Big increase in UHT milk consumption in Sub-Saharan Africa

By Jim Cornall contact

- Last updated on GMT

According to Proteus Insight, UHT milk consumption is increasing in Sub-Saharan Africa. And while there are challenges, there are also plenty of opportunities in the African dairy industry. Pic: ©iStock/BardoczPeter/phloxii
According to Proteus Insight, UHT milk consumption is increasing in Sub-Saharan Africa. And while there are challenges, there are also plenty of opportunities in the African dairy industry. Pic: ©iStock/BardoczPeter/phloxii
Dairy market specialist Proteus Insight says that by the end of 2015, consumption of UHT white milk in Sub-Saharan Africa increased at an average annual rate of 22% since 2013.

This is in marked contrast to overall static white drinking milk markets in Europe and North America.

The company’s research looked at data from more than 30 Sub-Saharan markets.  

More growth than Asia

While 2015 saw a slowdown in percentage growth compared to 2014, overall consumption of UHT white milk reached close to 1.3bn liters. A drop in global oil and mineral commodity prices in 2015 resulted in an economic slowdown across a number of markets resulting in weaker performance compared to 2014.

Nevertheless, UHT white milk consumption across a region with close to one billion consumers increased at a faster rate than other regions: Sub-Saharan Africa was up 13% compared to 12% in Asia in 2015.

And the low oil prices have been beneficial in packaging innovation, John Meropoulos, Proteus Insight director, told DairyReporter, because it means plastic materials are cheaper.

He added that this innovation also had implications regarding shelf life.

“It's always been the classic box carton, but now we're seeing carton pouches and plastic pouches, having that long extended shelf life, which is enabling further distribution into remote areas.

“As a result we're seeing a rate of growth since 2010 that has been substantial. It's almost bordering Chinese drinking milk development. Some are about that level, and some are still below it. It's a good news story from that aspect.”

Africa picking up pace

Meropoulos compared the growth in Africa today with that of China in the late 80s and early 90s.

“When starting from a low base, as they develop it picks up at a quicker pace,”​ Meropoulos said.

“In that part of the world [Africa], the expectations in some markets are higher growth rates because of the low base start point.”

Tradition of milk

However, Meropoulos said that there is a marked difference between Asia and Africa, in that Africa does have a tradition of milk drinking that Asia did not.

That established tradition encompasses powder in West Africa and unpasteurized milk in East Africa.

"...in general across the continent, people drink milk, they don't eat milk."

John Meropoulos, Proteus Insight

“There's always been a fermented milk culture in these countries. In southern Africa - Zambia, Zimbabwe, Botswana, Namibia, they've always had a dairy culture,” ​he said.

“They do drink milk, they don't eat milk. Cheese and those types are products are still at the incredibly early stage of development, but the notion of drinking milk is mature.”

He said that the growth was similar to that in Asia, but there were issues to overcome.

 “Will it be as dramatic as China's was? There's a tremendous amount of infrastructure that needs to go in.”

Logistical issues

Meropoulos said that moving products within African countries is still a major issue.

“How are you going to move a product from A to B? Logistics is probably the most important consideration in Sub-Saharan Africa,”​ he said.

The issue isn’t getting product to Africa, it is moving it around within a country once it is there.

“You're company A, based in Nairobi, and you want to get stuff to Mombasa; it's difficult. That would be the most significant impediment to hold back increasing consumption throughout FMCG, it's not just a dairy issue.

“In Congo, you drop off in Kinshasa, it's only going to be for Kinshasa. If you want to hit the second cities, you're probably looking at getting it to Zambia to go over the border to go to Lubumbashi.”

Increasing urbanization

Meropoulos said that increasing urbanization and expanding economies are set to create a concentration of urban consumers with higher disposable incomes, particularly in the super conurbations of Luanda, Lagos, Nairobi, Kinshasa and others, as the rural-urban shift across these markets sets to increase its pace over the next decade.

“As you get into the western part of Africa, it's not a question of disposable income, it's competing products. This is a powdered region. So if you think ‘how are they drinking milk’ – they are drinking it from a powder. They buy bulk and convert it at home into drinking milk. Nigeria has had a massive retail foodservice milk powder market,”​ he added.

