Dairy aggregation and storage
Dairy aggregation and storage
Business Model Description
Operate a distribution service to collect milk from smallholder farmers and offer cold storage and wholesale to processing facilities.
Expected Impact
Improve food security and nutritional situation especially for children by avoiding dairy product losses.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Uganda: Karamoja
Sector Classification
Food and Beverage
Development need
70% of Ugandans are employed in agriculture (IX), and the sector constitutes approximately a quarter of gross domestic product (GDP) and a large proportion of exports (III). The agriculture sector is marred by low levels of productivity and output, mainly caused by poor agricultural practices as well as the impacts of climate change.(VII)
Policy priority
The government supports the development of the agriculture sector, emphasising agro-industrialisation in the Third National Development Plan 2020/21 – 2024/25.(IV) The Vision 2040 recognises agriculture as one of the key pillars for the country's development and acknowledges the need for innovation and integration of the sector.(X)
Investment opportunities introduction
Approximately 80% of Uganda's land is arable, however only 35% is currently being cultivated. Agricultural development is predicted to contribute to domestic wealth creation and increased employment.(IV)
Key bottlenecks introduction
The Agriculture Sector Strategic Plan 2015/16 - 2019/20 provides a detailed analysis of opportunities and challenges in agriculture, emphasising agro-processing, innovation, improvement of skills and establishment of market linkages, which will help transform the sector towards industrialisation and higher value adding.(IV)
Agricultural Products
Pipeline Opportunity
Dairy aggregation and storage
Operate a distribution service to collect milk from smallholder farmers and offer cold storage and wholesale to processing facilities.
Business Case
Market Size and Environment
Of 6.9 million liters of milk produced daily, rural centers have capacity of only 1.7 million liters
Uganda has average daily milk production of 6.9 million liters, but rural collection centers have capacity of only 1.7 million liters.(1)
The value of marketed milk has increased by 5%, from USD 716 million in 2015 to USD 752 million in 2017-18.(1)
Indicative Return
15% - 20%
The estimated return rate for investors is 17.8% - 21.8%. This rate is a benchmark calculated as a cost of equity with a country risk premium, reflecting an average return required by investors active in the subsector.(20)
Investment Timeframe
Short Term (0–5 years)
Assuming a factory that can process 50,000 liters of milk daily, the estimated investment timeframe is less than 5 years.(16)
Market Risks & Scale Obstacles
Market - infrastructure challenges
Impact Case
Sustainable Development Need
In Uganda, 29% of children under 5 are stunted (2), and 41% of Ugandans suffer from insufficient intake of dietary energy.(3)
Including or increasing milk consumption among children can positively reduce malnutrition, especially because milk can provide up to 25% - 33% of the protein needed every day and positively contribute to weight gain and growth of malnourished children.(4)
Inadequate storage and cargo space are among key challenges to maintain the quality and shelf-life of milk, contributing to food insecurity and food losses.
COVID-19 contributed to increased food insecurity due to lockdown in Uganda (16), exacerbating issues of insufficient collection and cooling storage capacity, which in turn lead to high milk losses (17).
Gender & Marginalisation
Children with nutritional challenges negatively impact on opportunities for female household members.
Expected Development Outcome
Improved food security, decreased food losses, decreased malnutrition levels
Alleviated poverty levels due to higher demand for milk
Improved sustainability of the dairy industry, supporting smallholder farmers
Gender & Marginalisation
Particularly beneficial for women from better nutrition levels for children
Primary SDGs addressed
2.1.2 Prevalence of moderate or severe food insecurity in the population, based on the Food Insecurity Experience Scale (FIES)
2.3.2 Average income of small-scale food producers, by sex and indigenous status
2.4.1 Proportion of agricultural area under productive and sustainable agriculture
12.2.1 Material footprint, material footprint per capita, and material footprint per GDP
12.3.1 (a) Food loss index and (b) food waste index
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Corporates
Indirectly impacted stakeholders
People
Planet
Corporates
Outcome Risks
Pollution due to transport, water pollution (22)
Contribution to climate change due to greenhouse gas emissions (5)
Additional costs imposed by service providers if a storage facility is not owned by the farmers (23)
Impact Classification
What
Improved logistics between agricultural producers and silos/processing facilities to reduce milk losses
Who
Smallholder farmers, who do not have capacity to properly store or process their dairy and milk products on their own
Risk
This solution has already been implemented in some regions of Uganda, raising the risk of competition when upscaling the business.
Impact Thesis
Improve food security and nutritional situation especially for children by avoiding dairy product losses.
