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Syed Ibrar Hussain - University of Agriculture Faisalabad€¦ · Syed Ibrar Hussain CEO, SPECIALITIES ... product from cow can be ... Seasonality Perishability

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Page 1: Syed Ibrar Hussain - University of Agriculture Faisalabad€¦ · Syed Ibrar Hussain CEO, SPECIALITIES ... product from cow can be ... Seasonality Perishability
Page 2: Syed Ibrar Hussain - University of Agriculture Faisalabad€¦ · Syed Ibrar Hussain CEO, SPECIALITIES ... product from cow can be ... Seasonality Perishability

Which ma be at a lo orWhich may be at a low or high costhigh cost….. 

This is what I understand asThis is what I understand as VALUE ADDITIONVALUE ADDITIONThis is what I understand as This is what I understand as VALUE ADDITIONVALUE ADDITION

Page 3: Syed Ibrar Hussain - University of Agriculture Faisalabad€¦ · Syed Ibrar Hussain CEO, SPECIALITIES ... product from cow can be ... Seasonality Perishability

Dairy Value Addition: P ki i P iPakistan in Perspective

International Seminar on Value Addition Concerns

March 18, 2011National Institute of Dairy Science and Technology 

University of Agriculture, Faisalabad

Syed Ibrar HussainCEO SPECIALITIESCEO, SPECIALITIESwww.specialities.com.pk

Page 4: Syed Ibrar Hussain - University of Agriculture Faisalabad€¦ · Syed Ibrar Hussain CEO, SPECIALITIES ... product from cow can be ... Seasonality Perishability

Raw 2 Rewarding• Milk is a white liquid comprising hundreds of

thousands of moieties coexisting in an emulsion,suspension and true solution form

• A product from cow can be

p• These moieties singly or in combination can be used

to form thousands of new products• A product from cow can be 

– < Rs. 50/ kg (Plain Raw Milk)

– > Rs 288 million/ kg (Lactoferrin ~90 % Pure)

– > Rs 877 million/ kg (Folate Binding Proteins)

• Lactoferrin Concentration in milk (~1 kg/ 50000 liters)– Normal Milk 20 – 2100 g/ ml

/– Mastitis Milk 44 – 3100 g/ ml

• We choose….. To Add Value

Page 5: Syed Ibrar Hussain - University of Agriculture Faisalabad€¦ · Syed Ibrar Hussain CEO, SPECIALITIES ... product from cow can be ... Seasonality Perishability

Milk as a DairyAs single source in s s g e sou cehuman diet (infants)Dairy value

Milk as a MaterialDiversified productDiversified product Economic value

Page 6: Syed Ibrar Hussain - University of Agriculture Faisalabad€¦ · Syed Ibrar Hussain CEO, SPECIALITIES ... product from cow can be ... Seasonality Perishability

Pakistan• Pakistan Total Population 180 million• Avg. No. of People/ House 5• No of Household 36 millionNo. of Household 36 million• Avg. Household milk consumption 1.52 liters/ day• Rural Milk Consumption 11.8 billion liters/ annum

R l Milk C i 07 9 billi li /• Rural Milk Consumption 07.9 billion liters/ annum• Total Milk in Trade 19.7 billion liters/ annum• Process Industry 01.3 billion liters/ annum

16.48 % of total dairy trade in urban areas 06.59 % of total dairy trade in Pakistan

• Informal Trade 18 4 billion liters/ annumInformal Trade 18.4 billion liters/ annumKarachi 01.9 billion liters/ annum

Page 7: Syed Ibrar Hussain - University of Agriculture Faisalabad€¦ · Syed Ibrar Hussain CEO, SPECIALITIES ... product from cow can be ... Seasonality Perishability

AgendaAgenda

1 Dairy Processing Sector in Pakistan

2 Challenges in the Sector

3 Opportunities & Recommendations

Page 8: Syed Ibrar Hussain - University of Agriculture Faisalabad€¦ · Syed Ibrar Hussain CEO, SPECIALITIES ... product from cow can be ... Seasonality Perishability

1 Dairy Processing Sector in Pakistan

2 Challenges in the Sector

3 Opportunities & Recommendations

Page 9: Syed Ibrar Hussain - University of Agriculture Faisalabad€¦ · Syed Ibrar Hussain CEO, SPECIALITIES ... product from cow can be ... Seasonality Perishability

84 % 16 %84 %  16 %

Page 10: Syed Ibrar Hussain - University of Agriculture Faisalabad€¦ · Syed Ibrar Hussain CEO, SPECIALITIES ... product from cow can be ... Seasonality Perishability
Page 11: Syed Ibrar Hussain - University of Agriculture Faisalabad€¦ · Syed Ibrar Hussain CEO, SPECIALITIES ... product from cow can be ... Seasonality Perishability

