Dairy Sector PDF

CORPORATE STRATEGY
TERM REPORT
Report Name : Competitiveness of Pakistan’s Dairy Sector – A Comparison with India Page 2 of 34
Contents
1 Worlds Milk Industry Evolution & History ........................................................................................... 4
1.1 8000 BCE to 63 BCE.......................................................................................................................... 4
8000 BCE - Origins of the Domestic Cow .......................................................................................... 4
4000 BCE - Early Evidence of Milking Cattle in Neolithic Britian ....................................................... 4
3000 BCE - Evidence of Dairy Cows Playing a Major Role in Ancient Sumerian Civilization ........... 5
3100 BCE - The Domesticated Cow Appears in Ancient Egyptian Civilization ................................. 5
2000 BCE - The Domesticated Cow Appears in Northern Indian Vedic Civilization.......................... 5
1700BCE-63 BCE - Milk in Ancient Hebrew Civilization and the Bible .............................................. 6
1.2 1535 CE to 1776 CE .......................................................................................................................... 6
1535 CE - The First Cattle Brought to the Americas Arrive at Vera Cruz, Mexico ............................ 6
1535 CE - The First Cattle Brought to the Americas Arrive at Vera Cruz, Mexico ............................ 6
1679 CE-1776 CE - Milk and the Spanish California Missions .......................................................... 6
1.3 1800 CE to 1899 CE .......................................................................................................................... 6
Early 1800s - Milk Maids and the Compulsory Smallpox Vaccine in the United States .................... 6
1840 CE - 1920s CE - Milk Production And Distillery Dairies In The United States .......................... 7
1822 CE - 1895 CE - The Process of Pasteurization is Developed by Louis Pasteur ....................... 7
Mar. 23,1883 CE – The New York Milk War ...................................................................................... 7
1884 CE - First Glass Milk Bottles Patented ...................................................................................... 8
1893 CE - Dr. Henry L. Coit Forms the Medical Milk Commission to Certify Raw Milk ..................... 8
1895 CE - Commercial Pasteurization of Milk Begins ...................................................................... 8
1899 CE - Milk Homogenizer Is Patented .......................................................................................... 8
1.4 1900 CE to 1949 CE .......................................................................................................................... 8
1913 CE - Typhoid Epidemic in New York City .................................................................................. 8
1914 CE - The First Milk Tanker Trucks Are Introduced .................................................................... 8
1917 CE - Mandatory Pasteurization of Milk Begins .......................................................................... 9
1922 CE - Capper-Volstead Act Passed ............................................................................................ 9
1933 CE - Sioux City Milk War ........................................................................................................... 9
1937 CE - First Milk Marketing Orders Initiated ................................................................................ 9
1937 CE - First Milk Marketing Orders Initiated ................................................................................. 9
1.5 1950 CE to 1999 CE ........................................................................................................................ 10
1950s CE-1960s CE - Square Milk Carton Introduced .................................................................... 10
1983 CE - Dairy Act of 1983 and the Creation of the National Dairy Board .................................... 10
1990 CE - Fluid Milk Promotion Act ................................................................................................. 10
1990 CE - Fluid Milk Promotion Act ................................................................................................. 10
1995 CE - Dairy Management, Inc. (DMI) Formed .......................................................................... 11
1997 CE - Harvard Study on Milk and Bone Health Released ........................................................ 11
1998 CE - National Raw Milk Campaign Initiated ............................................................................ 11
1.6 2000 CE to Present .......................................................................................................................... 11
Dec. 2001 CE - Merger Forms Largest US Dairy Producer ............................................................. 11
2004 CE - Milk and Weight Loss Ad Campaign Initiated ................................................................. 11
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2005 CE - Organic Milk's Popularity Continues to Grow.................................................................. 12

2005 CE - USDA Dietary Guidelines Released ............................................................................... 12
Oct. 2005 CE - Physicians Group Files Lawsuit Demanding Lactose Intolerance Warnings on
Milk ................................................................................................................................................... 12
2007 CE - Japanese Man Creates Beer from Milk .......................................................................... 12
2007 CE - Milk and Weight-Loss Claims Withdrawn ....................................................................... 12
Apr. 16, 2007 CE - Nation's Largest Organic Dairy Violates Organic Rules.................................... 13
Jan. 8, 2008 CE - FDA Approves Cloned Milk for Human Consumption ......................................... 13
Aug. 3, 2011 CE - Market in Venice, CA Raided by Police for Selling Raw Milk; Three Arrested ... 13
Mar. 2012 CE - US Centers for Disease Control and Prevention (CDC) Release Report on Dangers
of Raw Milk ....................................................................................................................................... 13
2 Comparative Analysis of World’s Milk Industry ................................................................................ 14
2.1 Statistics: Dairy Cows ....................................................................................................................... 14
3 Microscopic View of Pakistan & India’s Dairy Sectors ..................................................................... 17
3.1 Introduction to Pakistan’s Dairy Sector ............................................................................................ 17
Structure of Dairy Farming in Pakistan ............................................................................................ 18
Challenges Faced by Dairy Farmers in Pakistan ............................................................................. 18
Efforts to Grow the Formal Sector - Campaiginng & Growth ........................................................... 23
Urbanization & New Competition ..................................................................................................... 24
Innovations in Dairy Products .......................................................................................................... 24
3.2 Overall Export Position of Pakistan .................................................................................................. 24
Performance of Dairy Sector in Exports ........................................................................................... 25
Potential Milk Exports for Pakistan ................................................................................................... 26
3.3 Introduction to India’s Dairy Sector .................................................................................................. 27
Structure of India’s Dairy Sector ...................................................................................................... 28
Indian Dairy Exports ......................................................................................................................... 29
Indian’s Journey to Success ............................................................................................................ 29
Case in Point – Amul India ............................................................................................................... 29
Challenges ....................................................................................................................................... 33
Conclusion: ....................................................................................................................................... 33
4 Future Prospects .............................................................................................................................. 34
Outlook – Pakistan Dairy Market ...................................................................................................... 34
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1 Worlds Milk Industry Evolution & History
1.1 8000 BCE to 63 BCE
8000 BCE - Origins of the Domestic Cow
Aurochs, the wild ancestors of modern cows, once ranged over large
areas of Asia, Europe and North Africa.
Aurochs were first domesticated 8,000 to 10,000 years ago in the

Fertile Crescent area of the Near East and evolved into two types of
domestic cattle, the humped Zebu (Bos indicus) and the humpless
European Highland cattle (Bos taurus).
Some scientists believe that domesticated cattle from the Fertile

Crescent spread throughout Eurasia, while others believe that a
separate domestication event took place in the area of India and
Pakistan
4000 BCE - Early Evidence of Milking Cattle in Neolithic Britian
Through analyzing degraded fats on unearthed potshards, scientists

have discovered that Neolithic farmers in Britain and Northern Europe
may have been among the first to begin milking cattle for human
consumption.
The dairying activities of these European farmers may have begun as

early as 6,000 years ago. According to scientists, the ability to digest
milk was slowly gained some time between 5000-4000 B.C.E. by the
spread of a genetic mutation called lactase persistance that allowed
post-weaned humans to continue to digest milk.
If that date is correct, it may pre-date the rise of other major dairying
civilizations in the Near East, India, and North Africa.
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3000 BCE - Evidence of Dairy Cows Playing a Major Role in Ancient Sumerian Civilization
Although there is evidence of cattle domestication in Mesopotamia as

early as 8000 B.C.E., the milking of dairy cows did not become a major
part of Sumerian civilization until approximately 3000 B.C.E.
Archaelogical evidence shows that the Ancient Sumerians drank cow's

milk and also made cow's milk into cheeses and butters.
The picture to the left is of a carved dairy scene found in the temple of
Ninhursag in the Sumerian city of Tell al-Ubaid. The scene, which
shows typical dairy activities such as milking, straining and making
butter, dates to the first half of the third millennium B.C.E.
3100 BCE - The Domesticated Cow Appears in Ancient Egyptian Civilization
At least as early as 3100 B.C.E., the domesticated cow had been

introduced to, or had been separately domesticated in, Northern
Africa.
In Ancient Egypt, the domesticated cow played a major role in

