Are investments of milk companieslikely to promote socially sustainable

business in developing countries?

Lessons learnt from West Africa and South-East Asia

Guillaume DUTEUTRE and Christian CORNIAUX

ContextInternational firms as opportunities or threats?

Part 1

The competition of dairy exports• La libéralisation va « hypothéquer l’avenir du

secteur du lait, qui fait vivre des millions d’éleveurs dans la région ouest-africaine, en permettant l’importation de poudre de lait européenne, largement subventionnée » (Media-part, 2016)

2007

Milk surplus and deficit per country

Source : IFCN, 2016

Source : Grain, 2011

Informal markets facing new quality standards

Total milk production

(2009)

Percentage of the milk market

handled by informal chains

Number of cows per farm

Rural jobs per million liters of

milk

DevelopedWorld(mainly North)

362 million t < 10%US, Australia, New-Zeland

> 1005

Developing world (mainly south)

337 million t 80%India <10

Kenya < 10Brazil < 30

200

Source : Grain, 2011

The new Mega Farms

• Importance of Farms of more than 1000 cows in the total production

1996 2006 2015USA 14% 50%Vietnam 1% 21%

The competition of International firms

• “Most dairy markets are supplied by small-scale vendors who collect milk from small farmers and pastoralists. But they are under threat from dairy corporations” (Grain, 2011)

Source : Grain, 2011

Towards inclusive dairy value chains

Source : IFCN, 2016

Towards inclusive dairy value chain

Source : IFCN, 2016

Farms number

Question

• Are investments of milk companies likely to promote socially sustainable business in developing countries?

What are the firms strategy related to local milk sourcing?

« Social business »?

« Non-social » business?

What is the social footprint of milk collection and processing?

Farmers’ employementand income

Community and value-chain

developmentSocial impact of sustainable business

West-African Dairy industryThe question of the « inclusion » of agro-pastoralists

Part 2

The « milk paradoxe » in West Africa

D’après Duteurtre et al (2013)

Strategies of Dairy Industries in West Africa

Sénégal

Mauritanie

Mali Burkina Faso

Niger

NigeriaBéninT

ogo

Ghana

Côted’Ivoire

Guinée

SierraLéone

Libéria

Sodiaal / Tiviski Lactalis / MaliLait

Lactalis / Cotim

Sodiaal / Eurolait

Belgomilk / Disnepal

Nestlé(Nido, poudre)

Friesland CampinaWamco Nigéria

Glanbia / Sicoma

Glanbia / PZ Cussons

Arla / Tolaram Group

Danone/ Abraaj

Glanbia / SicomaNestléArla / Mata Holdings

Sodiaal / Kirène

Lactalis / Meroueh

Lactalis / ISPL

Danone / LDB

Glanbia / Satrec

NestléLait collecte :

1991-2003

Sodiaal / Eurolait

Arla / Attieh Group

Solani

Social footprint

• Number of jobs (5 Sahelian countries)– Total volume collected by industries :

• 30 to 45 000 liters/day (monthly income for 5 000 families)– Total volume collected by mini-dairies:

• 15 to 25 000 liter/day (monthly income for 5 000 families)• Rural community development

– 1200 employments in processing+ collectors, retailers, input providers…

• Value chain upgrading– Investments in collection systems– New products– New production practices (intensification)

Source : Corniaux et al., 2014 ; Gret, 2015

South-East Asian Dairy industryDairying as a new business for smallholderfarmers

Part 3

Country profiles:Emerging dairy producers

0,000,050,100,150,200,25

1961

1966

1971

1976

1981

1986

1991

1996

2001

2006

2011

Senegal

0

10

20

30

1961

1965

1969

1973

1977

1981

1985

1989

1993

1997

2001

2005

2009

2013

France

0

10

20

30

40

1961

1965

1969

1973

1977

1981

1985

1989

1993

1997

2001

2005

2009

2013

China

00,20,40,60,8

11,2

1961

1966

1971

1976

1981

1986

1991

1996

2001

2006

2011

Thailand

00,20,40,60,8

11,2

1961

1965

1969

1973

1977

1981

1985

1989

1993

1997

2001

2005

2009

2013

Indonesia

0

0,1

0,2

0,3

0,4

0,5

0,6

1961

1965

1969

1973

1977

1981

1985

1989

1993

1997

2001

2005

2009

2013

Vietnam

Cow milk Production in selected countries(in million tonnes) Source : Faostat

Strategies of Dairy Companiesin South-East Asia

Firms Country Milk collection(l/day)

Specific processing lines N° offamilyfarms

N° oflargescalefarms

CSRprogram

TH Milk Vietnam 60 000 TH “True Milk” UHT Milk - 1 Yes

International Dairy Production (IDP) Vietnam 30 000 Local “Bavi” UHT milk 1 500 1 No

Vinamilk Vietnam 500 000 “100% fresh milk” UTH milk 15 000 5 Yes

Danone Dairy Indonesia (DDI) Indonesia 60 000 Lactic acid beverages 2 000 Yes

Danone Sari Husada Indonesia 1 500 - 50 - Yes

Firms collecting fresh milk in East Asia in 2014-2015

Family Farm in Ba Vi 3 cows, milking machine

Industrial Farm in Ba Vi185 cows, milking parlor

Social impact of Dairy companies

• Number of jobs– Family farms– Jobs in Industrial farming

• Value chain upgrading– Milk farms market participation (quality, payement…)– Input / output market

• Rural community development– Education (CSR)– Empowerment of local communities

ConclusionUnderlying complementarities

Part 4

Local milk as a business strategy

• To reach specific market segments• To limit cost volatility• To build long terms strategy

– Participation to Local development– Reputation and human rights issues (RSE)

• In coherence with local policies– Local Regulation with incitation to local milk collection– With diversity of State involvement in dairy development

policies

Inclusive business model 1:

= industries thatdevelop their local

sourcing

CSR programs : pros and cons

• Importance of credit, training and community support programs

• Limitations of “disconnected programs”

Beyond CSR programs :

The need for sustainable development strategiesof international and national firms

Inclusive business model 2:

= industries Involved in CSR

projects

References• Corniaux C., Duteurtre G. et Broutin C., 2014 : Filières laitières et développement

de l’élevage en Afrique de l’Ouest : L’essor des minilaiteries, Karthala, Paris, 229 p.• Duteurtre G. and Pannier E., 2016: “Local trajectories in the Vietnamese transition

to market economy: Alliances between firms, farmers and government officials in the livestock sector”, communication to the SASE 28th Annual Conference, June 24-26, 2016 - University of California, Berkeley, 24 p.

• GRAIN, 2011: “The Great Milk Robbery: How corporations are stealing livelihoods and a vital source of nutrition from the poor”

• Gret, 2015 : « Note d’analyse de l’impact des politiques commerciales régionales sur la filière « lait local en Afrique de l’Ouest » par Cécile Broutin, Laurent Levard et Amel Benkalha, 38 p.

• IFCN, 2016: ”Global dairy trends, drivers & outlook : Results of the IFCN Dairy Report 2016”

• MediaPart, 2016 : « L’accord commercial entre l’UE et l’Afrique de l’Ouest qui menace le lait africain », http://www.bilaterals.org/?l-accord-commercial-entre-l-ue-et-31729&lang=en