• Informal SectorRaw Milk– Raw Milk

– Milk Fat based Products

– Fermented Milk Products

Concentrated Milk Products– Concentrated Milk Products

– Milk based sweetened products

– Frozen Dairy Products

18 6 Billi lit ilk/

• Formal Sector– UHT Milk & Non Dairy Products

18.6 Billion liters milk/ annum

– UHT Milk & Non Dairy Products

– Spray Dried Dairy Products

– Dairy based Cereal Products

– Fermented milk Products– Fermented milk Products

– Milk Fat based Products

– Concentrated Milk Products

Frozen Dairy Products– Frozen Dairy Products

1.1 Billion liters milk/ annum

Page 12: Syed Ibrar Hussain - University of Agriculture Faisalabad€¦ · Syed Ibrar Hussain CEO, SPECIALITIES ... product from cow can be ... Seasonality Perishability

Major AvenuesMajor Avenues• 18.4 billion liters has a potential of transformation 

and value addition for the ultimate benefit ofand value addition for the ultimate benefit of consumer in terms of Health & Safety and immediate routes are:

– Pasteurized Milk

– Cheese 

Page 13: Syed Ibrar Hussain - University of Agriculture Faisalabad€¦ · Syed Ibrar Hussain CEO, SPECIALITIES ... product from cow can be ... Seasonality Perishability

Farmer/ Entrepreneurial Value pAddition Expectation?• Present Status

– Product/ Investment– Product/ Investment• B2B• B2C

• Short/ Long term prospects• Short/ Long term prospects– Products/ Investment

• B2B• C2CC2C• Specialized

Additional CM of ? %Fi i l KPI’ Financial KPI’s  ROI ? ROE? ROA? ROA? IRR?

Page 14: Syed Ibrar Hussain - University of Agriculture Faisalabad€¦ · Syed Ibrar Hussain CEO, SPECIALITIES ... product from cow can be ... Seasonality Perishability

Pakistan Population Est. 2010 Mio 182.00

Urban Population % 32.52

Urban Population Mio 59.19

Average Household (Pakistan) People/ House 6.8

Average Household (Urban) People/ House 7

Towns with > 0.25 mio Inhabitants No. 23

Total Population of Towns with > 0.25 mio Mio 41 26Total Population of Towns with > 0.25 mio Mio 41.26

Annual Liquid Milk Requirement Mio Liters 14653

Page 15: Syed Ibrar Hussain - University of Agriculture Faisalabad€¦ · Syed Ibrar Hussain CEO, SPECIALITIES ... product from cow can be ... Seasonality Perishability

Daily Milk Requirement of Major Towns Mio. Litres 8.50

Daily Existing Dairy Processing  Mio. Litres 3.00

Daily Proposed Dairy processing Mio. Litres 5.50

No. of Processing Units No. 275

Capex for each Unit Mio. Rs 23.5Capex for each Unit Mio. Rs 3.5

Total Capex Mio. Rs 6466

T l Skill d HR R i d N 16508Total Skilled HR Required No. 16508

Processing Unit Capacity Litres/ Day 20000

Page 16: Syed Ibrar Hussain - University of Agriculture Faisalabad€¦ · Syed Ibrar Hussain CEO, SPECIALITIES ... product from cow can be ... Seasonality Perishability

Raw Milk 

Fat 6 %, SNF 8.9 % 

Rs 35/ liter

Std. Homo, Past. Milk

Fat 3.5 %, SNF 8.9 %

Rs. 50/ liter

Fresh Cream

Fat 50 %, SNF 3.75 %

Rs. 160/ liter/ /

Page 17: Syed Ibrar Hussain - University of Agriculture Faisalabad€¦ · Syed Ibrar Hussain CEO, SPECIALITIES ... product from cow can be ... Seasonality Perishability

DESCRIPTION UNITS DAILY MONTHLY YEARLY

Cost of Value Addition Mio. Rs 100.12  3,003.61 36,043.33 

Cost of Sales Mio. Rs 31.92  957.46  11,489.49 

Cost of Marketing Mio. Rs 19.15  574.47  6,893.70 

Cost of Logistics Mio. Rs 12.11  363.17  4,358.08 

C t f l Mi R 5 50 165 08 1 980 95Cost of losses Mio. Rs 5.50  165.08  1,980.95 

Cost of Packaging Mio. Rs 14.86  445.71  5,348.56 

Cost of Processing Mio Rs 9 71 291 36 3 496 37Cost of Processing Mio. Rs 9.71  291.36  3,496.37 