Egyptian agriculture and spirituality.
Attesting to its central role in Egyptian life, the cow was deified. The
Egyptians "held the cow sacred and dedicated her to Isis, goddess of
agriculture; but more than that, the cow was a goddess in her own
right, named Hathor, who guarded the fertility of the land
2000 BCE - The Domesticated Cow Appears in Northern Indian Vedic Civilization
By 2000 B.C.E, the domesticated cow had appeared in Northern India,

coinciding with the arrival of the Aryan nomads.
The Vedic civilization that ruled Northern India from about 1750 BCE
to about 500 BCE relied heavily upon the cow and the dairy products
that it provided.
The heavy dependence on the cow was reinforced by the Vedas (the
religious epics of the Hindu religion) wherein the cow was considered
a sacred animal.
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1700BCE-63 BCE - Milk in Ancient Hebrew Civilization and the Bible
The ancient Hebrews...held milk in high favor; the earliest Hebrew scriptures contain abundant evidence of the widespread use of
milk from very early times. The Old Testament refers to a 'land which floweth with milk and honey' some twenty times. The phrase
describes Palestine as a land of extraordinary fertility, providing all the comforts and necessities of life. In all, the Bible contains
some fifty references to milk and milk products."
1.2 1535 CE to 1776 CE
1535 CE - The First Cattle Brought to the Americas Arrive at Vera Cruz, Mexico
The first cattle to arrive in the New World landed in Vera Cruz, Mexico, in 1525. Soon afterword, some made their way across the
Rio Grande to proliferate in the wild. They became known as 'Texas Cattle.' Soon after, some of the [Spanish] settlers transported
cattle to South America from the Canary Islands and Europe. More followed, and cattle multiplied rapidly throughout New Spain,
numbering in the thousands within a few years.
1535 CE - The First Cattle Brought to the Americas Arrive at Vera Cruz, Mexico
The first cows were brought to Plymouth colony in 1624.
The cattle present in 1627 in Plymouth included black, red, white-backed and white-bellied varieties. The black cattle may have been
of a breed or similar to those today called Kerrys. Kerry cattle are descended from ancient Celtic cattle and were originally native to
County Kerry Ireland.
1679 CE-1776 CE - Milk and the Spanish California Missions
"The Jesuit Priest, Eusebio Kino, introduced cattle to Baja California in 1679 as part of the missionary effort to establish mission
settlements... Milk became a blessing to missionaries in time of need."
During a food shortage in 1772, Junipero Serra stated that "...milk from the cows and some vegetables from the garden have been
[our] chief subsistence."
In 1776, at the Mission San Gabriel, Father Font wrote that "The cows are very fat and they give much and rich milk, which they
[Native American women at the mission] make cheese and very good butter."
1.3 1800 CE to 1899 CE
Early 1800s - Milk Maids and the Compulsory Smallpox Vaccine in the United States
In the 18th century it was common folk knowledge in Europe that milk
maids (women who milked cows) seemed to be immune from the
smallpox plagues when they swept through Europe.
In 1796, English physician Edward Jenner developed a vaccine for

smallpox based upon this folk knowledge.
"Recognizing that dairymaids infected with cowpox were immune to

small-pox, Jenner deliberately infected James Phipps, an eight year old
boy, with cowpox in 1796. He then exposed Phipps to smallpox-which
Phipps failed to contract. After repeating the experiment on other
children, including his own son, Jenner concluded that vaccination
provided immunity to smallpox…"
In the United States, compulsory smallpox vaccination was introduced

on a state by state basis, beginning in the early 1800s.
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1840 CE - 1920s CE - Milk Production And Distillery Dairies In The United States
In the early 19th century, the alcohol distillery business in the United
States began to grow. Large amounts of swill (spent-grains) were
produced as a byproduct of whisky and other alcohol production.
Many distilleries opened dairies and began feeding their dairy cows
with the waste swill. The low nutritional content of the swill lead to
sickness in the cows and in the humans who drank their milk.
"Confined to filthy, manure-filled pens, the unfortunate cows gave a

pale, bluish milk so poor in quality, it couldn't even be used for making
butter or cheese.".
1822 CE - 1895 CE - The Process of Pasteurization is Developed by Louis Pasteur
French chemist and biologist Louis Pasteur, considered one of the

fathers of microbiology, helped prove that infectious diseases and
food-borne illnesses were caused by germs, known as the "germ
theory."
Pasteur's research demonstrated that harmful microbes in milk and

wine caused sickness, and he invented a process - now called
"pasteurization" - whereby the liquids were rapidly heated and cooled
to kill most of the organisms.
Mar. 23,1883 CE – The New York Milk War
In 1883 a struggle known as the "milk war" broke out between milk
farmers/producers and milk distribution companies in New-York.
Milk farmers demanded a higher price for their milk. When the
distribution companies refused to pay more the farmers organized
"spilling committees" that blocked roads, seized shipments and
dumped out their own milk instead of selling it to the distributors.
These "spilling committees" created a "milk famine" in New York City

in an effort to force the milk distribution companies to pay the
farmers higher prices for their milk.
"In late March, 1883, a temporary settlement was reached between

committees of the striking dairy farmers and the milk retailers, the
latter representing about 800 of their fellow businessmen. They
agreed to set the price of milk at 2½-4¢ a quart, depending on the
season. Disputes between milk producers and dealers would resurface
at times over the years, the most notable of which were the milk
strikes of the early 1930s during the Great Depression."
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1884 CE - First Glass Milk Bottles Patented
One of the first glass milk bottles was patented in 1884 by Dr. Henry Thatcher, after seeing a milkman making deliveries from an open
bucket into which a child's filthy rag doll had accidentally fallen. By 1889, his Thatcher's Common Sense Milk Jar had become an
industry standard. It was sealed with a waxed paper disc that was pressed into a groove inside the bottle's neck. The milk bottle, and
the regular morning arrival of the milkman, remained a part of American life until the 1950s, when waxed paper cartons of milk
began appearing in markets
1893 CE - Dr. Henry L. Coit Forms the Medical Milk Commission to Certify Raw Milk
In the mid-to-late 1800s milk-born illness was a major problem.
Milk produced at unhygienic production facilities (like distillery dairies)

served as a medium to spread diseases like typhoid and tuberculosis.
These diseases created a public health crisis that led to skyrocketing
infant mortality in the cities.
As a result, "[i]n 1889, two years before the death of his son from
contaminated milk, Newark, New Jersey doctor Henry Coit, MD urged
the creation of a Medical Milk Commission to oversee or 'certify'
production of milk for cleanliness, finally getting one formed in 1893."
1895 CE - Commercial Pasteurization of Milk Begins
In 1895, commercial pasteurizing machines for milk were introduced in the United States.
1899 CE - Milk Homogenizer Is Patented
"In 1899 Auguste Gaulin obtained a patent on his homogenizer. The patent consisted of a 3 piston pump in which product was forced
through one or more hair like tubes under pressure."
Homogenization breaks down the large fat globules in milk into tiny ones.
The process prevents the cream from separating and rising to the top as it does in un-homogenized milk.
1.4 1900 CE to 1949 CE
1913 CE - Typhoid Epidemic in New York City
The New York Times reported that a large typhoid epidemic in New York City was attributed to contaminated milk.
1914 CE - The First Milk Tanker Trucks Are Introduced
The first tank trucks for transporting milk were put into service.
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1917 CE - Mandatory Pasteurization of Milk Begins
By 1917, pasteurization of all milk except that from cows proven to be free of tuberculosis was either required or officially
encouraged in 46 of the country's 52 largest cities. The proportion of milk pasteurized in these cities ranged from 10 percent to 97
percent; in most it was well over 50 percent.
1922 CE - Capper-Volstead Act Passed
Congress passed the Capper-Volstead Act, allowing producers of agricultural products, such as milk, to "act together in associations"
to organize collective processing, preparation for market, handling, and marketing of milk and other agricultural goods.
The act was of historic significance as it granted producers of milk and other agricultural products special exemptions from monopoly
laws to help farmers raise the price for their products.
1933 CE - Sioux City Milk War
In 1933 milk producers in Iowa organize a strike for higher milk prices.
One of the main tactics farmers used during the strike was to block roads and prevent milk from being shipped to Sioux City.
In one instance, strikers opened fire on a truck driver who was trying to get past a road blockade they had set up, seriously injuring
four of the passengers.
1937 CE - First Milk Marketing Orders Initiated
"Milk marketing orders came into existence as a result of the Agricultural Marketing Agreement Act of 1937...The rationale for the
legislation was to reduce disorderly marketing conditions, improve price stability in fluid milk markets, and ensure a sufficient
quantity of pure and wholesome milk.
The orders are regulations approved by dairy farmers in individual fluid milk markets that require manufacturers to pay minimum
monthly prices for milk purchases."
1937 CE - First Milk Marketing Orders Initiated
Dairy farmers in the countryside outside New York City were hit hard by the
Great Depression.
Milk prices in New York City fell so low that the milk distributors were paying
farmers less for their milk than it cost them to produce it.
As things got desperate, dairy farmers organized the Dairy Farmers Union
(DFU). Led by Archie Wright, a former organizer for the radical Industrial
Workers of the World, the DFU went on strike in 1939.
During the strike, DFU members blocked roads and halted market-bound
trucks. They confiscated milk and spilled it out on the roadsides. In some cases
they threw bottles of kerosene on trucks that did not stop. The picketers
fought non-strikers who tried to cross their lines, and State troopers who
intervened.
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1.5 1950 CE to 1999 CE
1950s CE-1960s CE - Square Milk Carton Introduced
In the 1950s and 1960s many dairies began to introduce the square
paper carton to replace bottles.
The square shape allowed more milk to be carried and displayed in a

