Global business insights for Myanmar’s nascent dairy industry

Myanmar’s growing economy is driving a shift in people’s dietary patterns and increasing the demand for

dairy products, especially in urban areas such as Yangon and Mandalay. The Burmese population has

traditionally consumed large quantities of sweet condensed milk, served in numerous teashops around the

country, but dairy consumption is not limited to sweet condensed milk. Through various nutrition

campaigns and school milk programmes, the government is encouraging the consumption of Ultra-Heat

Treated (UHT) milk from an early age to tackle malnutrition. However, domestic production of fresh milk is

currently underdeveloped and limited by poor infrastructure and an unstable supply of electricity. To meet

this growing demand, the country imports large amounts of UHT milk from Thailand and New Zealand and

in 2013 imported US$40 million worth of dairy products.

Global Leaders Programme Round-up Hong Kong & Yangon, Myanmar 1 – 12 September 2014

Yangon, Myanmar’s former capital, has a population of 2.5 million people and is located at the intersection of the Yangon and Bago Rivers. As the country’s economic and trading hub, Yangon accounts for 23 percent of Myanmar’s GDP and is attracting considerable interest from foreign businesses and investors.

Today, the existing milk industry in Myanmar is

characterised by condensaries and processors in and

around Yangon and Mandalay Division. It also consists of

smallholder farmers on marginal plots of land. Although

smallholder farmers account for almost 85 percent of

milk produced, many are ill-equipped to improve their

production by tackling issues of health and hygiene or

animal husbandry. The growing demand for quality dairy

products and the availability of raw milk create an

opportunity for a dairy business producing local fresh

milk to capitalise on this demand whilst adding value

along the supply chain.

Woman selling local fresh milk at a roadside stall in downtown Yangon.

For the experiential component of ORIX’s 3rd Global

Leaders Programme (GLP3), GIFT partnered with Yoma

Strategic Holdings (Yoma) and Serge Pun & Associates

(SPA Group), a leading Burmese conglomerate with

businesses in land and construction, automobile services,

banking and agriculture.

The group worked with Myanmar Dairy Nutrition (MDN),

a new subsidiary of Yoma/SPA to expand the Group’s

business operations into the agricultural sector.

Twenty-six ORIX managers from 19 nationalities joined

the GLP from a range of business units and regional

offices. They were accompanied by five managers from

the Yoma/SPA Group.

Within a short yet intense week in Myanmar, the group

would have to navigate through conflicting viewpoints

and learn to hone a greater sense of empathy to form a

high-performance team. With valuable insights from key

resource people from Yoma/SPA and well-seasoned

agricultural experts, the team was equipped to produce a

tangible and comprehensive report with real-world

implications, adapted to the Burmese context.

Tin Htut Oo, CEO of Myanmar Agri-Tech (MAGT) introduces GLP participants to the agricultural sector

in Myanmar.

Insights into a unique socio-economic environment

Andrew Rickards, CEO of Yoma, sharing the group’s plans to expand into agribusiness.

Participants discussing the business model for a dairy business in Myanmar with Karim Rushdy, GIFT’s Head of Programmes.

GLP participants from Kazakhstan and Myanmar and the MDN team visiting smallholder farms outside Yangon.

Before travelling to Myanmar, participants spent a week in Hong Kong debating the roles of business and

government in society, the impacts of globalisation and the various adaptations of capitalism around

Asia. They engaged in dynamic discussions on some of the most pressing business issues of our time

including the under pricing of natural resources, externalities and the shifting social contract between

the public, private and civil sectors. The also discussed the role of media in shaping our understanding of

the world. Given these rapidly changing contexts, participants also reflected on their own company’s

culture and their respective roles and responsibilities within the company.

ORIX participants critically examine Asia’s most pressing business issues.

From left to right: Joe Chou (Taiwan), Jihyun Kim (Korea), Liezl

Romeo (Philippines), Daisuke Morita (Japan) and Khalaf AlMutairi (Saudi

Arabia).

Mrs. Anson Chan, former Chief Secretary for Administration of HKSAR, with

Chandran Nair, GIFT Founder and CEO

Prominent speakers complemented the GIFT programme by

offering their perspectives and anecdotes on a variety of topics.

Mr. Frederick Tsao, Chairman of IMC Pan Asia Alliance Group,

communicated the values that motivate and drive his business.

Mrs. Anson Chan, Former Chief Secretary of HKSAR, gave an

inspiring account of her role leading a 190,000-strong civil

society during the Hong Kong handover. Mr. Graham Barkus,

Head of Organisation Development and Change at Cathay

Pacific Airways and Swire Properties, shared insights for leaders

in large organisations to anticipate the changes taking place in

their business environment. Mr. Amirali Nasir addressed how

different value systems can influence an individual’s personal and

professional development and shape management theories.

