By ABCafrica reporter
Investment in the milk processing sector is estimated to have reached about $80m (about Shs288 billion) by the end of 2016. Additionally, estimates from the Dairy Development Authority (DDA) place the value of marketed milk at about $700m (about Shs2.5 trillion) at the end of 2016, compared to $500m (about Shs1.8 trillion) in 2015. The value of marketed milk is rising in part because of the value addition investment that several processing factories are making.
Uganda currently has Brookside Dairy (Fresh Dairy) Uganda Ltd (the market leader), Jesa Farm Dairy Limited, Pearl Dairy Farms Limited, Amos Dairies Limited, Paramount Dairies Limited, GBK Dairy Products Limited, Vital Tomosi Dairy Limited and Mega milk, among others. These players have a total installed capacity of 1.4 million litres per day.
The most recently completed investment in the sector is Vital Tomosi Dairy (VTD), which makes the Milkman brand. This was launched in November 2016 after investment of $13m (about Shs46.8 billion) from Vital Capital Fund, an Israel-based private equity firm with $350m (about Shs1.3 trillion) funds under management. The entry of Vital Fund ensured that VTD was now able to produce yoghurt and UHT Milk. “The investment follows a hands-on operational approach Vital Capital has successfully implemented in similar projects throughout Africa, by creating commercial-scale agro-processing ventures, while strengthening rural communities and utilizing a region’s competitive advantages,” explains Mr Eyal Jones, the managing director at VTD. Recently, Dembe Distributors, the makers of the Snowman’s ice-cream, also expanded their production of yoghurt, making their presence felt in supermarkets.
One of the drivers for processing is the increased milk production. It is estimated that the production of milk is about 2 billion litres annually from 1.7 billion litres three years ago. Of the 2 billion litres, about 1.4 billion litres is sold on the market but only 30 per cent of that is processed, a rise from 20 per cent in 2014. That translates to about 420m litres of processed milk annually. The presence of supermarket chains has eased distribution of dairy products across the country. Retail shops distribute UHT milk.
According to a 2015 report by Euro monitor, Uganda has been identified as one of the 20 markets of the Future that will offer the most opportunities for consumer goods companies. “Uganda’s modern retail outlets are expected to increase their sale of dairy processed products at 11 per cent. A young and growing population, with one of the fastest economic growth rates in Africa and strong purchasing power in the capital Kampala is anticipated to augment sales of consumer goods across all categories,” reads an October 2016 International Growth Centre report on East Africa Dairy Value Chains.