given space than did the old glass bottles.
The new cartons also reduced the cost of milk for consumers since
disposable paper cartons were cheaper than glass bottles.
1983 CE - Dairy Act of 1983 and the Creation of the National Dairy Board
"The Dairy Production Stabilization Act of 1983 (Dairy Act) authorized a national producer program for dairy product promotion,
research, and nutrition education to increase human consumption of milk and dairy products and reduce milk surpluses. This self-
help program is funded by a mandatory 15-cent-per-hundredweight assessment on all milk produced in the contiguous 48 States and
marketed commercially by dairy farmers. It is administered by the National Dairy Promotion and Research Board (Dairy Board). The
Dairy Act provides that dairy farmers can direct up to 10 cents per hundredweight of the assessment for contributions to qualified
regional, State, or local dairy product promotion, research, or nutrition education programs."
1990 CE - Fluid Milk Promotion Act
In 1990, the U.S. Congress passed the Fluid Milk Promotion Act to promote the sale of milk and to allow collective, producer financed,
generic milk advertising.
The act stated that "fluid milk products are basic foods and are a primary source of required nutrients such as calcium, and otherwise
are a valuable part of the human diet," and mandated that "fluid milk products must be readily available and marketed efficiently to
ensure that the people of the United States receive adequate nourishment."
1990 CE - Fluid Milk Promotion Act
"The Food Guide Pyramid was introduced in 1992 to illustrate a food

guide developed by the U.S. Department of Agriculture (USDA) to help
healthy Americans use the Dietary Guidelines to choose foods for a
healthy diet.
The Food Guide Pyramid is a graphic tool that conveys 'at a glance'
important dietary guidance concepts of variety, proportion, and
moderation. These concepts are not new—with varying emphasis, they
have been part of USDA food guides for almost 100 years."
The 1992 Food Pyramid recommended that 2-3 servings of milk and other
dairy products be consumed daily.
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1995 CE - Dairy Management, Inc. (DMI) Formed
"Dairy producer board members of the National Dairy Board (NDB) and the United Dairy Industry Association (UDIA) create Dairy
Management Inc.™ (DMI) as the organization responsible for increasing demand for U.S.-produced dairy products on behalf of
America’s dairy producers; direct coordination between national and local dairy promotion programs begins.
DMI forms the U.S. Dairy Export Council® (USDEC) to leverage investments of dairy processors, exporters, dairy producers, and
industry suppliers to enhance the U.S. dairy industry’s ability to serve international markets. Both dairy checkoff dollars [funds
collected from farmers for collective generic advertisements] and USDEC membership dues fund the organization."
1997 CE - Harvard Study on Milk and Bone Health Released
Harvard School of Public Health doctors published a study in the American Journal of Public Health titled "Milk, Dietary Calcium, and
Bone Fractures in Women: A 12-Year Prospective Study."
The study investigated whether higher intakes of milk and other high calcium foods during adulthood could reduce the risk of
osteoporosis and related bone fractures.
The study found that high intakes of milk (two or more glasses a day over a 12-year period) did not reduce the incidence of
osteoporosis and related bone fractures.
1998 CE - National Raw Milk Campaign Initiated
In 1998, the Weston A. Price Foundation initiated the "Real Milk Campaign" to promote the health benefits of raw cow's milk and to
advocate for the legalization of raw milk sales.
The goal of the Real Milk Campaign is to make"[r]aw milk available to consumers in all 50 states and throughout the world!"
In 2007, the sale of raw cow's milk for human consumption was illegal in 17 states.
1.6 2000 CE to Present
Dec. 2001 CE - Merger Forms Largest US Dairy Producer
In December 2001, Suiza Foods Corporation acquired Dean Foods Company and formed the "new" Dean Foods Corporation. The new
Dean Foods Corporation became the nation's largest dairy processor and distributor with more than 25,000 employees and $10
billion in revenues.
2004 CE - Milk and Weight Loss Ad Campaign Initiated
In 2004, Dairy Management Inc. and the National Dairy Promotion and
Research Board initiated a nationwide advertising campaign with the
slogan "3-A-Day. Burn More Fat, Lose Weight."
The advertising campaign ran television, print and internet advertising

claiming that the consumption of 3 servings of milk or other dairy
products each day could help with weight loss.
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2005 CE - Organic Milk's Popularity Continues to Grow

In 2005, organic milk grew in popularity with a 23 percent increase in consumption over 2004. During this same
time period, overall milk consumption dropped by 8 percent.
2005 CE - USDA Dietary Guidelines Released

In 2005, the United States Department of Agriculture and the Department of Health and Human Services released
an updated "Dietary Guidelines for Americans" that recommended Americans should:
"Consume 3 cups per day of fat-free or low-fat milk or equivalent milk products."
Oct. 2005 CE - Physicians Group Files Lawsuit Demanding Lactose Intolerance Warnings on Milk
In October 2005, the Physicians Committee for Responsible Medicine (PCRM) filed a class-action lawsuiton behalf
of all residents of Washington, DC, against a number of large milk companies demanding lactose intolerance
warnings on milk.
PCRM filed the lawsuit "To help raise public awareness about lactose intolerance...on behalf of all residents in
Washington, D.C., who may purchase milk without realizing the serious digestive distress it can cause. Filed in the
Superior Court of the District of Columbia on October 6, the suit calls for all milk cartons sold in D.C. to carry labels
warning of milk’s possible side effects."
As of Oct. 31, 2007, the case is still pending.
2007 CE - Japanese Man Creates Beer from Milk

For many years, milk consumption in Japan had been on the decline, creating a surplus milk problem in Japan.
The Japanese island of Hokkaido alone had to dispose of nearly 900 tons of surplus milk in a single month.
Sensing an opportunity, Hokkaido liquor store owner Chitoshi Nakahara decided to see if he could ferment this
excess milk into beer.
The experiment worked, and Nakahara began selling "Bilk" in local liquor stores in 2007.
2007 CE - Milk and Weight-Loss Claims

Withdrawn
In response to a 2005 complaint from the Physicians
Committee for Responsible Medicine(PCRM), the Federal
Trade Commission (FTC) published a letter regarding The
National Fluid Milk Processor Promotion Board (and
others) advertisements that claimed drinking milk helps
with weight-loss.
The letter stated that the FTC had been "advised by USDA
staff that the Dairy Board, the Fluid Milk Board, and other
affiliated entities that engage in advertising and
promotional activities on behalf of the two boards, have
determined that the best course of action at this time is to
discontinue all advertising and other marketing activities
involving weight loss claims until further research provides
stronger, more conclusive evidence of an association between dairy consumption and weight loss."
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A lawsuit (still in appeals as of Oct. 31, 2007) was also filed by the PCRM against a number of milk retail companies,
including Kraft Foods and General Mills, to prevent them from making milk weight-loss claims.
Apr. 16, 2007 CE - Nation's Largest Organic Dairy Violates Organic Rules
On April 16, 2007, Aurora Organic Dairy, the largest organic milk producer in the country, and supplier of organic
milk to Wal-Mart, Target, Costco, Safeway and many other large stores, received a notice of proposed revocation
from the USDA for willful violations of the 1990 Organic Foods Production Act.
The revocation letter from the USDA described 14 violations committed by Aurora Organic Dairy and stated: "Due
to the nature and extent of these violations, the NOP proposes to revoke Aurora Organic Dairy's production and
handling certifications under the NOP."
According to the Cornucopia Institute, a farm policy research group, the practices of Aurora are "a 'horrible
aberration' and that the vast majority of all organic dairy products are produced with high integrity."
Jan. 8, 2008 CE - FDA Approves Cloned Milk for Human Consumption

