Bottling Hope in Africa
Land O’Lakes providing boost
to Ugandan dairy industry
By Todd Thompson,
Country Manager
Land O’Lakes Inc. — Uganda
E-mail: tthompson@landolakes.co.ug
ost people know Land O’Lakes, Inc. as the producer
of America’s top butter brand, one of the
country’s leading farmer-owned cooperatives and
a major player in agricultural supplies. But few
are aware that the dairy cooperative giant has an
International Development Division that has been helping farmers
and rural businesses increase productivity in developing
countries around the world for 25 years.
In the east African country of Uganda, Land O’Lakes has
been implementing a private sector-based dairy development
project since 1994. The project provides technical assistance at
all levels of the dairy value chain — from smallholder farmers to
milk-bulking cooperatives and collection centers to processors of
milk and value-added products like cheese and yogurt. Land
O’Lakes’ presence has helped Uganda’s dairy industry expand
and become more efficient, increased the popularity of dairy
products among consumers and raised income and profits for
smallholder dairy farmers and rural enterprises.
Project staff based in Uganda and short-term consultants —
many of them U.S. farmers and agribusiness experts — offer
advice on a wide variety of topics. These
include: cooperative development, marketing,
milk bulking and handling,
value-added processing, production,
policy reform and industry organization.
Funding for the Uganda project and
other Land O’Lakes economic development
initiatives overseas comes primarily
from USDA and the U.S. Agency for
International Development.
Much of the Uganda project’s current
funding came from the recent sale
of 11,100 metric tons of donated
American wheat on the local market
under USDA’s Food for Progress
Program. Under this monetization
process, USDA takes excess commodities
raised by American farmers and
converts them to cash in developing
countries to provide grants to implement
development projects. A study is
done before the sale to assure it will not
disrupt local production and markets.
Getting results
Stimulating sustainable economic
growth to alleviate rural poverty is a
major goal of the Uganda project. The
country’s economy is largely agricultural,
and two-thirds of the country’s poor
are smallholder farmers. To date, the
Uganda project has achieved results
that include:
- $349 average annual increase in
household income for participating
farmers (average per capita income is
$270 a year);
- 28 percent increase per day in milk
production in participating animals;
- 45 percent increase in processingcapacity
utiliztilization;
- 6.5 million-liter increase in domestic
consumption of processed dairy products;
- 75,000-liter increase per day in milk
entering the cold chain;
- 89 percent increase in membership in
producer organizations.
A recent success story involves
MADDO Dairies Ltd., a company that
began operating a 1,200-liter microprocessing
plant in the town of Masaka
in 2003. MADDO buys milk from local
farmer cooperatives and processes it
into flavored milk and yogurt. Like
many start-up enterprises, MADDO
had good ideas but lacked the knowledge,
systems and internal controls
needed to effectively manage its operations.
With Land O’Lakes’ help,
MADDO’s management turned the
company around, instituting financial
and other reforms that brought it from
the brink of collapse to profitability by
2005. Within one year, the amount of
milk purchased from area farmers
increased from 74,800 to 208,580 liters,
increasing their income from milk sales
by more than 200 percent.
Production efficiency at MADDO
was improved with a cooling tower
developed by Land O’Lakes’ Sam
Sebadduka, supervisor of milk quality
and dairy processing in Uganda.
Sebadduka developed a water-cooling
tower that recycles water used in cooling
the pasteurization unit. Adoption of
this simple technology cut water usage
from 90,000 liters a month to 40,000. It
also reduced the share of water as a cost
of production from 4.3 percent to 1
percent.
Uganda currently produces 1.2 billion
liters of milk per year. Of that, 40
percent is consumed on the farm. Of
the rest, about 20 percent enters the
“formal” market in the form of
processed and value-added products
worth $108 million. The remainder
enters the “informal” market, where
small-volume traders buy milk and sell
it unprocessed to consumers, who then
boil it at home. The value of the informal
market is about $160 million.
Central role for co-ops
Because rural cooperatives play a
central role in Uganda’s dairy industry,
much of the project’s emphasis is in the
area of cooperative development. Land
O’Lakes’ advisors help all types of
groups, from those still in the initial
planning stages to large established
businesses with turnovers approaching
$1 million a year. The project advises
on issues such as governance, membership
responsibilities, the role of the
board and legal registration.
Because many smallholder farmers
have no experience running commercial
enterprises, Land O’Lakes also provides
assistance in business management.
Many groups, regardless of size, are
weak in accounting and financial management,
leaving them unable to track
their funds and plan for the future. To
address this problem, Land O’Lakes is
introducing a common accounting software
program to the cooperatives it
advises.
“This will help tremendously in getting
the cooperatives we work with to
the next level of financial management,”
said Abbey Ariong, the project’s supervisor
of cooperative and business development
services. “Once our role of
training in how to use the software on a
day-to-day basis is done, we will then
begin training them on analysis of the
data.”
The common system not only will
enable the client cooperatives to do a
more professional job accounting for
their funds, Ariong said, but will also
allow for comparisons among groups
and the development of industry norms
on profitability per liter and other
measures.
Proper handling and milk safety are
other major issues for cooperatives,
many of which operate milk collection
centers where members take their milk
for bulking and chilling prior to pick up
by processors. The major centers have
capacity in the range of 15,000 to
25,000 liters. The system is essentially a
spoke-and-hub system, with smaller
collection centers in the countryside
feeding into the larger centers. The
milk is transported in 50-liter stainless
steel cans delivered on everything from
trucks to bicycles.
Land O’Lakes provides assistance to
the centers on the proper hygienic handling
of the milk. Training in standard
milk testing procedures has been conducted
to improve the milk quality and
ensure the product is safe for consumers.
Improving products, production
Assistance to dairy processors generally
focuses on improving existing products
and production methods, as well as
new product development. As with U.S.
cooperatives, many Ugandan processors
are looking for ways to increase their
profitability through value-added products.
The technology for making products
like yogurt and ghee (a semi-liquid
form of butter) is relatively simple and
offers a realistic means of utilizing
excess milk and boosting profits.
The project also has played a major
role in generic marketing for the dairy
industry, which is not large enough to
handle that function on its own.
Generic marketing is one of the project’s
biggest components. A few years
ago, the slogan: “So have you had milk
today?” was adopted for the industry.
Similar to the milk campaign in the
United States, a series of posters were
produced featuring prominent
Ugandans promoting the consumption
of milk.
Other marketing activities include
radio and newspaper advertisements,
sponsorship of local Dairy Days and the
nationwide June Dairy Month, and various
market research activities. Based on
market research, emphasis is now being
placed on targeting activities to specifically
reach young people in Uganda.
These include advertisements in the
weekly educational supplement of the
two daily newspapers, implementing a
wall-painting competition at 100
schools in and around the capital city of
Kampala, and providing assistance to
processors who have targeted schools as
one of their primary market areas.
Uganda’s dairy industry has made
great strides over the past 10 years, but
there is much more that can be done.
The Land O’Lakes project will continue
to work to increase the income of
farmers in the program, increase the
size of the formal market in relation to
the informal sector, improve the range
and quality of products, and explore the
potential for Uganda to become a major
regional exporter of milk and other
dairy products.
