Dairy Market Study Report of Pulle Alam, Logar, Afghanistan

Transcription

1 Dairy Market Study Report of Pulle Alam, Logar, Afghanistan Dairy Industry Development in Kabul, Logar and Parwan Province Project (UTF/AFG/080/AFG) Prepared by: Dr. Ramesh B. Munankami International Consultant Dr. Rulang Lutfulla National Professional Officer Mr. Abdul Hakim Hakimy National Consultant Mr. F. Hamid Salimee National Dairy Industry Officer August 2014 Dairy Market Study Pulle Alam Page 1

2 Table of Content Acknowledgement 4 Executive Summary 5 1. BACKGROUND 7 2. INTRODUCTION Objectives of the Study Specific objectives of the study Methods of Study Limitations DEMAND FOR FRESH MILK AND DAIRY PRODUCTS Size of the Market Population Consumers of dairy products Demand for Dairy Products Present potential average demand for dairy products General consumer Present potential users demand for dairy products General consumer Consumers basket of dairy products Present demand for dairy products Institutional consumer Future Potential demand for dairy products General consumer Share of imports in total existing demand Import season Consumers Preference Consumers preference for imported vs. local dairy products Consumers purchasing of domestic vs. imported products Share of import in consumers consumption basket Consumers requirement of local dairy product Traders perception on consumers preference Prices of Dairy Products Consumers Willingness to Pay SUPPLY OF FRESH MILK Milk Production Marketable Surplus Marketing by the Farmers Farmers selling fresh milk to Pulle Alam Farmers selling dairy products to Pulle Alam SUMMARY, CONCLUSION AND RECOMMENDATION 26 List of Tables: Table 3.1.1: Growth in Urban Population Pulle Alam Municipality, Logar: Afghanistan 12 Table : Estimated Present and Future Potential Demand for Selected Dairy Products Pulle Alam: Afghanistan (Year: 2014) 14 Table 3.2.4: Quantity of Dairy Products Purchased by Institutional Consumers Pulle Alam Market, Afghanistan 15 Table 3.2.6: Quantity and Seasons of Milk Products Import, Pulle Alam: Afghanistan 17 Table 3.3.1: Consumers Behaviors on Purchasing of Dairy Product, Dairy Market Study Pulle Alam Page 2

3 Pulle Alam, Logar: Afghanistan 18 Table 3.3.2: Average Price and Consumers Purchasing Preference for Dairy Products Pulle Alam, Logar: Afghanistan 19 Table 3.3.4: Consumers Consideration in Buying Dairy Products, Pulle Alam, Logar: Afghanistan 21 Table 3.3.5: Wholesaler/Importer s Perception on Consumers Preference of Imported and Local Dairy Product, Pulle Alam: Afghanistan 21 Table 3.4: Wholesale, Retail Price and Margin of Imported Dairy Products Pulle Alam: Afghanistan 22 Table 3.4.A: Price Differences in Local and Imported Dairy Products Paid by Consumer Pulle Alam: Afghanistan 23 Table 4.1: Estimated Milk Production in Three Project Districts, Logar Province 24 Table 4.2: Marketable Surplus of Milk of Responding Farmers, Logar Province 24 Table 4.3.1: Farmers Selling Fresh Milk, Pulle Alam: Afghanistan 25 Table 4.3.2: Selling of Dairy Products by the Farmers 25 List of Figures Figure 3.1.1: Population of Pulle Alam Municipality: Afghanistan 11 Figure 3.2.3: Composition of General Consumers Consumption Basket of Dairy Products, Pulle Alam Market: Afghanistan 15 Figure 3.2.4: Composition of Institutional Consumers Consumption Basket of Dairy Products, Pulle Alam Market: Afghanistan 16 Figure 3.2.7: Seasonal Variation in the Imports of Dairy Products, Pulle Alam: Afghanistan 17 Figure 3.3.3: Share of Import in Total Purchase of Dairy Products Pulle Alam: Afghanistan 20 Bibliography 30 List of Annex Annex 2.2: Staff Participants in Data Collection Training 32 Annex 2.2.A: Number of Respondents for Baseline and Dairy Market Study 33 Annex 3.1.1: Total Urban and Rural Population in Pulle Alam Province 34 Annex 3.1.2: Different Level of Dairy Product Users Consumer: Afghanistan 35 Annex A: Different Category of Household and Average Consumption Pulle Alam: Afghanistan 36 Annex 3.2.1: Estimated Present Potential Average Demand for Dairy Products in Pulle Alam: Afghanistan 37 Annex : Estimated Present Users and Future Potential Demand for Dairy Products Pulle Alam: Afghanistan 38 Dairy Market Study Pulle Alam Page 3