The United States Food and Drug Administration (FDA) released its 968 page report "Animal Cloning: A Risk
Assessment,” and announced to the public that milk from cloned cows had been approved for human consumption.
In its Jan. 15, 2008 press release announcing the report and its conclusions, the FDA wrote that "meat and milk
from clones of cattle, swine, and goats, and the offspring of clones from any species traditionally consumed as
food, are as safe to eat as food from conventionally bred animals.”
Aug. 3, 2011 CE - Market in Venice, CA Raided by Police for Selling Raw Milk; Three Arrested
"The owner of a Venice health food market and two other people were arrested on charges related to the allegedly
unlawful production and sale of unpasteurized dairy products. The arrests of James Cecil Stewart, Sharon Ann
Palmer and Eugenie Bloch on Wednesday marked the latest effort in a government crackdown on the sale of so-
called raw dairy products.
Prosecutors in Los Angeles alleged that Stewart, 64, operates a Venice market called Rawesome Foods through
which he illegally sold dairy products that did not meet health standards because they were unpasteurized. Palmer,
51, has operated Healthy Family Farms in Santa Paula since 2007 without the required licensing for milk production,
prosecutors allege. She and her company face nine charges related to the production of unpasteurized [raw] milk
products.
Bloch, a Healthy Family Farms employee, is charged with three counts of conspiracy."
Mar. 2012 CE - US Centers for Disease Control and Prevention (CDC) Release Report on Dangers of
Raw Milk
In March, 2012, the US Centers for Disease Control and Prevention (CDC) released a report titled "Nonpasteurized
Dairy Products, Disease Outbreaks, and State Laws - United States, 1993-1996," which concluded:
"Public health officials at all levels should continue to develop innovative methods to educate consumers and
caregivers about the dangers associated with nonpasteurized dairy products. State officials should consider further
restricting or prohibiting the sale or distribution of nonpasteurized dairy products within their states. Federal and
state regulators should continue to enforce existing regulations to prevent distribution of nonpasteurized dairy
products to consumers. Consumption of nonpasteurized dairy products cannot be considered safe under any
circumstances."
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2 Comparative Analysis of World’s Milk Industry
2.1 Statistics: Dairy Cows

 There are over 264 million dairy cows worldwide, producing nearly 600 million tonnes of milk every year (source FAOstat – see
table 1).
 The global average for milk production is approximately 2,200 litres per cow (source FAOstat 2012).
 The largest producer of milk is the USA producing over 87 million tonnes per annum (source FAOstat 2012).
 India has the greatest number of dairy cows in the world with over 40 million cows.
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3 Microscopic View of Pakistan & India’s Dairy Sectors
3.1 Introduction to Pakistan’s Dairy Sector

According to latest figures published in Pakistan Economic Survey 2016-17, milk production in the country is on
the increase and during the current fiscal year the gross production of milk was estimated to be 56 billion litres.
This production comes from roughly 80 mn cattle and buffalo and 10 million farming households and according
to latest statistics makes Pakistan the 3rd largest milk producing country in the world.
Dairy farming in Pakistan is characterised by fragmented, smallholder farmers operating at subsistence level,
forming around 8.5 million of the population. More than 96% of the milk produced in Pakistan comes from cattle
and buffalo. The rest of it is collectively produced by sheep, goat and camel which, most of the time, is not sold
as such, rather consumed domestically or mixed with buffalo and cow milk. Estimated current National livestock
Population based on National Livestock Census 2006 and Economic Survey of Pakistan 2014-15 are shown on
the next page.
The interesting thing regarding the dairy sector of Pakistan
is that although it is third largest milk producing country in
the world but still its production falls short to meet the
national demand. It is not right to say that Pakistan is
deficient in Milk Production. Pakistan is sufficient in milk
production but the core issue is with supply chain as milk
is produced in sufficient volume in a few pockets of country
but its demand is nationwide. So to fulfill the national
demand of milk the need is to manage its supply chain to
ensure its availability through out the country. Being of
perishable nature makes managing supply chain and
logistics nothing short of a challenge.
Current Milk Production and its availability for human consumption in Pakistan as per Economic Survey of
Pakistan 2014-15 are given below:
Milk and dairy products account for 22% of kitchen expenditure (compared to wheat, which is 12%).
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Structure of Dairy Farming in Pakistan
Dairy Farming has always been considered as a by-product of cropping in Pakistan; it is not an independent
activity as in Europe and other countries with developed industries. This parallel application of two kinds of farming
is described as mixed farming. The benefits of mixed farming include: the waste or farm residue of agro-farms is
utilized in dairy farms; likewise, dairy farm residue is utilized in agro-farms thus minimizing losses to farmers.
However, the weakness is that in the absence of enhanced management techniques for dairying, its profitability
relative to other forms of arming has been overshadowed. This has hampered the growth of a specialized sector
with specific dairy innovative techniques.
The vast majority (about 70%) of dairy farmers in Pakistan are smallholding farmers. Up to 43% of dairying
households in Pakistan maintain herd sizes of one to two animals while another 28% of the households maintain
herds ranging from three to four animals. Some 90% of milk production comes from smallholding farmers. Many
believe that only large mechanized farms are the solution to increased profitability and quality. While this is true
for many US, EU and other developed countries having achieved a level of farm mechanization, the challenge is
to achieve the goals of profitability and quality while recognizing the situation in Pakistan.
Despite dairy farming being a by-product of cropping, many farmers have self-selected themselves into dairying
and have been able to improve their economic status. This has been proved by two country experiences namely
India and Kenya - in both countries smallholding farmers have benefited substantially by dairy farming. Many
farmers secure reasonable returns in dairy farming; resulting in the economic uplift of rural areas. The small
holding farms have been analyzed by the IFCN5 as three dairy farm categories belonging to three typical farm
sizes as shown on the right.
Farm Structures:
The three most common milk production systems in Pakistan are:
1. Rural subsistence producers- they produce milk only for their family
2. Rural commercial farms - these farms usually have more than 40 animals. Their production is for sale.
These types of farms are becoming more popular.
3. Peri-urban/urban commercial dairy farms- peri-urban farms are located around large cities, the largest
one being the Landhi cattle colony in Karachi. Mostly these farms have 25-100 animals
Small and marginal land-holding farmers and landless laborers dominate milk production in Pakistan. These small
holding farmers usually practice dairy farming as a by-product of the crop sector.
Out of the total supply, roughly 12-13 billion liters of milk is available & consumed in urban areas. Of this, only
10% of milk is sold in packaged form. To increase the contribution of the formal sector in Pakistan, a two-tiered
action plan is required: to develop systems, which provide profitability for the smallholder and maintain quality
through the supply chain, while assisting the development of larger scale commercial farms. We believe the co-
existence of both kinds of farms is the reality of dairying in Pakistan and development efforts must provide
solutions for both smallholders and commercial farmers.
Challenges Faced by Dairy Farmers in Pakistan

