easy by the presence of regulations such the 2013 National Dairy Development Policy that aims at promoting milk processing and exportation, among many other intentions. Other policy incentives include tax rebates on new investments such as zero-rating of milk processing inputs and making it illegal to hawk raw milk.
Although at times there is influx of milk from neighbouring countries like Uganda, the competitiveness of Kenya’s dairy sector is superior in the region. For example, a 2019 annual milk production report gave production figures of 5.2 billion litres (Kenya), 2.2 billion (Uganda), 2.5 billion (Tanzania) and 4.6 billion (Sudan). Milk packaging increases its shelf-life hence expansion of the export market. The regional integration and cross-border trade among the seven East Africa Community member countries, therefore, offers a good outlet for packaged milk.
Milk processing experienced a drawback in 1990s when the publicly owned Kenya Cooperative Creameries (KCC) collapsed. However, this attracted the private sector into the industry. In 2019, there were 29 licensed milk processors and 67 dairies with a processing capacity of 3.75 million litres per day, which is approximately 46 per cent of the capacity that was there in 2018.
Advances in processing and packaging technologies
In the recent past, advances in milk processing and packaging technologies have improved the quality, safety and shelf-life of fluid milk, thus making packaged milk affordable to the consumer. The innovations are in separation, standardisation of milk fat, pasteurisation, homogenisation and packaging. For example, the current centrifugation equipment for separation of milk constituents has the ability to self-clean of any dirt and sludge with minimal loss of milk.
Standardisation involves online rapid analysis of milk fat with automated feedback adjustments so that the fat content is maintained at the desired levels, plate pasteurisation has led to 94 per cent recovery of heat thus saving on energy cost and environmental pollution which comes about with energy production and milk pasteurisation machines can now produce as much as 200,000 litres per hour. Over the years, milk packaging has shifted from cans to glass and plastic bottles, to paperboard coated with polyethylene and to the milk pouch now common in the market.