SWB Mio. Rs 6.88  206.35  2,476.18 

Raw Milk Cost Mio. Rs 192.59  5,777.76  69,333.14 , ,

TOTAL COST of GOODS MANUFACTURED Mio. Rs 292.71  8,781.37  105,376.47 

NSR (Past. Milk & Cream) Mio. Rs 319.15  9,574.58  114,894.92 

Gross Margin Mio. Rs 31.92  957.46  11,489.49 

Page 18: Syed Ibrar Hussain - University of Agriculture Faisalabad€¦ · Syed Ibrar Hussain CEO, SPECIALITIES ... product from cow can be ... Seasonality Perishability

Industry Growth Drivers - DemandUrbanisation rise in disposable incomes and changingUrbanisation, rise in disposable incomes and changing

lifestyle and aspirations are leading to significant demand for processed Dairy…

Increasing spends on health Dairy 

Increasing Urbanisation– Lifestyle and Aspirations

Increasing Nuclear Families and Working Women

D i P iDairy Processing Demand Drivers

ChangingChanging demographics – Rise in disposable incomes

Demand for Functional Dairy

Organised Retail and 

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gPrivate Label Penetration

Page 19: Syed Ibrar Hussain - University of Agriculture Faisalabad€¦ · Syed Ibrar Hussain CEO, SPECIALITIES ... product from cow can be ... Seasonality Perishability

Industry Growth Drivers - PolicySupportive Policy in light of the significant employment andSupportive Policy, in light of the significant employment and trade potential, to boost the quantity and quality of output in

the sector is also driving growth in the sector…Dairy Processing 

Industry

ure  nt y  n ntrol/ 

ng   R&D

al 

ent

Policy SupportInfrastructu

developm

e

Techno

logy

Upgradatio

Quality Co

nDairy te

stin

Labo

ratory,

HR and 

Institu

tion a

Develop

me

HR & Institutional DevelopmentFinancial assistance to set up 

Infrastructure Development

Mega Dairy Farms

Technology Upgradation

Grant of 25% of the cost of

Quality Control/ R&D

Setting up a network of ptraining centresEstablishment of NIFTEMStrengthening of State Nodal AgenciesIT

Mega Dairy FarmsIntegrated Cold ChainModernisation of Process

Grant of 25% of the cost of plant & machinery and technical civil (maximum of Rs 50 lacs in general areas and Rs 75 lacs in difficult areas)

Setting up a network of laboratoriesHigher level of assistance to research institutesAssistance for organisingpromotional activities 

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50‐100% subsidy to private companies/state governments, which set up quality testing laboratories

Page 20: Syed Ibrar Hussain - University of Agriculture Faisalabad€¦ · Syed Ibrar Hussain CEO, SPECIALITIES ... product from cow can be ... Seasonality Perishability

1 Dairy Processing Sector in Pakistan

2 Challenges in the Sector

3 Opportunities & Recommendations

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Page 21: Syed Ibrar Hussain - University of Agriculture Faisalabad€¦ · Syed Ibrar Hussain CEO, SPECIALITIES ... product from cow can be ... Seasonality Perishability

Challenges in the Sector Challenge 1: Productivity Issues

P ki t ’ ll d i d ti it i till LOW!Pakistan’s overall dairy productivity is still LOW!

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Page 22: Syed Ibrar Hussain - University of Agriculture Faisalabad€¦ · Syed Ibrar Hussain CEO, SPECIALITIES ... product from cow can be ... Seasonality Perishability

Challenges in the Sector Challenge 2: R&D

Key Problems in Pakistani R&D

Commodity‐centric R&D Lack of a holistic approach involving a matrix of farm enterprises 

Compartmentalization of R&D agencies 

Lack of effective bilateral flow of information amongst research, extension, and implementation departments 

Poor validation and feedback mechanisms 

Lack of large‐scale on‐farm validation of techniques and feedback thereon, leading to practically no scope for enhancement

A seven‐step mechanism is required to set‐up a research‐development‐technology transfer continuum involving all stakeholders

1. Problem identification and prioritization

2 Convergence of existing technologies to match the need2. Convergence of existing technologies to match the need

3. Generation of need‐based viable technologies using the holistic farming system approach

4. On‐farm assessment and evaluation

5. Feedback on the technologies

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6. Refinement of technologies, if necessary

7. Ensuring timely availability of inputs

Page 23: Syed Ibrar Hussain - University of Agriculture Faisalabad€¦ · Syed Ibrar Hussain CEO, SPECIALITIES ... product from cow can be ... Seasonality Perishability

Challenges in the Sector Challenge 3: Human Resource Development

The industry is in dire need of highly skilled/trained manpower across different levels to handle various operations 

• Emphasize Dairy safety in storage conditions 

• Training in Warehousing and Distribution 

Industry level Regulatory and trade issues

• Managerial and Operational level HRD • Platform to make policy 

d i iWarehousing &  Distribution

Enforcement Dairy production• Dairy safety awareness

decisions

• Inclusion in academic curriculum

Enforcement Dairy production

• Auditing and inspection skills

• Process development • Institutional Development

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• Focus on packaging techniques, storage and safe transportation