In the classroom – critical thinking about global issues

At the end of the first week and ahead of their journey to Yangon, participants discussed their initial

assumptions about the field project and business model. These assumptions were challenged when

participants were given an opportunity to see for themselves the shortfalls of the Burmese dairy sector,

to learn first-hand from stakeholders about their relationship with other players in the value chain and to

find out more about current consumption trends of dairy products.

Although there are examples of successful dairy

businesses in places like Pakistan, India and Vietnam,

it was important for the group to apply and adapt their

learnings to the local Burmese context. Key resource

people and consultants working for the Yoma/SPA

group provided valuable insights into the existing

dairy industry, specifically around current animal

husbandry practices, the provision of veterinary

services and quality control mechanisms.

Participants met with smallholder farmers, traders,

transporters and processors in their workplaces to

witness and experience for themselves the realities

faced by stakeholders in the value chain. These

meetings helped to gauge the current status of

infrastructure development in and around Yangon and

to gain a better sense of the challenges and

opportunities in the dairy sector.

The group identified a number of issues, including land

constraints for grazing, strong but informal

relationships between producers and purchasers, a

lack of domestic technical expertise and insufficient

financing options for farming inputs. The group also

quickly realised that procuring raw milk only from

smallholder farmers was not feasible for a viable dairy

business due to quality issues and quantity

constraints.

Participants visiting a smallholder farm.

Dr Yan Aung, Chairman of the Myanmar Ruminant Association sharing his expertise on animal husbandry.

Participants and MDN team meeting with the Chairman of the Insein milk collection centre and with dairy producers.

Bridging the gap between the classroom and reality

After analysing the information gathered over previous days, participants formulated new ideas which

turned the apparent challenges in the dairy industry into tangible opportunities for MDN’s aspiring

business.

The group’s key recommendations to MDN include:

• Acquire land and cattle for the establishment of a parent farm and fresh milk processing facility to

control quality standards and ensure sufficient volumes of quality raw milk are produced in-house;

• Develop an educational and training programme for member farmers to obtain input from technical

experts in animal husbandry and access products and services at subsidised prices to improve farming

techniques and increase the quality and quantity of output;

• Increase production volumes by procuring higher quality raw milk from smallholder farmers using

mobile milk hubs to collect raw milk straight from the farm gate. The mobile milk hubs minimise the

risk of contamination and ensure the refrigerated storage and transportation of raw milk to the

processing facility;

• Consider offering shareholding opportunities for founding members to gradually increase smallholder

engagement, strengthen relationships with milk producers and secure a steady supply of raw milk

over time;

• Diversify MDN’s portfolio of dairy products to include yogurt and ice cream to meet the expected

demand of a growing middle class and a booming tourist industry.

Participants working into the night to build out the business plan for the dairy business and make recommendations for an inclusive dairy supply chain.

New business model for an emerging industry

New product design produced by participants.

At the end of the two-week programme, the team

presented a compelling case to support MDN’s vision

of becoming Myanmar’s leading dairy enterprise for

the production and processing of high-quality fresh

milk in a way that is inclusive and supportive of

existing dairy producers.

The proposal was presented to senior management

from the Yoma/SPA Group, and to representatives

from the private sector (NEC APAC, ORIX, ACLEDA

Bank), development organisations (ILO, BRAC, LIFT

Fund) and the media. The plan was met with

enthusiasm, not least by Serge Pun, Chairman of

Yoma/SPA, who has built one of Myanmar’s most

reputable businesses.

Yoma/SPA is now planning for further due diligence

on the proposal, a testament to the Group’s

commitment to establishing viable local businesses

with far-reaching social and economic benefits for

the Burmese population.

For more information on this project or the Global Leaders Programme in general please contact Helena Lim (GIFT Programme Manager) at hlim@global-inst.com or +852 3571 8133

Participants present the proposal for a dairy business at a forum in Yangon.

Jerry Westmore, Group General Manager of Yoma, asking a question to panelists after the presentation.

Below: the group poses with Yoma/SPA senior management including Serge Pun, Chairman of Yoma/SPA, Melvyn Pun, CEO

of FMI, Andrew Rickards, CEO of Yoma, Tin Htut Oo, CEO of MAGT, and Arne Lugeon, Group Head of HR, and GIFT senior

mentor Prof. Hideh Takahashi.

Sharing the ideas with a wider audience