4 Acknowledgement Many people at different levels have helped and provided their support during my mission for analyzing the situation of Kabul, Charikar and Pulle Alam dairy markets and for preparing this report. I extend my sincere gratitude to all of them whose names will not be possible to list in this short acknowledgement. I cherish their friendship and the moments of warm discussions with them. To mention few names that always come to my mind are: Dr. Lutfullah Rlung, National Professional Officer who was very instrumental from assigning to completion of the mission, Mr. F. Hamid Salimee, National Dairy Industry Officer and Mr. Abdul Hakim Hakimy, National Consultant who constantly supported with all required information to complete this study, and Mr. Shams Haq Safi, Administrative Officer who provided all required logistics before, during and after the mission. I am grateful to all the staff members of FAO country office in Afghanistan, specially Ms. Abdullah RoyaNazar and Mr. Walid who provided me with a very cordial mission management supports. Thanks to Mr. Vinod Ahuja, Technical Officer for his kind support and Ms. Pawadee at FAO Regional Office in Bangkok who provided me with very prompt administrative and financial procedural help. I am very thankful to Mr. Moeen-uddin Siraj for his professional support for the successful completion of the mission. Also, would like to highly appreciate the technical support of Dr. Mohammad Aref Amanyar, Director, Livestock Production Department, Mr. Abdul Latif Zahed, Program Director, RMLSP & CLAP, and Mr. Shahzar Zadran, Project Manager of CLAP to undertake the survey and data entry activities. I would like to acknowledge the good efforts extended by the Government staff under Department of Livestock Production for interviewing the different respondents and extend gratitude to them all. And thanks to the responding farmers, wholesaler/importer, processors, consumers and institutional consumers without which the study would not have been materialized. Ramesh Munankami (Ph. D.) International Consultant ramesh.munankami@gmail.com Dairy Market Study Pulle Alam Page 4

5 Executive Summary This study is undertaken to assess the market situation of fresh milk and dairy products in Pulle Alam city basically to assess the required dairy processing capacity to cater the market demand. Four different levels of stakeholders of dairy value chain including the farmers, importers/ wholesalers, households and institutional consumers were purposively interviewed in structured questionnaires to acquire necessary information for the study. Two variables, population and the present consumption pattern of dairy products as gathered from the consumers survey, have been used to estimate two levels of present demand and three levels of future potential demand for fresh milk and milk products in Pulle Alam markets. As many as 86% of the total households of Pulle Alam market, at present, consume different dairy products. And 70% of this is high user consumer segment buying dairy products every day. However, there are only 663 urban household consumers in Pulle Alam and the urbanization is very slow. This limits the size of market demand for dairy products in Pulle Alam. For example, the present average total demand for pasteurized milk is only 572 Lit./day and yoghurt is 815 Kg./day. A more precise demand estimation indicates the present potential demand for pasteurized milk of 719 Lit./day and of yoghurt 891 Kg./day. To meet these demands, processing units of less than 2 ton/day will be sufficient. Even the estimated present potential demand for selected 12 dairy products that are domestically produced (approximately 3,673 Ton/day) and sold by the farmers and few small household level dairy products seller in Pulle Alam market could be met by processing units of 3 Ton/day capacity. The estimations of future potential demand of those 12 dairy products indicate that processing units of less than 5 Ton/day capacity will be required to meet the future demands. The quantity demanded and the composition of consumption basket of institutional consumers brings out two important implications: a) this segment of market is still very small in Pulle Alam; and b) yoghurt is highly demanded processed dairy products. Any processing unit established there should be structured (machineries and plant buildings) to produce larger amount of yoghurt than other dairy products. The dairy processing industry in Pulle Alam market is non-existence. There is not a single significant processing unit that supplies milk and dairy products to the consumers. Most fresh milk and dairy products are produced and sold by the farmers through small shops or directly to the consumers. Also, some imported dairy products are sold by few wholesale/retail shops. The very small market segments of imported products and a large domestic dairy products segment are different and, in general, they are mutually exclusive. Therefore, the competition from imported products is highly limited to a very few products and not very strong in Pulle Alam market. All interviewed consumer preferred local dairy products against imported ones and all consumers buy fresh milk directly from the farmers. It could be argued that all consumers prefer local products because imported processed products have not penetrated in Pulle Alam market. Dairy Market Study Pulle Alam Page 5

