East Africa Dairy Development Project (EADD)Uganda Dairy Market Study

Presentation of FindingsFebruary 2015 | Tig Marketing Consults

Introduction

— EADD focuses on helping smallholder dairy farmers in East Africa to:— Enhance dairy production and market access

— Double their dairy-related incomes by increasing ownership of improved breeds, increasing milk

Market Study Overview

ownership of improved breeds, increasing milk production and improving access to markets

— EADD carried out a market study to:— Assist in the developing strategies to increase milk

consumption and expand dairy markets in Uganda

Objectives

• Identify and quantify types of milk and milk products consumed in Uganda

• Identify the different market segments and describe the key factors that drive the consumption of dairy products

• Assess each consumer segment’s perception and understanding of various milk products

Market Study Overview

of various milk products

• Determine the availability and prevalence of processed dairy products by competitive brand in Uganda retail outlets

• Assess the current marketing and distribution strategies employed by milk processors, traders, and producer organizations

• Identify the challenges affecting milk collection, processing, and marketing, and make recommendations

Scope

The scope of the market study assignment entailed the following five main components:

• Milk collection and processing and marketing Milk consumer segmentation

• Household milk consumption

Market Study Overview

• Household milk consumption• Milk retail study• Social impact on milk consumption

Methodology

— Both qualitative and quantitative approaches (the majority of the data was qualitative)

— Review of secondary data— Milk production volumes— Number of milk collection centers

— Meetings with stakeholders/key informants— Regional level

Market Study Overview

— Regional level— National level

— Focus group discussions— District Veterinary Officers (DVOs)— Dairy farmers— Processed and raw milk dealers— Dairy processors

— Household survey interviews on milk consumption

Milk Value ChainFindings: Milk Collection and Marketing

Milk Production(1.9 billion litres per

year)

Milk Marketed

Milk Processing(into liquid milk & milk products)

Milk Marketing

(distributed to

consumers)

70% 20% 90%

year)

Consumed on Farm

products)

Sold as Raw Milk

consumers)

30% 80%

Exported

10%

Collection centers: Rural vs. Urban

Milk Collection Centers (MCCs)

Milk OutletsMilk Capacity

per Day (Litres)

Milk Collection and Marketing

The number of urban installed coolers and outlets is more than the number of rural collection centers. The trend for milk chilling is now shifting from

rural to urban areas.

Centers (MCCs)(Litres)

Rural 308 Not Applicable 1,009,934

Urban/Peri-Urban

929 657 1,234,478

Note: MCCs are used by farmers to bulk milk, while milk outlets are used by traders to sell raw milk mostly in urban centers - both use milk coolers.

Rural Milk Collection Centers by regionMilk Collection and Marketing

• There are 308 rural milk collection centers countrywide

• The South- western region is leading with 67%, the central region has 21%, mid-western region has 21%, mid-western has 7%, northern region has 4% and eastern has the least with 1%

• There is a large imbalance in the rural milk collection regional infrastructure

Milk Processing

— Currently there are about 45 large, medium and small scale processing plants registered with DDA, producing mainly pasteurized milk, UHT milk, yoghurt, powdered milk,

Milk Collection and Marketing

Installed Capacity1,353,700

litres

720,190 yoghurt, powdered milk, cheese, ghee and ice-cream.

— Their utilization processing capacity was at 53% in 2014. This is mainly due to inadequate marketing strategies and low milk supply during dry season.

Utilization Capacity720,190

litres (53%)

Level of Inefficiency47%

Source: DDA Reporting, 2014

Milk consumer Segmentation

Unprocessed Milk Segment

• Milk sold in cups, bottles, polythene bags

Processed Liquid Milk Segment

• Pasteurized milk, UHT milk and flavored milk

Processed Milk Products Segment

• Yoghurt, Ghee, Ice cream, Butter Cheese, Powdered Milk, Bongo, etc

Segmentation

Milk, Bongo, etc

— The initial segments identified were: Unprocessed & Processed milk

— Processed milk is further sub-divided into: liquid milk & milk products

Note: Attempts were made to profile milk consumer segments based on geographic, demographic, socio economic and psychographic profiles because the initial two segments did not present significant differences in consumption behavior.