Enabling Environment
Policy Environment
Plan for Modernisation of Agriculture (PMA): This plan aims to create a framework for economic growth and structural transformation, ensure good governance, and directly increase the ability of the poor to raise incomes and their quality of life.(15)
Agriculture Sector Strategic Plan 2015/16-2019/20: This plan outlines the necessary investment and development within agriculture, in accordance with the National Development Plan.(8)
Agricultural Technology and Agribusiness Advisory Services (ATAAS): This organization aims to improve agricultural productivity and increase the incomes of households by enhancing agricultural research and advisory services.(10)
Financial Environment
Financial incentives: The Uganda Development Bank provides funding for agro-industrialization.(18) The Agricultural Credit Facility provides medium and long term loans to farmers and agro-processors for purchases of agricultural machinery, etc.(19)
Fiscal incentives: Operators within an industrial park or free zone receive an income tax exemption. Income from agro-processing also receives a tax exemption.(11)
Regulatory Environment
The Dairy Industry Act 2000: This Act regulates all issues connected to dairy production, processing and marketing, and outlines the scope of power of the Dairy Development Authority.(7)
Dairy (Marketing and Processing of Milk and Milk Products) Regulations 2003: These regulations outline the components of the registration and certification processes of actors in the dairy industry, and determine the scope of inspections.(14)
Marketplace Participants
Private Sector
AgDevCo, Nestle, Brookside Dairy Limited, Jesa Farm Dairy, Pearl Dairy Farms Limited, Amos Dairies Uganda Limited, Paramount Dairies Limited, GBK Dairy Products Limited, Lakeside Dairy Limited, Rainbow Industries Limited
Government
Ministry of Agriculture, Dairy Development Authority
Target Locations
Uganda: Karamoja
References
- (II) Ministry of Agriculture, Animal Industry and Fisheries. Agricultural sector potential in Uganda. https://www.agriculture.go.ug/agricultural-sector-potential/ (IV) National Planning Authority. National Development Plan III (NDPIII) 2020/21 – 2024/25. (V) Fowler, M. and Rauschendorfer, J. (2019). Agroindustrialisation in Uganda. https://www.theigc.org/wp-content/uploads/2019/11/Fowler-and-Rauschendorfer-2019-working-paper.pdf (VI) Rakotoarisoa, M.A., Iafrate, M. and Paschali, M. (2011). Why Has Africa Become a Net Food Importer? http://www.fao.org/fileadmin/templates/est/PUBLICATIONS/Books/AFRICA_STUDY_BOOK_REVISED_low_res.pdf (VII) Government of Uganda. Uganda Green Growth Development Strategy (UGGDS) 2017/18 – 2030/31. (VIII) United Nations Development Programme (2019). Inequalities in Human Development in the 21st Century. Briefing note for countries on the 2019 Human Development Report. Uganda. (IX) World Bank (2018). Making Farming More Productive and Profitable for Ugandan Farmers.https://www.worldbank.org/en/country/uganda/publication/making-farming-more-productive-and-profitable-for-ugandan-farmers (X) Government of Uganda. Uganda Vision 2040. https://consultations.worldbank.org/sites/default/files/materials/consultation-template/materials/vision20204011.pdf
- (1) Okwakol, S. (2018). 'Milk Production In Uganda Hits 2.08 Billion Litres', EABW News, June 25. https://www.busiweek.com/milk-production-in-uganda-hits-2-08-billion-litres/
- (5) World Wildlife Fund (2020). Dairy Industry. https://www.worldwildlife.org/industries/dairy
- (6) Netherland Development Organisation (2008). Dairy Investment Opportunities in Uganda Report. http://www.bibalex.org/search4dev/files/338024/171497.pdf
- (7) Government of Uganda. Diary Industry Act 2000 (Ch 85). https://www.ilo.org/dyn/natlex/docs/ELECTRONIC/88143/100692/F1567060613/UGA88143.pdf
- (8) Economic Policy Research Centre (2018). Fostering a sustainable agro-industrialisation agenda in Uganda. https://eprcug.org/research/research-reports?task=document.viewdoc&id=579
- (9) Uganda Investment Authority (2016). Compendium of Investment and Business Opportunities. https://www.ugandainvest.go.ug/wp-content/uploads/2016/02/Compendium-of-Investment-and-Business-Opportunities-Vol-2.pdf
- (10) SOGEROM Consortium (2018). Diagnostic Studies N° 1.1 to 1.4 To support the Mid-Term-Review of Uganda's 2nd National Development Plan (NDP-II) and evaluation of NDP-I.
- (11) PwC (2019). Corporate - Tax credits and incentives. https://taxsummaries.pwc.com/uganda/corporate/tax-credits-and-incentives
- (12) Food and Beverages (2020). FrieslandCampina set to invest 23 million euros in its Nigerian business. https://www.foodbev.com/news/frieslandcampina-set-to-invest-e23m-in-its-nigerian-business/
- (13) Capital IQ Company Screening Report.
- (14) Uganda Legal Information Institute. Dairy regulations. https://ulii.org/ug/legislation/statutory-instrument/2002/200326
- (15) Government of Uganda. Plan for Modernisation of Agriculture: Eradicating Poverty in Uganda. https://www.inclusivebusiness.net/sites/default/files/wp/PMAMaindocument.pdf
- (16) International Institute for Environment and Development (2020). To address food insecurity in Uganda post COVID-19 the government must act now. https://www.iied.org/address-food-insecurity-uganda-post-covid-19-government-must-act-now
- (17) Food Business in Africa (2020). Dairy Industry in Uganda. https://www.foodbusinessafrica.com/dairy-industry-in-uganda/
- (18) Uganda Development Bank (2020). Agriculture. https://www.udbl.co.ug/agriculture/
- (19) Bank of Uganda (2020). Agricultural Credit Facility. https://www.bou.or.ug/bou/bouwebsite/ACF/moreinfo.html
- (20) PwC analysis based on Prof. A. Damodaran data, 2020.
- (21) Economic Policy Research Centre (2018). Fostering a Sustainable Agro-industrialisation Agenda in Uganda. Kampala. https://eprcug.org/research/research-reports?task=document.viewdoc&id=579
- (22) Environment Protection Authority (1997). Environmental Guidelines for the Dairy Processing Industry. State Government of Victoria. https://www.epa.vic.gov.au/-/media/epa/files/publications/570.pdf
- (23) Grain (2011). The great milk robbery: How corporations are stealing livelihoods and a vital source of nutrition from the poor. https://www.grain.org/media/W1siZiIsIjIwMTEvMTIvMTYvMTFfNDNfNTBfOTk4X0dSQUlOX0RhaXJ5X1JlcG9ydF9FTi5wZGYiXV0