Being a highly perishable commodity and produced primarily in the heart of the rural environment, milk reaches
the consumer only with much difficulty and increased cost. Urban usage of milk is only 30% with the formal milk
processing industry handling only 10 % of total milk production of the country. For the other 90%, a multi-layered
distribution system of middlemen has evolved for milk supply. An estimated 20% of current milk production is lost
from income generation due to fragile infrastructure facilities required for a highly perishable commodity like milk.
As a result of these factors, Pakistan is a net importer of milk and milk products. An important goal for the dairy
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industry of Pakistan is to meet the needs of the people of Pakistan, such that while imports are welcome they are
not necessary.
In Pakistan, we have been highlighting the production numbers of milk, which hardly speaks of value addition.
In the production approach, the quantity is highlighted, whereas in the value approach, the productivity and
resultant economic gains are more important. We have a Production-centric approach vs value-centric model.
New Zealand exports almost 95% of the milk it produces and in 2014, it fetched around $11 billion in export
income.
A major challenge faced by the industry is procurement of quality milk at an affordable price. Packaging costs
that constitutes approximately 35% of the total cost of the product also increases each year. Power and gas
outages pose another challenge to the industry. Larger herd size, that may comprise even 50 heads, can bring
a lot of certainty in the business contracts a farmer may enter. Our average herd size, on the other hand, is
hardly 10 cows.
In an informality driven market, there is no incentive to innovate, grow and scale-up. Pakistan’s milk market is
essentially informal – where the packaged milk industry accounts for only 10% of total milk consumption in the
country.
FAO warned that while dairy has big potential, the sector needs to be more sustainable and competitive in Asia
and Pacific region. This means helping smallholder farmers gain greater access to markets and services and
develop successful dairy business models to increase domestic production. Under the new deal and 2020
strategy arrangements, Engro Foods will aim for higher milk quality, variety of milk packages and products and
farmers’ capacity building leading to a reduction in poverty.
Pakistan’s huge animal population of 50 million suffers from low productivity compared to global players
although it is quite reasonable in comparison to the rest of Asia. It is estimated that Pakistan has three times
the animals that Germany has, but yields are one fifth of Germany’s and one third of New Zealand’s
representing a significant loss in potential economic and social value.
The main causes of this low productivity are:
1. Imbalanced Feeding
Shortages of fodder and water two-three times a year. It is said that if only water was readily available to the
animals, productivity could increase by as much as 7%.
Feeding of animals is practiced according to the farmers’ experience and tradition, without any training or
knowledge of ration formulation based on production levels.
 The buffalo in this sense is an easy animal and has relatively modest nutritional requirements.
 Cattle require a balanced fodder containing appropriate amounts of concentrate and forage. This is important
for efficient rumen digestion and metabolic balance.
Technology driven fodder preservation systems (silage) are needed to ensure availability of feed despite
seasonality issues.
2. Unhygienic Animal Care
Smallholding farmers generally tie their animals within the house premises or in premises where animals cannot
move freely. Sustainable agriculture training should be encouraged for a long-term rural vision.
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The local breeds of Pakistan are shown on the following page. Comparisons show that the role played by
indigenous breeds such as Sahiwal, Red Sindhi, Neeli and other breeds native to Pakistan is useful and, if
properly managed, this role should become more than useful and indeed important. They have traits, which
are important under local conditions, such as resistance to heat and disease. These native breeds need
further improvement. A public private sector partnership program could encourage local breeding systems,
since it is evident that without the intervention of the stakeholders no projects are successful, as rightly pointed
out by Micheal Porter. To this effect a Pakistan Breed Improvement Project should be commissioned by Dairy
Pakistan.
3. Structure of Employment
The dairy sector of Pakistan is divided into organized and unorganized sector. Only around 10% of the total
dairy sector is organized and the rest of 90% falls under unorganized sector. The proportion of organized
sector is very insignificant which results in many of the problems faced by this sector. Therefore, the ‘white
revolution’ originated by the Pakistan dairy development company (PDDC) aims to increase the share of
formal sector to 40% till 2015.
The structure of employment in the unorganized sector is further divided into production and marketing
systems, both of which are dominated by the informal sector:
4. Marketing (Wastage in Collection and Distribution)
The milk collection and distribution system in
Pakistan is quite fragmented. Most of the milk
produced (70% of it) is consumed by the
households themselves and the rest of it is
marketed through different channels.
The marketing chain of milk consists of different
players each performing a special role. These
include milk collectors (dhodhis), de-creamers,
and khoya makers, retailers etc. The dhodhis are
further divided into small, medium and large
scale. As shown in the figure above the milk can
go through various different channels depending
on the amount of milk and also many other
factors.
Moving on to the organized sector, this sector is mainly involved in processing the milk.
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5. Education Level:
The education level of the workforce in the dairy sector is very low.This is because of lack of educational
institutes relating to the dairy industry.there are only a few of them. One of them is :
The University of Veterinary and Animal Sciences, Lahore: it is one of the oldest Veterinary Institutions in Asia.
Since its inception in 1882, the staff of this Institution has worked enthusiastically and successfully conducted
a wide range of programs that have effectively catered the educational and training needs in the field of
Veterinary and Animal Sciences. By now it has emerged as one of the famous centers of teaching in Veterinary
Education in Asia.
Due to lack of education farmers are unaware of good farming practices and therefore the productivity suffers.
Due to this the supply at farm level is less than the potential supply therefore not allowing the dairy sector to
contribute fully to the economy. There is a huge need to educate the farmers. Human resource development
in the rural population through education of farmers in basic principles of nutrition (maintenance versus
production requirements), in reproduction management, mastitis, vaccination and metabolic problems would
yield returns in the short term in rural systems.
6. Labor Productivity
Technological Capital
Technological capital comprises of Research and Development and Innovation. Specific to the dairy sector,
many unsuccessful attempts to revolutionize the dairy sector have been made on part of the government and
some private institutes, but to no avail. Some of the recent efforts by the Pakistan Dairy Development
Corporation (PDDC) and the Ministry of Food, Agriculture and Livestock (MinFAL), aimed towards Research
and Development in the dairy sector are listed below:
1.Self-sustaining/private-public partnership for vaccine production centers: Veterinary vaccines are currently
manufactured by 5 public sector and a few private sector institutions. Public sector institutions face severe
problems in operational funding and equipment costs for the vaccine manufacturing, thus many a times
compromising the quality of vaccines. The funding mechanism of public sector vaccine manufacturing
institutions will be modified to either make them self-sustaining by following a model similar to already being
followed at Sindh Poultry Vaccine Production Centre, Karachi or these vaccine manufacturing units will be
operated on public-private partnership.
2.Poor institutional infrastructure: Research and development infrastructure for the livestock sector is very
poorly developed. Veterinary hospitals, dispensaries and artificial insemination centres provide stationary
service to less than 25 per cent animals. Only Punjab has livestock production research institute, otherwise
livestock production research in other provinces is practically non-existent. There is not a single institution that
is exclusively devoted to dairy technology development. Meat production and processing technology is equally
neglected area.
3.Improvement in research & development infrastructure as well as funding levels: Research in livestock sector
is vital to make it more competitive in the globalization scenario. Research can also create new opportunities
for improving productivity of the sector and develop new products for better consumer appeal. Unfortunately,
this vital support to the local livestock sector has been minimal. Three out of four provinces do not have
livestock production research institutes. New livestock production research and development institutes will be
developed in southern Punjab, Sindh, NWFP and Balochistan with facilities for multidisciplinary research and
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farming system approach. Furthermore, the government will ensure that existing livestock research is
adequately funded by providing additional funding to bring the establishment: operational ratio at 50:50.
4.Fodder research and development programs in livestock production institutions: Fodder is basic requirement
for rearing the livestock and is cheap source of energy and protein. Thus improved varieties of fodder and
production technologies are required for reducing the cost of production of livestock products. Currently
research and development activities in fodder are undertaken by Department of Agriculture in the provinces.
Since agriculture departments have different administrative set-up and are not linked with livestock
departments, their priorities are cereal, horticulture and oilseed. Fodder research and development is is given
least priority both in terms of manpower and financial resources in the current set-up and even many efforts in
this direction are out of focus. Keeping in view the beneficiaries of research and development of fodder as
livestock, governments will work towards shifting these activities to livestock departments. Furthermore, fodder
research and development programs will be started in all livestock production research institutions.
5.Seed availability of high yielding multi-cut fodder varieties: In the absence of well-developed pastures and
ranges, the large ruminants (buffaloes and cattle) are primarily raised on fodder. Most of the existing varieties
of fodder are single cut and low yielding. Furthermore, there are two lean seasons of fodder availability in the
country. The government will invest more in research and development of new fodder varieties as well as
encourage import of improved multi-cut fodder varieties for better availability of fodder for animals around the
year.
6. A project for the implementation of modern dairy farms has been proposed by the Pakistan Dairy
Development Corporation (PDDC). The plan of the proposal is as follows:
 Promote dairy farming under a range of circumstances, from smallholding to commercial
 Improve dairy farm efficiency by implementing best farm practices.
 Develop/ construct model dairy farms to serve as demonstration farms for awareness and dissemination
of best practices to local farmers.
 Drive awareness of profitability.
 Provide the opportunity to fine tune farming practices for local conditions, following which farmer training
can take place with a high degree of confidence
Most dairy farms are in the informal sector, thus they limit the possibility of investment in productivity and
innovation that demands economies of scale.
A fundamental feature of a good tax policy is its ability to encourage more business, growth and jobs creation.
A bad tax policy, on the other hand, can force business firms to remain small, fragmented or even out of the
tax net, i.e. remain informal.
In addition, regulatory duties to the tune of 25pc have been imposed on the import of skimmed milk powder
and whey powder. This is to attract further investments in the dairy sector along with protecting small dairy
farmers.
The government, instead, should take concrete measures to refund the stuck billions in input-output
adjustment.
Turkey has transformed its dairy sector in the last decade or so where the processed/packaged milk industry
now comprises 70% of the market, up dramatically from 30% just a few years ago.
Pakistan’s industry can catch up in huge leaps by going from the baseline of 6% to at least 25% by 2025.
About 10 years ago, a White Paper by the government declared that “the white revolution is at hand”. It
projected that by 2015 the formal market of milk products would reach to 40%, wherein today, we are at 6%.
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While its projection of achieving 40 billion litres per annum – from a base of 33 billion litres – was realised, one
can argue that this growth was bound to occur on the basis of population growth itself. The so called white
revolution is still years, if not decades away.
If, as recent reports indicate, the Government removes the zero-rating on dairy products the most immediate
effect will be a direct increase in the price of packaged milk (by about 6-8 Rupees), as well as other dairy products.
While only 6 percent of milk currently sold is packaged, there is also bound to be a knock-on effect on the price
of loose milk. As such, the removal of the zero-rating will lead to further price hikes and in turn lead to a rise in
the Consumer Price Index, with an overall rise in inflation.
Withdrawal of zero rating will negatively impact the livelihoods of the 600,000 farmers engaged in the dairy value
chain across the country and will notice a decrease in demand for the milk they produce. Related industries for
breeding, feeding and milking equipment will also shrink. Direct investment in the dairy processing sector will
decrease and lower the quality of milk for consumers as well as production capacity, discourage corporate dairy
farming, and make value chains less efficient while simultaneously increasing rural poverty and decreasing GDP.
Consequently, foreign and local investment in dairy farms and the dairy processing sector will suffer – which
amounted to USD 800 million over the last five years.
Hence, there is an imperative need to re-engineer Pakistan’s dairy industry; both at farm and processor level.
This paper seeks to investigate the tools that could bring about such change. We believe achieving the strategic
change outlined in this paper for the dairy industry may prove challenging for at least some sectors. Major effort
is required to achieve the scale and cost competitiveness necessary to continue to successfully compete in a
globalizing and demanding world, while at the same time the interests of the millions of smallholder farmers must
be catered for, and a more prosperous future made available to them.
It is important conditions are in place to ensure decisions about scale, the number and product portfolio of
processing plants are made in a rational manner; this is needed to maintain price competitiveness and market
growth. Small niche players will also have substantial growth opportunity in the Pakistani dairy market and their
growth will be an added asset. In the absence, at present, of a cold chain; presentation and packaging
methodologies will be explored for longer shelf life of its products.
Lastly, investing in dairy infrastructure and the dairy workforce in rural and urban areas cannot be
overemphasized. Without doubt such developments will revolutionize rural Pakistan and improve the quality of
life of millions of farmers. An improved dairy infrastructure less dependent on the middlemen will support the
farmer to connect directly to processors and the consumer.
Efforts to Grow the Formal Sector - Campaiginng & Growth