Page 24: Syed Ibrar Hussain - University of Agriculture Faisalabad€¦ · Syed Ibrar Hussain CEO, SPECIALITIES ... product from cow can be ... Seasonality Perishability

Challenges in the Sector Challenge 4: Supply Chain Hindrances

Necessity for a Strategic focus on Supply Chain in FPI

Seasonality

Perishability

Seasonal production Vs Year‐round Processing Operations

Highly perishable nature of raw materials

Variability Variable quality of raw materials due to cyclic variations and changing weather conditions

• This situation discourages processing units to reach optimum size and achieve economies of scale. 

• Additionally, lack of consistent quality hinders small scale units to build brand equity for themselves in international and domestic marketsinternational and domestic markets. 

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Page 25: Syed Ibrar Hussain - University of Agriculture Faisalabad€¦ · Syed Ibrar Hussain CEO, SPECIALITIES ... product from cow can be ... Seasonality Perishability

Challenges in the Sector Challenge 5: Low Adherence to Quality Standards

I i d f D i t dh t lit t d d f b th d ti ll t k tIncreasing need for Dairy processors to adhere to quality standards for both domestic as well as export market

Increasing Globalisation Stringent Safety Norms Rising Customer awareness on Quality and Health

• Lack of requisite controls across the agri‐value chain‐from farm inputs to storage of produce to Dairy processing techniques

• Poor compliance to requisite Dairy standards in export countries

• Absence of basic standardization and certification infrastructure

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Page 26: Syed Ibrar Hussain - University of Agriculture Faisalabad€¦ · Syed Ibrar Hussain CEO, SPECIALITIES ... product from cow can be ... Seasonality Perishability

1 Dairy Processing Sector in Pakistan

2 Challenges in the Sector

3 Opportunities & Recommendations

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Page 27: Syed Ibrar Hussain - University of Agriculture Faisalabad€¦ · Syed Ibrar Hussain CEO, SPECIALITIES ... product from cow can be ... Seasonality Perishability

Opportunities & Recommendations Dairy Processing sector has strong synergies with the inclusive growthDairy Processing sector has strong synergies with the inclusive growth

mandate of the government and also provides a platform to significantly transform the face of rural Pakistan…

A developed Dairy Processing sector will help overcome the biggest challenges in front of Pakistan:

• Low farmer income and high subsidiesg

• High wastage along the value chain

• Poor hygiene and safety standardsyg y

Given the huge potential opportunity, players should consider the constraints as opportunities waiting to be exploited and make investments for the overall growth of the industry. 

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Page 28: Syed Ibrar Hussain - University of Agriculture Faisalabad€¦ · Syed Ibrar Hussain CEO, SPECIALITIES ... product from cow can be ... Seasonality Perishability

Opportunities High domestic demand and supportive policy provides significant opportunitiesHigh domestic demand and supportive policy provides significant opportunities

across the Dairy Processing value chain…

Policy SupportPolicy Support

Farm Inputs Farming Marketing/ Aggregator Processing Logistics

(Food)

Retail/ Food

ServicesConsumerFarm Inputs Farming Marketing/

Aggregator Processing Logistics (Food)

Retail/ Food

ServicesFarm Inputs Farming Marketing/

Aggregator Processing Logistics (Food)

Retail/ Food

ServicesConsumer

Financial & Business

Product Design

Distribution

MarketingTransport Services/ Quality Control Market IntelligenceFinancial & Business

Product Design

Distribution

Marketing

Product Design

Distribution

MarketingTransport Services/ Quality Control Market IntelligenceServicesa et gp

Infrastructure Quality Control Market IntelligenceServicesa et ga et gp

Infrastructure Quality Control Market Intelligence

M D i P kDairy Safety 

Q lit C t l L b

Key Opportunities

Mega Dairy Parks

Integrated Cold Chain

y yManagement Systems

Training Facilities

Quality Control Labs

Joint Research Facilities

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Backward and Forward Integration

B2B SalesCustomised Farm Equipment

Page 29: Syed Ibrar Hussain - University of Agriculture Faisalabad€¦ · Syed Ibrar Hussain CEO, SPECIALITIES ... product from cow can be ... Seasonality Perishability

Recommendations Recommendations for the Dairy Processing Industry in Pakistan

Processable variety Promote Nutrition of ProductsDairy Products

A Dynamic Dairy 

Processing Industry

Increase Promotional Activities

Support Backward Integration

Industry

Investment in Hard/Soft Infrastructure

Market Access to farmers

Harmonisation of Taxes

Technology Upgradation

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