We collect 40,000 litres of milk a day from local farmers— FrieslandCampina MD
FrieslandCampina WAMCO started its Dairy Development Programme(DDP) in Nigeria in 2010. It was targeted at setting up backward integration projects in order to source raw milk locally and upscale the country’s dairy industry. Ten years down the line, the DDP has been a humongous success, extending from Oyo to four other states and impacting the lives of 7,000 farmers and their families.
Ben Langat, managing director, FrieslandCampina WAMCO Nigeria plc, spoke with Odinaka Anudu, Industry Editor, on the achievements of the DDP and how it has helped to grow the Nigerian economy.
Your Dairy Development Programme (DDP) is going on in five states. Tell us how it started 10 years ago.
In 2010, we started with Shonga Farms in Kwara State by supporting the farm to meet our quality standards. Then we began offtake of milk from them. We then moved to Oyo state, putting infrastructure in place for our pilot Dairy Development Programme (DDP). We built milk collection centres in several communities in Oyo. The first milk collection centre was built in Fashola in 2011. We started from scratch. Today, we have a total of 16 milk collection centres and 10 new ones are being constructed as we speak, with one bulking centre in Iseyin, where the raw milk goes into big cooling trucks and moved to Lagos.
What quantity of raw milk are you currently getting per day?
We are collecting about 40,000 litres a day. Our actual storage capacity is 85,000 litres, which means there is still a lot of room for this to increase. Presently, we are in Oyo, Ogun, Osun, Kwara and we have just launched into northern Nigeria with a large project that is going on in Niger state at Bobi Grazing Reserve. We have a milk collection centre there with plans to engage a third party processor. We are doing full backward integration with the DDP, which is also supported by government through the Central Bank of Nigeria and the Federal Ministry of Agriculture and Rural Development.
How do you utilise the raw milk you source through your DDP?
In 2019, we built a new factory and the bulk of fresh milk that is collected is what we use in producing our Peak yoghurt range. It is a brand new factory, which was commissioned last year. So, you see, we are not only collecting some raw milk, it’s a full business strategy. It is adequate to run a full production and manufacturing process. We also use some of the fresh milk in manufacturing the evaporated milk.
How has the DDP engaged local dairy farmers?
We work with 7,000 farmers presently; 950 of them are women and we are targeting to work with a lot more. We have established dairy cooperatives for a sustainable dairy value chain.
What are the most consistent challenges confronting the dairy programme?
We have faced a lot of challenges, having started from scratch. We don’t have quality dairy breeds in the country and have to build stock from very low mother stock. A key part of the DDP effort is in the crossbreeding programme to ensure we build enough dairy stock for farmers. There is the challenge of poor infrastructure. There are also normal challenges of cow diseases, water supply to farms and nomadic lifestyle of pastoralists, among others. So there was a need to educate the farmers on how to improve their feeds, get veterinary support for the cows, all in a bid to improve the milk yield. The challenge around animal husbandry is really getting the right animal that can give the right yield. The cows that are in Nigeria are largely beef cattle. Overtime, they have to be improved. Progress is slow and that is one big challenge.
Are there areas government can help the dairy sector?
There is a lot more that needs to be done to improve infrastructure – road networks, power and water supply in rural locations. Security is also a challenge. Each community comes with its own challenges, like communal clashes over land resources, among others. The biggest challenge that dairy development will face in the north is security in addition to low quality pasture. We are focused on getting the yield per cow up to the right level. We have the traditional beef cows that produce one to two litres per day. But with artificial insemination and crossbreeding, we can get more than 10 litres per cow over time, and that would be a lot better.
At your 47th annual general meeting, your company announced N161.8 billion turnover. How much has the DDP contributed to that figure?
The DDP is still at infancy. It was difficult to call out DDP’s percentage in the turnover reported because the yoghurt factory built for that was done mid-year 2019. Perhaps at the next AGM, it would be easier to call out its impact on turnover. I am sure it would be disclosed in the financial report. Right now, it is still at infancy stage. We have accelerated quite a great deal, but it will still be a long time before the expected returns on investment start to come in.
Are SMEs benefitting from the DDP?
Yes. To produce a litre of milk from any cow, a lot of processes are involved. In all our DDP locations, there are a lot of small and medium businesses that have developed different things around those areas. They sell feeds and animal nutrition boosters to the farmers; they offer veterinary and consultancy services, even pasture cultivation, fertilizers, herbicides, and drugs, among others. Others offer logistics – trucks, farm equipment, tools. At every DDP location, we have a laboratory that requires suppliers of lab equipment, chemicals and disposables. Even the motorcycle riders transporting milk from farmers to the milk collection centres are part of the value chain. We also have institutional partners – organisations, universities and government ministries. It is an ecosystem that is developing just like in other countries where we have DDP. Farmers are giving up their nomadic lifestyle and they are settling around FrieslandCampina WAMCO DDP locations, where their wives have also set up cooperatives and established various businesses. The women have more time for themselves now because of having an income source. They don’t have to walk long distances to hawk items or fetch water anymore.