In the past, efforts have been made to increase the consumption of packaged milk in Pakistan and this was done
through campaigning. A Tetra Pak commercial ad gained much popularity where the company focused on the
importance of hygienic milk with the key words “Doodh aur Kya”. This campaign was launched to educate the
people of Pakistan that packaged milk is safe to consume and is free from adulteration.
According to Tetra Pak Dairy Index, the consumption of Liquid Dairy Products (LDP) in Pakistan increased in line
with population growth and showed Compound Annual Growth Rate (CAGR) of 2.4%. There was 8.4% CAGR in
packaged milk as compared to 2.1% CAGR of unpackaged milk.
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Urbanization & New Competition

The main factor in this evolution is the change in demographics & increased urbanization which demand safe &
convenient products. During the past 11 years, there is 3% points increase in urban population of Pakistan. A lot
of people have shifted to the main stream cities either in search of job or some other business and as mentioned
earlier, most of the milk supply is from rural areas, this urbanization provides growth opportunity for packaged
milk as the cold chain facilities are not appropriate in rural areas to preserve their milk.
These statistics & facts have influenced many companies to enter this segment and since the past 10 years, we
have seen that the corporates have invested heavily to enter this growing segment.
Engro Foods Limited was launched in 2005 with its manufacturing facility in Sukkur and later on it expanded its
production operations in Sahiwal. The company has also invested in livestock and it owns a dairy farm which is
located in Nara.
Dairyland Pvt Ltd was launched in 2009 with their premium milk brand Day Fresh. The company has set up a
dairy farm and production facility in Dhabeji near Sujawal district in Sindh. The introduction of these brands has
increased competition in the market and is a positive sign for a country like Pakistan.
Innovations in Dairy Products

In recent years there has been a lot of developments in Pakistan dairy market with the introduction of tea
whiteners/creamers & other dairy drinks. Both the major dairy companies, Engro Foods & Nestle Pakistan have
innovated their dairy formulations in order to target the lower income segments who wish to consume good
nutrition diet within their budget. The importance of tea whiteners can be witnessed from a Tetra Pak estimate
that drinking milk with tea accounts for 32% of total milk consumption in Pakistan.
One of the biggest strength of tea whiteners is the cost factor as compared to packaged milk. The main reason
for this low cost is due to higher quantity of vegetable fats which is replaced with milk/milk fats. The price of milk
fat ranges between Rs245-250 per kg as compared to Rs130 per kg for vegetable fats.
All the milk processors have followed this strategy and some of the notable brands are; Tarang(Engro Foods),
Tea Max(Haleeb), Kudrat(Shakarganj Foods), Dostea(Nurpur) Everyday(Nestle). All these products are priced
between Rs 25-30.
Currently, these dairy whiteners are facing a tough challenge from the regulatory authorities and social media is
also criticizing that whether it is safe and healthy to consume these products which are not 100% milk.
3.2 Overall Export Position of Pakistan
The export performance of Pakistan has remained weak over the past two decades. According to World Bank
report, the export share of Pakistan has decreased from 0.18% to 0.13% while the share of its competitors have
increased. Exports of the country mainly consists of cotton, rice & hides and skins in the past few years.
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Performance of Dairy Sector in Exports

Despite of the huge potential in dairy sector, Pakistan is still dependent on imports and the main reasons are current
capacity constraints, low milk yield & output, lack of awareness and overall value in the milk supply chain. Due to
these factors, Pakistan has not fully exploited the export potential of its dairy products. The current major export
market of Pakistan dairy products is Afghanistan, and it is buying to fulfill its basic dietary needs of their nation since
their livestock and national herd have faced deterioration in the past years due to decades of long wars
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Potential Milk Exports for Pakistan

By analyzing the export of dairy milk to European Union (EU) countries, it reflects that Pakistan may not be able
to gain a much bigger share in that market. The main is because of the intra EU milk trade which accounts for
84% of its total import of dairy milk. On the contrary, EU import of milk from Asian countries is as low as 0.01%
of their total imports in the same category.
Market analyses reflects the some sort of situation regarding exports to Gulf Cooperation Council (GCC) states
and Pakistan may find it hard to gain immediate market share in this region. Intra GCC trade of dairy milk consists
of 72% of their total imports in the same category and their imports from other countries accounts for 0.32% of
their total dairy milk imports.
Considering the short & medium term export strategy, Pakistan can explore the opportunity to enter Singapore,
Hong Kong & Philippines due to the size and geographical location of these nations. The table below provides
some valuable information and it can prove to a viable option for Pakistan to enter these markets in order to
achieve or exceed their desired level of profitability.
Considering the short & medium term export strategy, Pakistan can explore the opportunity to enter Singapore,
Hong Kong & Philippines due to the size and geographical location of these nations. The table below provides
some valuable information and it can prove to a viable option for Pakistan to enter these markets in order to
achieve or exceed their desired level of profitability.
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3.3 Introduction to India’s Dairy Sector

India is the world’s largest dairy producer since the past 18
years, with 156 billion Tonnes of annual milk production,
growing at a CAGR of 4% for the last 5 years, contributing
over 18 % of global production. Dairy is Indian agriculture’s
single largest sub sector in value terms, generating annual
revenue of over USD 70 Bn. Demographic dividend,
changing lifestyle patterns, rise in disposable incomes,
structural food habit changes and improved health
consciousness are key growth drivers fuelling development
of the dairy industry in India. Strong farm gate prices and
rising domestic demand for value-added dairy products are
the major factors providing impetus to a steady increase in
milk production. Liquid milk contributes 60% - 70% of all
dairy production in the country. The rest is processed into
dairy products like cheese, butter, ghee, ice cream, curd etc.
Majority of milk produced in India is consumed either as liquid milk or converted to traditional indigenous products
but the manufacturing is largely scattered and unorganized. Thus, substantial scope lies in organized production
of these indigenous products and extension of their shelf life, and to make these products available throughout
the country.
To tap this surging demand, most dairy players have entered the processed dairy products market with
introduction of value added products like ice cream, flavored yogurt, butter (with variants), flavored milk, cheese
etc. New value added dairy products, innovative packaging, cold chain and new processing technologies offer
tremendous potential for technology suppliers, processors as well as service providers. The edge Indian dairy
sector has over Pakistan is that formal sector contributes around 30% of overall industry and has focused on
producing value added products with Cheese topping the list.
From the below table it can be seen that in terms of productive output India’s output is not much better than that
of Pakistan’s. It is able to be a leading milk producer due to the sheer quantum of it’s cattle.
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Structure of India’s Dairy Sector

Dairy cooperatives account for the major share of processed liquid milk marketed in India. According to National
Dairy Development Board (NDDB), there were around 160,000 village dairy cooperative societies in the country
in 2013-14 through which 12.5 million MT of milk was procured. At the end of March 2011, 1,065 units (including
cooperatives, private and Government) were registered. Processing capacity of private players was highest at
73.3 million litres per day (61%) followed by cooperatives at 43.3 million liters per day (36%) and government
players (3%).
Gujarat Co-operative Milk Marketing Federation Ltd., which sells products under brand name AMUL, is the leading
player in the dairy industry with a market share of 16% followed by Mother Dairy Fruit & Vegetable Pvt. Ltd. (9%),
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Karnataka Cooperative Milk Producers Federation Ltd. (8%) and GlaxoSmithKline Consumer Healthcare Limited
(6%).
Some of the major private players include Hatsun Agro (2%), Heritage Foods (2%), Nestle India (2%), Mother
Dairy Calcutta (2%), Hindustan Unilever (HUL) (1%), VRS Foods (0.9%), Britannia (0.7%) and Vadilal (0.7%).
Indian Dairy Exports