Unprocessed Milk Processed Liquid Milk Processed Products

GE

OG

RA

PH

ICA

L • Rural areas (especially cattle keeping regions), urban areas, towns and town suburbs

• Buy directly from farmers, bicycle sellers, coolers and shops that have fridges and stock milk in cans, buckets and other

• Urban areas, towns and city suburbs

• Buy from supermarkets and shops

• High end parts of town and urban dwellers

• Buy from supermarkets and shops

Geographic & Demographic ProfilesSegmentation

GE

OG

RA

PH

ICA

L

cans, buckets and other containers

shopsshops

DE

MO

GR

AP

HIC

Large families, children, expectant mothers, elderly and the sick

All ages but specifically for young, youth and the

elderly

• All ages for ghee, butter and cheese

• Ice cream and yoghurt is mainly for the young and the youth

Socioeconomic & Psychographic ProfilesSegmentation

Unprocessed Milk Processed Liquid Milk Processed Products

SO

CIO

EC

ON

OM

IC

• Low, middle income earnersand farmers themselves

• Most consume milk as a tradition

• Taken as liquid plain milk, in tea/coffee or added in porridge and sometimes in foodSpend less on milk and buy

• Working class, middle and high income earners and expatriate community

• Spend more money on milk purchases and buy larger

• High income families for: cheese and butter

• People with high disposable income

• Have travelled and lived in the western world

• Expatriate familiesFor bongo, they are rural

SO

CIO

EC

ON

OM

IC

and sometimes in food• Spend less on milk and buy

fewer quantities

on milk purchases and buy larger quantities

Expatriate families• For bongo, they are rural

traditional families

PS

YC

HO

GR

AP

HIC

• Raw milk is believed to be nutritious, fresh, pure and better in quality than processed milk

• The taste attribute is considered more in this profile

• Quality as a major attribute to milk consumption

• Processing of the milk increases milk quality

• High quality, luxurious consumers

• For bongo they are rural and traditional families

Influencing Factors

UnprocessedMilk

Processed Liquid MilkProcessed Milk

Products

1. Affordability

2. Availability andconvenience

3. Traditions and

1. Quality

2. Promotion/branding

3. Convenience

• Yoghurt: Health

• Ice cream: Indulgence

• Ghee: Flavor

Segmentation

3. Traditions and occasions

4. Perceptions (+ and -)

3. Convenience

4. Occasions

Ghee: Flavor

• Butter: With bread

• Cheese: Food

— Influencing factors affecting buying of unprocessed and processed liquid milk were analyzed and later ranked based on the most mentioned

— For milk products, the factors indicated are the most mentioned on each product

JM52

Slide 13

JM52 Are there any main insights / takeaways for this slide from the data?Jennifer Mok, 2/8/2015

Consumer NeedsSegmentation

Nutrition Refreshment Luxury

ü üUnprocessed Milk

Elite & high income: nutrition

Consumed by all ages in all regions of Uganda

Consumer Breakdown

ü ü

ü ü

Processed Liquid Milk

Processed Milk Products

Yoghurt, Cheese, & Butter: NutritionIce Cream: Luxury (e.g. an outing)

Elite & high income: nutritionLow income: refreshment (e.g.

drinking directly from pack)

Household penetration Milk Consumption per Capita

— Uganda’s per capita milk consumption is growing at an estimated average rate of 7% per annum

— In Uganda, approximately 30% of the milk produced annually is consumed on farm while 70% is marketed (DDA Databases, 150

200

250

Per Capita Consumption

WHO Recommendation: 200 L

marketed (DDA Databases, 2013)

— Of the 70% marketed milk, only 20% is processed

— The household study shows that majority households (54.7%) consumed unprocessed milk compared to processed liquid milk in Kampala city

100

5440 43

0

50

100

Kenya Uganda Tanzania Rwanda

Type of Dairy ProductAverage Monthly

Consumption

Unprocessed milk (N=1047) 25.2 litres

Pasteurized liquid milk (N=721) 20.6 litres

UHT milk (N=321) 14.9 litres

Flavored milk ((N=136) 14.5 litres

Consumption by Volume

— For milk products the averages seem to be on a higher side if you look at it from the national average

— The majority of the respondents were from Kampala (85%); therefore it reflects more of Kampala city consumers

Household Penetration

Bongo (N=193) 9.6 litres

Yoghurt (N=821) 6.7 litres

Ice cream (N=592) 4.3 litres

Powdered milk (N=218) 3.8 kg

Cheese (N=53) 2.2 kg

Butter (N=138) 2.0 kg

Ghee (N=591) 1.8 kg

Kampala city consumers

Note: Average consumption is per month for a household of about 6 people.