In 2016, you set a target of 10 percent local input sourcing. So with 85,000-litre storage facilities, how soon do you think you would outgrow that facility?
We have achieved and surpassed the target we set in 2016 on dairy development. We have even moved beyond just surpassing our target to setting up a complete business line with the Peak Yoghurt. We are committed to helping to grow the economy as the clear leader in the dairy sector. We are training dairy farmers in line with international best practices, improving their livelihood and quality of life, and improving quality of livestock and pasture for better milk yield. We are building and sustaining new ecosystems. The DDP model has proven to be sustainable. We have a factory that is producing yoghurt and is going to need a lot of fresh milk. We still need more and that is why we are building more capacity. Perhaps over the next 12 months, the factory can run at full capacity.
What measures are you putting in place as a company to mitigate the challenges of COVID-19 as well as enhance productivity and continued growth?
Every day you plan to do something different, and the following day something new comes up. We review all that we do daily and weekly, and we are ahead of the game. What we try to do is to make sure our people stay safe because at the end of the day, it’s about lives. Within our premises, we have very strict guidelines to follow in terms of social distancing, wearing face masks, using sanitisers, and washing of hands, among others. If you come, it is strict protocol to get in here. We have had to let some people work from home. For those who need to work in the office, we have protocol for that. We have also provided for our staff to access medical services when necessary. So far, we have been lucky. We don’t pray for it, but the effects of the pandemic will be here for a long time. Business continuity is key. In terms of workplace psychology, we have built around our people, we have designed protocols for different kinds of journeys and have tried very hard to secure partnerships that ensure business continuity in areas like raw materials and packaging, among others.
While, the pandemic has an effect on logistics and the like, the cows still continue to produce milk daily. So the challenge is how to get the milk down here. The cows and the farmers are in fairly isolated locations, so milk production is not impacted. It’s just the little disruption that we see in the movement of milk. All things considered, we have a stable business and we remain committed to Nigeria and to making quality dairy nutrition available and affordable for all Nigerians.
To what extent do you think COVID-19 would affect your 2020 financial projection?
COVID-19 brought about a lot of changes and challenges. We have felt the impact of the coronavirus pandemic in the same manner that every other company has felt it. From the safety point of view, having to take precautions, have people work from home. We have felt all that like everybody else. But we provide essential services being in the business of nutrition. So we have been allowed to operate throughout this period. Our factories have been running, we’ve been working very closely with government to ensure the movement of raw materials coming in and finished products around the country. We have been working together with industries that have similar products, food and pharmaceuticals, and other key essentials. Our production has been steady; consumers are focusing on real essentials; they are not buying luxury items. Dairy is important to a healthy nutrition and lifestyle, more so at this time when a strong immune system is important.
Since CBN restrictions on foreign exchange (FX) to dairy import were announced, how has it been accessing FX?
We have felt the impact of COVID-19 on global oil prices. This has significantly affected the sourcing of foreign currency locally to bring in equipment and materials that we need. We are one of the six companies that have been granted access to FX and it is because of our steady investment in the dairy development programme, which we have been doing for the past 10 years. The fact that we are expanding and scaling fast in the north doesn’t mean that there is enough raw milk. We need a lot more for production and it will take many more years of committed dairy development.
In terms of local milk production, what other policy direction do you expect from government?
I can’t tell what government policies would be, going forward. But I think the intention behind backward integration in any country is always good, and policies are best formulated in a manner that is consultative and allows input from stakeholders so that they do not create more pain or difficulty in the country. There is a big difference between backward integration that affects crops that can be grown in a fairly short period of time, like perennial crops that take three to six months to grow, and one that involves life, which needs to be developed like dairy. It takes a long time and it’s a lot more sensitive. Dairy cows need constant attention; you must treat, clean and feed them properly. It takes time.
How well-positioned is FrieslandCampina WAMCO in supporting policy-making in the dairy sector?
Backward integration policy-making will continue and we are committed to it. We want to be part of the consultation process because our company is a big knowledge base for dairy development, not only in Nigeria but globally. This can be leveraged because there is so much we believe that still needs to be done to boost the sector. To accelerate backward Integration, the big challenges that must be tackled head on are insecurity and infrastructure. To get products out of the ports is a night mare, and the cost of clearing goods is going up by two to three times more. It has been like this over the last year or two because of port congestion and poor infrastructure. In terms of power supply, we have been here for many decades, but still trying to get into the national grid. Supporting companies to bring down the cost of doing business is a very essential thing for government to do. When you ask farmers to go and produce milk, cereal, rice, wheat or whatever, they need to know that once the process of farming starts, all the required infrastructure will be put in place and will work all the way to the point of sale and they will get value for what is produced. That way, the cycle remains sustainable and profitable.
With COVID-19 lockdown challenges, how did you transport raw milk daily?
We experienced some delays and difficulties with enforcement agencies, but we were able to resolve them being categorised among essential services that were granted access. Our capacity to move was reduced by half; our trucks could only move during the day. Security officials required a lot of paperwork. We experienced all of those, but at the end, we resolved it all. There was a lot of consultation with government, so we had places to reach out to and they eventually allowed the trucks to move.