India’s export of Dairy products was 66,424 MT worth USD 0.17 billion during the year 2014-15. The major exports
destinations included Bangladesh, Pakistan, UAE and Nepal.
India’s share in the global milk trade has traditionally been low, due to:
 Limited quantity available for exports, after accounting for domestic demand
 Regular bans on export of high-volume products like milk powder by the government
 Indian dairy products prices are not competitive in global markets
Indian’s Journey to Success

India was primarily an import dependent country till early seventies. Most of the demand-supply gaps of liquid
milk requirements for urban consumers were met by importing anhydrous milk fat / butter and dry milk powders.
But with the onset of Operation Flood Program, the scenario dramatically changed and commercial imports of
dairy products came to a halt except occasional imports of very small quantities. In the 1990s, India started
exporting surplus dairy commodities, such as SMP, WMP, butter and ghee.
Innovation
Innovation and modernization have gone hand in hand in India’s Dairy Sector Development. Initiatives taken
to revamp the delivery system are a good example of innovativeness in India’s Dairy Sector. One such
innovation that changed the structure of the milk distribution system is the “Operation Flood” launched by
the Indian Government, specifically the National Dairy Development Board (NDDB).
Case in Point – Amul India
The farmer-owned Amul Co-operative in Anand, Gujarat, has become a model for all dairy development
projects in India. This model showed that an integrated approach along cooperative lines could enhance
production, procurement, processing and marketing of milk. Based on this success story of the 1960s, the
Government of India launched Operation Flood nationwide in 1970. This project was modeled on the Anand
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Pattern Co-operative and established organizations similar to Amul in other states of India. The purpose was
to provide a regularized and standardized link between the rural milk supply centers and the urban demand
centers.
3.3.4.1 Mechanism
The core of the project is the village milk cooperative. According to the Anand Pattern, a village cooperative
society of primary producers is formed under the guidance of a supervisor or milk supply officer of the Co-
operative Dairy Union (district level cooperative owning the processing plant). A milk producer becomes a
member by paying a nominal entrance fee. He must then agree to sell milk only to the society. The members
elect a managing committee headed by a chairman. This committee is responsible for the recruitment of
staff that is in charge of the day-to-day operations of the society. Each society has a milk collection center
to which the farmers take their milk in the morning and evening. Milk is procured from the farmers at the
village cooperative societies and is then sent to the district cooperative dairy union by trucks in cans or by
tankers from the bulk coolers located at the villages. It is weighed and tested for fat at the dairy docks and
then the milk is pasteurized. The dairy then converts the milk into liquid milk for sale and various milk
products as per the product mix provided by the state-level Dairy Federation which markets the products of
all the dairies in the state. Surplus milk from the dairies, after meeting the local liquid milk requirement and
converting into various products, is then sent to the Mother Dairies situated in metro cities by road milk
tankers or rail milk tankers (40,000 liter capacity). Liquid milk is generally sold in urban centers in plastic
pouches, which is packed at the district dairies. In metros, milk is also sold through bulk vending booths,
where consumers can obtain a measured quantity of milk by inserting a coin in an automatic machine. A
National Milk Grid has been formed by linking deficit areas with the surplus areas thus assuring proper
marketing of the milk and hence an assured return to the rural producers. For example, milk is sent across
a distance of 2,200 km (3,498 miles) from Anand in Gujarat to Calcutta in West Bengal by rail tankers.
3.3.4.2 Scope and Importance

Starting with 18 milk sheds or collection centers in the first phase, Operation Flood now organizes marketing
of milk from 179 milk sheds in over 500 towns. These milk sheds form the catchment area from where milk
is brought into the cities. In addition to organizing milk collection and marketing, the cooperative also
standardizes methods of procurement, processing and quality control of milk, assuring the producer/farmers
of fairness in these procedures. The number of farmers organized into village milk producers’ cooperative
societies is now 1,000,000 and the daily procurement of milk by the cooperatives is 13,000,000 liters per
day.
The importance of speed of operations should be emphasized, because 600 milk collection centers receive
milk from 60,000 farmers daily. On an average, if the saving in time per farmer were 10 minutes every day,
it would amount to a huge saving to the tune of 10,000 hours per day! The deployment of technology was
considered instrumental to realize such savings.
3.3.4.3 Technology Used
1) Electronic Milko-Tester
The conventional Gerber method takes 2 to 3 hours to ascertain the fat content of milk. This in turn leads to
a delay in the payment to the farmer as the payment is made strictly on the quality of milk. To overcome this,
Milko-tester was developed by a Danish firm that was later modified to Milko-tester Minor, a less complicated
version of the Milko-tester III. This model is not only economical but also simple to operate. Moreover, it is
suited to village conditions. The greatest advantage of this tester is the accuracy coupled with the rapidity of
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analysis of fat content. Rajasthan Electronics and Instrumentation Ltd. (REIL), in collaboration with Foss
Electric, Denmark started the commercial production of milko-testers in 1981 and sold about 26,000 units to
dairy cooperatives all over India.
2) The Micro-Processor-Based Milk Collection System
Milko-testers reduce the time taken to ascertain the quality and the fat content of milk which in turn helps in
overcoming all associated problems of the traditional method of testing such as storage of samples, and
handling of corrosive chemicals. However, the calculation and payment of bills remained as cumbersome as
ever since the bills were still being calculated manually. The NDDB, in 1988, took up a project to develop an
integrated milk collection system to effect immediate calculation and payment of bills to the farmer. For this
REIL and ATE Enterprises Ltd. developed prototypes that were tested in two villages in Kheda district,
namely Mogri and Bedwa.
REIL-developed milk collection system: This system has been operational in Mogri for the past several
years. It consists of three pieces of equipment, placed alongside each other: (a) the Electronic Milk Tester
(EMT); (b) the Milk Weighing System (MWS); and (c) the Data Processor (DP). The printer is a
supplementary piece of equipment. The EMT and the MWS are interfaced with the Data Processor (DP).
This system needs only three operators. Under this system each farmer is given a plastic card with a code
number as his or her identification. The DP reads the identification on the card and the farmer pours his milk
into a steel trough over a weigh-bridge. The weight of the milk gets displayed to the farmer and
instantaneously gets transferred to the DP in liters. One man is required to fill the cans after the milk has
been weighed, while the second operator takes a 5ml. sample of the milk and holds it up to a tube of a fat
testing machine. The hand lever of a machine is then moved thrice and the fat content of the milk sample is
displayed on the monitor and also transferred to the DP. A small printer attached to the DP gives a slip that
reads the farmer’s name, quantity of milk, percentage of fat and the amount of the payment to be made. The
calculations of the payment are made on the basis of a rate chart as the price of the milk depends on its fat
content. With this slip the farmer can collect his or her money from an adjoining window. The payment is
rounded to the closest rupee value and the balance is credited to his account the next day. The entire process
takes about 20 seconds. The DP has the added advantage of storing the transaction of milk collection of all
farmers of the shift. At the end of the shift the machine prints out the individual transactions along with the
grand totals.
Other functions made possible by this system are:

• Entry of year, date, cow/buffalo milk fat rate, shift and membership number into the DP at
initialization
• Erasing and rectifying any incorrect data that may have been fed in inadvertently
• Independent displays of the weight and fat content by the MWS and the EMT on individual display
ports
• Storage of weight and fat content figures in the memory of the DP and immediate printout of all the
necessary details to each farmer
• A memory capacity to hold the data for up to 1,000 farmers
• Data can be sent online to a PC via RS232C serial communication at the end of a shift.
ATE Enterprises Ltd. developed milk collection system: This system has been operational in the Bedwa
district for the past several years. The system is similar to the one developed by REIL except for some
additional functions such as:
A digital display port facing the farmer showing the farmer’s code number, quantity of milk, the fat percentage
and the total amount of money to be paid to the farmer. A battery backed RAM for the DP to enable storage
of all transactions for a period of 11 days. After this the DP can be attached to a standard dot matrix printer
which prints out all the transactions. This ledger is then sorted and processed by a ROM-based program.
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PC-based milk collection system: The micro-processor based milk collection system facilitates speedy
collection of milk, an efficient and accurate measurement of fat content and quick payment to the farmer.
The PC-based system not only enhances the speed of services at each cooperative, but also increases the
efficiency and reliability of overall operations. Among other things, it:
 Stores individual milk collection details on a suitable storage device for yearly analysis
 Facilitates the complete financial accounting of the cooperative society
 Maintains records of cattle feed, ghee1 and other local milk sale of the society Monitors the animal
breeding, health and nutrition programs
 Maintains records of the members, for instance, details of their land holdings and animals
The benefit of information technology (IT) to the societies is manifold. The number of people required for the
manual procedure has come down. Daily accounts can be obtained immediately. The computer can, within
moments, calculate the profits of the society on the basis of the data received from the dairy regarding the
payment made to the milk society for the previous day’s collection. The income and expenditure incurred by the
society can also be incorporated. Perhaps most significantly, the farmers are now ensured of correct and honest
payments.
3.3.4.4 Technological and Financial Support
When the NDDB financed the project in the early 1990s for the micro-processor based automatic milk collection
stations (AMCs) the cost was about $2,250 (approximately Rs 96,800), which included the micro-processor,
weighing machine, milko-tester, an 80 column dot-matrix printer, and an uninterrupted power supply. Prices have
now come down, and the entire set is available for about $1,800 approximately Rs 77,400).
In terms of technological support, intensive training was given to the operators. Service engineers on motorcycles
provided quick maintenance whenever required. Virus-proofing of the systems was also taken care of and back-
up procedures for data were defined. The NDDB has financial support from the untied foreign assistance funds
and the government budget in addition to other sources to sustain technological upgradation requirements. NDDB
has financed 200 such units under a scheme of 30 percent grant and 70 percent loan under Operation Flood III,
with a view to popularize this system in villages.
Farmers at the Automatic Milk Collection Station