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

Perc

enta

ges

ofR

espo

nden

ts (%

)

Purchasing FrequencyHousehold Penetration

Daily Weekly Once in 2 weeks Monthly

Unprocessed milk (N=1034) 68.7 23.8 6.4 1.2Processed liquid milk (N=397) 49.6 37.0 10.3 3.0Processed Milk products (N=329) 12.8 29.8 26.7 30.7

0.0

10.0

— Most households purchase both unprocessed (68.7%) and processed liquid (49.6%) milk daily

— Processed milk products were the least purchased on a daily (12.8%) or weekly (29.8%) basis but mostly purchased on a monthly basis (30.7%)

Grocery market0.0

10.0

20.0

30.0

40.0

50.0

60.0

Perc

enta

ge o

f R

espo

nden

ts (%

)

Point of PurchaseHousehold Penetration

Grocery market

Dairy Farmer

Bicycle seller

Milk Cooler Shop/ Super Kiosk Others

Unprocessed milk(N=1065) 22.5 30.8 33.1 7.7 0.0 2.3 3.7Processed liquid milk (N=401) 0.0 0.0 0.0 53.4 45.4 1.2 0.0Processed milk products (N=455) 18.0 3.1 6.8 24.2 43.3 2.0 2.6

— Majority respondents get unprocessed milk from coolers (33.1%), followed by persons on bicycles with cans (30.8%), and dairy farmers (22.5%)

— Note: The processed milk products under dairy farmers, bicycle sellers and milk coolers are mainly ghee and locally processed yoghurt

<15,000 15,000- 30,001- 75,001- Above 0.05.0

10.015.020.025.030.035.040.0

Perc

enta

ge o

f R

espo

nden

ts (%

)

Amount Spent on Dairy

Dairy Expenditures (Absolute)Household Penetration

<15,000 15,000-30,000

30,001-75,000

75,001-150,000

Above 150,000

Unprocessed milk (N=1023) 27.4 32.4 32.6 6.8 0.8Processed liquid milk (N=393) 28.8 23.9 36.6 8.9 1.8Processed milk products (N=436) 37.6 27.5 26.4 6.2 2.3

— About the same proportion of households (32.4% and 32.6%) spend 15,000 –30,000 UGX and 30,000 – 75,000 UGX per month on unprocessed milk

— Most households (36.6%) spend 30,000 – 75,000 UGX per month on processed liquid milk

— Expenditure on milk products is less than 15,000 UGX per month

1 – 5% 5 – 10% 10 – 20%Above

0.010.020.030.040.050.060.0

Perc

enta

ge o

f R

espo

nden

ts (%

)

Proportion of Income Spent on Dairy

Dairy Expenditures (Relative)Household Penetration

1 – 5% 5 – 10% 10 – 20%Above 20%

Unprocessed milk (N=1011) 53.4 35.8 8.5 2.3

Processed liquid milk (N=390) 55.1 30.8 9.2 4.9

Majority of respondents spend less than 5% of their income on milk in all product segments.

Influencing FactorsHousehold Penetration

Level of income / economic class

Availability of milk & milk products

Lack of effective marketing

1

2

3 Lack of effective marketing

Cultural & traditions

Nutritional value

Health reasons

Factors affecting milk consumption at household level were ranked based on most mentioned.

