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Cambodia’s dairy industry

Source:Ringier Food

Date Published:11/22/2016 08:11:33 PM

Dairy companies are gearing up for this promising market, writes Jean Alingod

IN THE 1960s, it was Cambodia that exported dairy to Thailand and Vietnam. But the civil war reversed the tide. The country has long relied on imports for its dairy needs, sourcing from neighbors as well as France, Australia and New Zealand. But that will begin to change.

Influencing the shift is Angkor Dairy Products Company Limited, an equal joint venture between Vietnam dairy giant, Vinamilk and Cambodia’s BPC Trading Co. In May this year, the companies opened what is to be Cambodia’s first dairy plant to yearly provide the local market 19 million liters of liquid milk, 64 million cups of yogurt, and 80 million tins of sweetened condensed milk.

The design, construction and the installation of machinery and production lines at the US$23-million dairy plant comply with international standards on Food Safety and Environment. Tetra Pak integration technologies are used from handling raw materials to processing and packaging. The manufacturing is automated to optimally control the entire processing area, filling as well as integrate with the enterprise resource planning system.

Producing on a smaller scale but equally gunning for quality for its fresh whole milk is Moo Moo Farms. Its dairy farm in Kandal in southeast Cambodia, imported eight- to nine-generation specialty bred cows, which are 90 percent Holstein and 10 percent primarily Brahman Southeast Asia cattle. According to the company, this combination of breed acclimatizes well to the heat and humidity without losing production quality.

At 5 kilograms per person, annual consumption of milk in Cambodia is a fraction compared to those of Thailand and Vietnam, which industry insiders say stands at 20 kilogram per person. But as with the rest of its Southeast Asian neighbors, this is expected to grow. In fact, regional dairy consumption is forecast to outpace the rest of the world, second only to China, by 2020, reveals Dutch agro-banking firm Rabobank.

The inauguration of Angkor Dairy Products Company Limited in May 2016

The inauguration of Angkor Dairy Products Company Limited in May 2016 changes the game for Cambodia’s dairy industry

Big presence in Cambodia

Exporting to Cambodia since 2002, Vinamilk has witnessed rising demand for dairy in the Kingdom.

“Cambodian consumers, often backed by government initiatives, have grown much more knowledgeable about dairy’s role in health and nutrition,” explains Mr Vo Trung Hieu - BOD member of Angkor dairy factory.

For example, National Nutrition Program encourages calcium consumption for bone strength, milk for infant health, and overall dairy as part of a healthy diet to raise average height levels. Trust in dairy is driving people to incorporate milk, cheese and dairy containing products into their traditional diets.”

Mr Vo adds, “Economic conditions are fueling middle class expansion and dietary shifts. When income increases, Cambodians spend more for nutrition as well as dairy products.

“The reduction in trade barriers through ASEAN coupled with rising demand has proven extremely attractive to food and beverage firms. Local as well as multinational companies are investing in Cambodia to build capacity and product development capabilities to not only service national demand but to also export to the broader region. It has created a significant market for high-value dairy ingredients made to tight specifications.”

In terms of milk, Mr Vo says Cambodia prefers condensed milk, liquid milk and milk powder. “In addition, other dairy products, such as yogurt drink and spoon yogurt, are becoming more popular. People are getting more used to the taste of these products, and distribution systems are improving.”

Powder milk is another growth area. Vinamilk currently exports this and is considering investing additional production line in Angkor Dairy in the future.

“Especially when income goes up, people pay more attention to baby nutrition and spend more on their child’s milk intake,” he says.

The company positions its Dielac Alpha Gold, with trademark Opti – Grow IQ formula, as supporting brain development, increasing resistance and helping children’s premature digestive system to better absorb nutrients.

Cambodia’s rapid urbanization is likewise driving sales. “Lifestyles are becoming faster-paced. Time pressure and changing social habits have increased the number of consumers looking for convenient foods that fit modern lifestyles. Most of Cambodians are driving demand for new products, including packaged foods,” Mr Vo adds.

Moo Moo Farms founders Kenny Matthews (right) and Matthew Boyd sell fresh whole milk in Phnom Penh

 

Moo Moo Farms founders Kenny Matthews (right) and Matthew Boyd currently sells fresh whole milk in Phnom Penh

Fresh whole milk

A number of foreign companies have attempted commercial dairy production in Cambodia. Among them, F&B multinational Nestlé. In the late 90s, it tried setting up a local supply chain for its sweetened condensed milk only to have it close down in 2002 reportedly due to supply chain difficulties and the influx of smuggled dairy products.

Moo Moo Farms co-founder, Kenneth Matthews, admits to having had to overcome many challenges as well as go through and analyze previous attempts to work out the reasons for failure and identify how to counter them.

“One of our biggest strengths has come from a solid leadership team that we have set up to help us navigate through the Cambodian government licensing issues along with bringing on dairy experts with experience in starting micro-dairies in developing countries. With the proper management team, we have been able to overcome each barrier as it arises.”

Like most of its neighbors in Asia, Cambodia generally favors UHT milk because of its longer shelf life. But according to Mr Matthews, with proper refrigeration at 2-4 degrees Celsius, Moo Moo Farms fresh milk can last for seven to nine days. He adds that the milk is competitively priced compared to imported competition but with superior quality.

“Our cows are fed a specific diet to ensure cow health along with premium milk taste and quality. The feeds are free from genetically modified organisms (GMOs) and growth hormones, and the cows are treated with organic medications.”

Mr Matthews adds, “We control the supply chain from the feed all the way to the market. We have an onsite lab where we test the milk every day before it is shipped out to ensure safety and quality of the product. If the milk does not pass US standards for distribution, then the milk is not sold.”

Currently, Moo Moo Farms distributes its fresh milk to various grocers in Phom Penh, the country’s capital. But the company is bullish on ramping up its herd, product line and reach. By 2017, it hopes to increase its cattle size four-fold to also enable it to produce flavored milk, cheese, butter, yogurt and ice cream. The following year, it plans to make inroads to two of Cambodia’s major provinces, Siem Reap and Sihanoukville, and from there market its products to all major cities in the country, which is home to more than 15 million.

“We’ve opened up a new round of fundraising to move to our next phase of expansion,” explains Mr Matthews. “We ambition to turn Moo Moo Farms into an example of what dairy farming could and should look like in South East Asia. We are looking to expand to a large-scale dairy and begin meeting the full scope of high demand found in Cambodia.” 

Helping local farmers

“As we grow we would like to start a dairy education program to help locals have their own cows and with proper care to ensure quality, sell the milk back to us. We also buy all our feed locally from farmers and have been training them on proper dairy feed farming techniques for a higher yield with each crop to maximize their profits. For our feed, we contract them out for a long term supply,” Mr Matthews shares.

Despite recent developments from Angkor Dairy and Moo Moo Farms, the situation is not expected to change anytime soon. Such is the case with the rest of Southeast Asia anyway because even as local production in most of the region is increasing, industry players say structural challenges such as feed quality, productive land, operations and animal husbandry and lack of capital continue to dog the sector, and only by importing can increasing demand be met.

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