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3.3.4.5 Implementation Benefits of the Automatic Milk Collection Station

Farmers were the main beneficiaries of this project. The main benefits of the automatic milk collection systems
as compared to the conventional methods are as follows:
 Immediate payment for the milk delivered
 Accurate information about the fat content, quantity of milk and the payment due to the farmer is displayed
 Accuracy in weighing the milk on the MWS as against the manual process where milk was weighed using
measuring containers which very often led to a financial loss to farmers
 Immediate testing of the quality of milk as against testing after 2 to 3 hours of collection
 The card reader unit ensures speed of operation and an error-free entry of identification number of the
farmer
 The elimination of manual registers for all kinds of information and data storage
Challenges
In a recent report published by the Kingdom of Netherlands, the below opportunity areas have been identified for
Indian Dairy Sector:
1. Milk Procurement - Processors are investing in back end infrastructure to ensure availability of good
quality raw milk. Companies also engage closely with farmers to provide veterinary and paraveterinary
support, cattle breeding and nutrition management, to ensure better health of cattle and quality milk
supply. Hence there is need for new technologies in adulterants testing, chilling and storage of raw milk
along with technical expertise in farm management practices.
2. Processing - Companies are diversifying into high margin value added products like Cheese, UHT milk,
Ice cream, Whey based products etc. Majority demand of the traditional Indian dairy products like Curd,
Paneer and Butter Milk is catered by the unorganized sector. With gradual shift of consumer towards
packaged dairy products there will be demand for new economically viable technologies for
manufacturing of these products.
3. Packaging – There is potential to introduce new packaging format for dairy products in the market.
Companies are looking out for innovative packaging solutions which are economically viable for value
added dairy products like cheese, long shelf life milk, ice cream, flavored milk etc. to ensure better quality
and improved shelf life.
From the above opportunity areas it is clear that India is standing far ahead of Pakistan when it comes to
development in the dairy sector. The biggest edge India has is the contribution of the organized sector which is
around 60%. In terms of the basic fundamentals, India also is working towards improving milk output and quality
through better management and feeding practices of their cattle yet the scope at which these issues plague India
is far less than that of Pakistan.
Conclusion:
The cheap and credible technology described illustrates how the delivery system has been improved by ensuring
prompt payment to the farmers and instilling their confidence in the cooperatives set-up, and also minimizing the
problem of adverse selection and defeating corruption. It is one of the several ways in which the NDDB has dealt
with problems by using state-of-the-art technology. Other improvements and innovations have been in breeding
and feeding technologies, and in processing and delivery infrastructure.
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4 Future Prospects
Outlook – Pakistan Dairy Market

The Federal budget has withdrawn zero rating facility
on dairy products which includes packaged milk and
additionally, 10% sales tax is imposed on such items.
This will increase the cost of milk as the input sales
tax, which was previously claimable, will now become
part of cost thus increasing the cost of goods sold.
The dairy companies cannot absorb all the
incremental cost and some of the portion will be
passed on to the consumer by initiating a price
increase for their products.
Since the market is very attractive based on the
statistical data, we have seen some foreign direct
investment (FDI) in Pakistan and the acquisition of
Engro Foods by Royal Friesland Campina (RFC) is
the recent development. RFC has acquired 51%
stake in the company in order to obtain a key position
in Central Asia as Pakistan is the 3rd largest milk
producer in the world.
RFC aims to increase the consumption of packaged
milk in the region by investing in the entire
infrastructure of the company.
Pakistan is market where the middle class segment is
growing in addition to the urbanization rate. These
factors reflect the potential of dairy segment in the
country and the transformation from loose to
packaged & pasteurized milk.
Pakistan’s population is growing by 1.7% a year, and liquid dairy consumption is expected to grow at a CAGR of
2.8%. Milk has always played a central role in the Pakistani diet but with demographic changes driving new
preferences for packaged milk, the era of nothing but plain, white unpacked milk is rapidly changing.
34 | P a g e

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CORPORATE STRATEGY

2005 CE - Organic Milk's Popularity Continues to Grow.................................................................. 12

1 Worlds Milk Industry Evolution & History

1.1 8000 BCE to 63 BCE

8000 BCE - Origins of the Domestic Cow

Aurochs were first domesticated 8,000 to 10,000 years ago in the

Some scientists believe that domesticated cattle from the Fertile

4000 BCE - Early Evidence of Milking Cattle in Neolithic Britian

Through analyzing degraded fats on unearthed potshards, scientists

The dairying activities of these European farmers may have begun as

Although there is evidence of cattle domestication in Mesopotamia as

Archaelogical evidence shows that the Ancient Sumerians drank cow's

3100 BCE - The Domesticated Cow Appears in Ancient Egyptian Civilization

At least as early as 3100 B.C.E., the domesticated cow had been

In Ancient Egypt, the domesticated cow played a major role in

By 2000 B.C.E, the domesticated cow had appeared in Northern India,

1700BCE-63 BCE - Milk in Ancient Hebrew Civilization and the Bible

1.2 1535 CE to 1776 CE

The first cows were brought to Plymouth colony in 1624.

1679 CE-1776 CE - Milk and the Spanish California Missions

1.3 1800 CE to 1899 CE

In 1796, English physician Edward Jenner developed a vaccine for

"Recognizing that dairymaids infected with cowpox were immune to

In the United States, compulsory smallpox vaccination was introduced

"Confined to filthy, manure-filled pens, the unfortunate cows gave a

1822 CE - 1895 CE - The Process of Pasteurization is Developed by Louis Pasteur

French chemist and biologist Louis Pasteur, considered one of the

Pasteur's research demonstrated that harmful microbes in milk and

Mar. 23,1883 CE – The New York Milk War

These "spilling committees" created a "milk famine" in New York City

"In late March, 1883, a temporary settlement was reached between

1884 CE - First Glass Milk Bottles Patented

In the mid-to-late 1800s milk-born illness was a major problem.

Milk produced at unhygienic production facilities (like distillery dairies)

1895 CE - Commercial Pasteurization of Milk Begins

1899 CE - Milk Homogenizer Is Patented

1913 CE - Typhoid Epidemic in New York City

1914 CE - The First Milk Tanker Trucks Are Introduced

1917 CE - Mandatory Pasteurization of Milk Begins

1922 CE - Capper-Volstead Act Passed

1933 CE - Sioux City Milk War

1937 CE - First Milk Marketing Orders Initiated

1937 CE - First Milk Marketing Orders Initiated

1.5 1950 CE to 1999 CE

1950s CE-1960s CE - Square Milk Carton Introduced

The square shape allowed more milk to be carried and displayed in a

1990 CE - Fluid Milk Promotion Act

1990 CE - Fluid Milk Promotion Act

"The Food Guide Pyramid was introduced in 1992 to illustrate a food

1995 CE - Dairy Management, Inc. (DMI) Formed

1997 CE - Harvard Study on Milk and Bone Health Released

1998 CE - National Raw Milk Campaign Initiated

1.6 2000 CE to Present

Dec. 2001 CE - Merger Forms Largest US Dairy Producer

2004 CE - Milk and Weight Loss Ad Campaign Initiated

The advertising campaign ran television, print and internet advertising

2005 CE - Organic Milk's Popularity Continues to Grow

2005 CE - USDA Dietary Guidelines Released

As of Oct. 31, 2007, the case is still pending.

2007 CE - Japanese Man Creates Beer from Milk

2007 CE - Milk and Weight-Loss Claims

Jan. 8, 2008 CE - FDA Approves Cloned Milk for Human Consumption

2 Comparative Analysis of World’s Milk Industry