3

4

5

6

Neighbours’ Milk Collection Centre (MCC)

Traders who have coolers

Dairy Farmer

Bicycle Traders who mount milk

Distribution Network: Raw MilkMilk Retail market dynamics

have coolers in rural areas

Milk Processors

Traders in urban centres who wholesale or retail to final consumers’

mount milk cans on bicycles /motorcycles

Final consumer

— The raw milk distribution network is more complex as seen in the chart compared to the processed milk network

— The raw milk operations are expanding more in the urban areas with more milk outlets and coolers in urban areas

Distributors

Milk processors

Distribution Network: Processed MilkMilk Retail Market dynamics

Milk Agent Milk Agent

Final Consumer

Retailer

The processors use this type of distribution system of three levels, which brings in efficiency in distribution.

Retailer Retailer

Market Share by Processed Milk Packs

Product Market SharePasteurized Milk

1000ml 25%500ml 75%

UHT Milk500ml 33%

Milk Retail Dynamics

500ml 33%250ml 67%

Yoghurt(Sachets) 400ml 70%

(Cups) 250ml 30%

The data suggests that smaller packs are preferred in the market.

Shelf Space Share of Primary Products

Product Shelf Space Share (%)Pasteurised milk 64%

UHT Milk 26%

Milk Retail Market Dynamics

Yoghurt 10%

TOTAL 100%The assessment is for pasteurized milk, UHT and yoghurt - the main products

on the market - for the main brands i.e. Fresh Dairy, Jesa, GBK, Highland, Hillside, Rainbow, Mama

Omulungi, Mega, Brookside (Dairy Fresh).

Milk ATM - New Retailing Trends

Case of ‘Moo Milky Bar’ Wandegeya, Kampala

Milk Retail Market Dynamics

• Moo Milk Bar uses a milk vending machine (Milk ATM) to dispense milk using coins or cards

• Customers load money on their cards, which they use whenever they come to buy milk from Moo Milk Bar

• The milk bar receives pasteurised milk from milk processor• The plan of the proprietor is to have more milk vending machines in

Kampala and other urban centres in Uganda

Social Trends

— Consumption of yoghurt as a form of food in all regions of Uganda.

— Parents taking their children out for ice cream mostly in urban centres.

— “Bongo” (local yoghurt) is coming up as a serious item on local restaurants in urban centres.

Social Factors Study

centres. — Increasing consumption of cheese in first

foods restaurants e.g. pizzas, sandwiches and buggers mostly in Kampala

— Ghee (eshabwe) consumption of ghee is no longer a cultural issue, it has become a serious business especially in the South-west, Mid-west and Kampala city. This call for regulation and offering extension services to ensabwe micro processors.

Beliefs and Perceptions

— Milk and milk products cause weight problems

— Drinking too much milk causes laziness

— Milk mixed with cow urine cures skin and stomach diseases e.g. in Karamoja

— Processed milk has less nutrients (losses them during processing) has chemicals and has a funny tastes

— Taking yoghurt or bongo gives a good skin

Social Factors Study

— Taking yoghurt or bongo gives a good skin

— Yoghurt and ice cream are a healthy snacks and better than carbonated drinks

— Yoghurt helps people with stomach ulcers

— Yoghurt is believed to be a complete meal, easily digested

— Yoghurt boosts immunity in patients and fighting genital- urinary infections

— Women take milk and yoghurt to boost their sexual health and treat candida

— Ghee is a medication for fractured limbs and also used in massages when mixed with local herbs. It believed to give one a smooth skin

Challenges

Milk Collection

• Lack of strong and organised milk marketing structures and bulking centres

• Low milk collections during dry season

Milk Processing

• Low utilizationcapacity by processors

• 18% VAT on processed milk and milk products

Milk Marketing and Retailing

• Limited milk markets during the wet season

• Lack of adequate milk consumer education and campaign to increase milk

Milk Markets Challenges

during dry season• Inadequate chilling

facilities and milk tankers for transportation

• Low quality milk• Undeveloped road

infrastructure and unstable power

milk products increase milk consumption

Recommendations

Milk Collection

• Organizing, Forming and Strengthening Dairy Farmers Co-operatives

• Formation of a dairy cooperative at each district level

• Dairy farmers should belong to a dairy cooperative society

Milk Processing

• Encouraging Business Partnerships

• Milk Processors to Undertake Product diversification

Milk Marketing & Retailing

• Farmers’ cooperatives should be used as vehicle to promoting milk drinking in rural areas