While there is liquid drinking milk that can be purchased from a supermarket ready to drink, Meropoulos said, it gets dwarfed in comparison to evaporated and powdered milk in West Africa.

Developing processing

South Africa and Kenya were once the main centres of gravity in terms of production but other markets are developing their own local production capacity and driving higher UHT white milk consumption.

nestle nido
Nestlé’s NIDO Essentia NutriPAK production line launched in the Congo in 2015.

Meropoulos said that there is a belt of countries developing local processing.

“Tanzania, Uganda, Mozambique, come down and around, Zimbabwe, Zambia, Botswana, Namibia up to Angola, that's a belt of countries that are developing local processing.  You are seeing an emergence of a 'middle class' with disposable income and purchasing power,”​ he said.

Companies not using local milk

Large foreign companies entering the African market aren't really using local milk supply, he added.

“It's a huge market for the dairy processors, so they are not even utilizing in-country local milk, it's just tonnes of milk powder coming in to be converted to liquid milk,”​ Meropoulos said.

“The one exception is in Senegal. The French company Candia, which is manufacturing under license with a local company, and over the years the Senegalese government has encouraged dairy farms, with the aim of import substitution. So for the last couple of years, you can see on some of the packs 'manufactured locally in Senegal under license’.”

But Meropoulos said that the dairy farm chain is very weak in West Africa.

“They don't have the size of farms.

“In east Africa and south Africa, it's the reverse. You don't see the powder footprint in that part of the world, evaporated is almost non-existent, the geography is different, dairy is part of their culture, so there's a huge amount of raw milk. The question becomes what do consumers buy?

“Do they buy packaged ready to drink products, or unpasteurized milk that they then heat at home and make pasteurized.  It's definitely attractive to the big global companies.”

Big companies’ strategy

Meropoulos said that big companies moving into Africa is a long-term strategy.

“Arla is moving in. Arla taking their business model into West Africa, it's a natural extension for them, so it's a step into being there for the long term.

“Danone has made acquisitions in Nigeria and in Kenya and Uganda. I anticipate they are thinking long-term about these acquisitions, but it's still a move that will position them well in the next decade,”​ he said.

“If they follow the Lactalis way, throughout the Noughties it was making acquisitions everywhere, everywhere they made an acquisition they let the local company run itself - like Dukat in Croatia is still Dukat. If Danone were to bring in Activia yogurts and force it through, I think that would be hurting the local company.”

Establishing footprints

And these aren’t the only companies keen on the African dairy market.

“The Dutch (FrieslandCampina) have been here for a long time.  Nestlé, it's very much one of their targeted regions for the next decade across their whole food portfolio, including dairy.”

Nestlé is already active in the Congo with NIDO Essentia NutriPAK, and has operations in many SSA countries.

FrieslandCampina has a Dairy Development Programme, which aims to enable local dairy farmers in Asia and Africa to run their businesses optimally and raise the quality and quantity of their dairy production.

“Fonterra made a JV in Ethiopia for powder, which was an interesting move. They also have an industrial dairy ingredient JV with Clover, the big South African dairy.

arla senegal
Arla Food opened its Dano milk powder packaging facility in Dakar, Senegal, in 2015, to handle 5,000 tonnes of milk powder made in Europe.

“So internationally, in terms of getting more into the market, those big global dairy processors are definitely establishing footprints, but none of them have the expectations that it's anything other than a long game.”

Different categories

Meropoulos said that the liquid milk element within Africa is the category that's moving on, but also commented on other dairy products.

Butter will always have strong competition from margarine,”​ he noted.

“In cheese, in general across the continent, people drink milk, they don't eat milk. Cheese is increasing in consumption, but it is from a very low base.”

However, he noted, one of the world's biggest branded cheese companies, Fromagerie Bel, has commissioned a plant in Côte d'Ivoire.

“So they are another company looking to expand. Africa for them is a natural next region.”

Proteus Insight

Meropoulos said that Proteus Insight looks at emerging markets a lot, and specializes in dairy.

“We have a series of reports we put out, and we populate databases that companies subscribe to. We get down into packaging types, pack sizes, SKU totals, etc., and breaking out the markets.

“We also do bespoke works for some companies, market entry strategies.”

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