Market Study Recommendations

dairy cooperative society• Cooperatives should address

quantity, quality and hygiene of milk• Government and development

partners to champion dairy cooperatives

• Address the imbalance and increase the milk collection and cooling infrastructure in regions with less collection capabilities

• Undertake a campaign for households to own cows

Undertake Product diversification

• Promoting a cheese eating segment

• Promoting yoghurt processing at local level

• Financial support

milk drinking in rural areas

• Promoting a strong school milk campaign in the country

• Consumer education on the usefulness of milk and campaigns to increase milk consumption

General Recommendations• Organizing a National Dairy Conference• Creating and updating dairy sector data

Strategy Direction & Outcomes

To increase consumption of milk / milk products among groups, areas, institutio

GO

AL

O u t c o m e s

ü Increased Affordability / Lower price of milk/milk products

ü Create Awareness of Health Benefits from milk/milk products

ü Change peoples perceptions / Attitudesgroups, areas, institutions, markets, or peoples who currently exhibit stagnant or nonexistent dairy consumption patterns.

ü Change peoples perceptions / Attitudestowards milk/milk products

ü Increased Availability of milk/milk products

ü Increased access to milk/milk productsü Improved Quality of milk/milk productsü Milk / Marketing Structures

Strengthened ü Policy / Governance systems in the

dairy industry Strengthened

Outcome Indicators Overview

Outcome Indicators Description / Rationale

Affordability / Lower Price

• According to 2015 dairy market study, affordability / price was the highest driver of household milk consumption

• Majority of Ugandans spend less than 5% of their income on milk / milk products• In relation to other drinks (soda, juice, etc.), milk / milk products are one of the highest prices• Prices are driven by a milieu of factors, including high production costs and availability

Awareness of Health Benefits / Usage

• Due to the lack of education, most people do not understand fully the nutritional benefits of milk / milk products, especially in comparison with alternative drinks

• Most Ugandans take milk in the same forms and do not practice other milk usages, such as milk products, cooking / baking with milk, eating with cereal, etc.

Increased Promotions / • In the past, not much emphasis and resources have been devoted to the marketing of milk and milk

products, on all levels of the value chain

S T R AT E G I C P R I O R I T I E S

Increased Promotions / Campaigns

• In the past, not much emphasis and resources have been devoted to the marketing of milk and milk products, on all levels of the value chain

• Children grow up seeing advertisements and campaigns on alternatives (sodas, juice, etc.)• There are little / no campaigns that promote milk drinking, especially among leaders

Positive Perceptions / Attitudes

• Many think milk is only for the young or elderly, or that processed milk is unclean• Negative perceptions of milk start at the household level and are pervasive in many communities

Increased Availability • Poor infrastructure, lack of distribution / retail outlets, and high transportation costs for the cold

chain are factors that limit the availability of milk, especially in rural areas• Most consumers buy milk from wherever is most convenient and / or closest

Higher & Trusted Quality

• Milk is adulterated at all levels of the value chain, including farmers, traders, processors, retailers, and consumers due to poor milk handling

• Many Ugandans trust imported milk and certain brands only due to the quality perceptions

Strengthened Milk / Marketing Structures

• There are currently many potential marketing structures that are not built or utilized to its capacity (e.g. producer organizations or member associations marketing their own milk)

• Poor governance, mistrust, and informal trade all contribute to inefficient structures

Strengthened Policy / Governance

• Policy and standards are often not implemented (e.g. quality) due to lack of resources• Poor governance often causes marketing structures and milk quality to crumble

W1

Slide 32

W1 I think we should end our presentation on Slide 20WALEKHWA, 4/14/2015

Strategic PrioritiesS T R AT E G I C P R I O R I T I E S

ASTRENGTHEN VALUE

CHAIN GRASSROOT/APEX ASSOCIATIONS

BPROMOTE THE

Increased consumption of milk / milk products

among BPROMOTE THE

CONSUMPTION OF MILK & MILK PRODUCTS

CCREATE A SUSTAINABLE & INFORMAL PLATFORM FOR

DECISION MAKING, DISCUSSIONS, A

ND COOPERATION

among groups, areas, institutions, markets, or peoples

who currently exhibit stagnant or nonexistent

dairy consumption patterns.