6 The price of the product does not seem to be the foremost consideration while buying the dairy products. The consumers give maximum importance to taste/color of the product and are willing and to pay a premium for the quality and convenient domestic dairy products. The estimated milk production of three target districts of Logar Province (Baraki Barak, Pulle Alam and Moh Agha) is quite large. About percent of the production is consumed within the household and the remaining (83.27%) is available for sale in the market. But 92% of the responding farmers are converting large part of this marketable surplus into various products Chaka, butter milk and cream. Thus, their marketed surplus is only 52.91% of their total milk production. As many as 73% of the interviewed farmers reported that they have no problem selling fresh milk including to the Kabul Dairy Union in Kabul and dairy products in Kabul city. Thus, in the absence of any discernible dairy processing industry in Pulle Alam, the farmers are accessing Kabul and other surrounding markets. The analysis of potential milk supply indicate that the total marketed surplus of all the farmers of those three target districts will amount to 200,737 Lit./day which can cater the needs of a very large processing unit in Pulle Alam. But the demand for dairy products is miniscule of that potential milk supply. Therefore, Project efforts there should also be directed towards mobilizing that huge surplus of farmers milk to Kabul and other market areas. For this purpose, additional milk collection and chilling centres should be established in Pulle Alam area (Logar Province) to mobilize the surplus milk production. Dairy Market Study Pulle Alam Page 6

7 1. BACKGROUND Afghanistan is very idyllically rural in its all aspects and more than three-fourth of its population reside in rural area. The rural economy (the formal agriculture sector) alone contributes about 35% of the GDP and agriculture production is the main source of rural livelihoods. The country s economy recently has registered a brisk growth rate largely revealing the booming activities concentrated in the small urban areas or settlements where less than 25% of the total population reside. But, there has been insignificant growth in rural Afghanistan. Therefore the Government of Islamic Republic of Afghanistan has instigated a number of national initiatives under the Livelihood and Social Protection Public Investment Program which has resulted significant recovery and accomplishments in a number of areas. Livestock keeping is an important part of the Afghan rural economy. It is the vital component of the rural economy, both for food security as well as for income and employment generation. For the major proportion of the rural population, cattle are the most important animal species and increased milk production for sale and home consumption is seen as an important opportunity for reducing their poverty and food insecurity. Therefore, the Government of Afghanistan has set livestock development as priority focus in its Agriculture and Rural Development Strategy, National Agriculture Development Framework and the National Priority Programs. In this context, the FAO and IFAD joined hands with the Government to address the challenges of poverty reduction and food insecurity in rural areas by improving agriculture and livestock productivity through the delivery of agriculture and livestock services and strengthening the institutional capacity at all levels of governmental and non-governmental organisations. Accordingly, IFAD is supporting the Government in implementing Community Livestock and Agriculture Project (CLAP) to improve food security of rural households in selected districts of Pulle Alam, Parwan and Logar Provinces. The CLAP is organised around three mutually reinforcing components. Component 1 covers Community Development with three sub-components of: 1.1) Productive infrastructure; 1.2) Institutional strengthening; and 1.3) Gender mainstreaming and capacity building. Component 2 incorporates Livestock and Agriculture Development which is the largest component of CLAP with allocation of more than 44% of the total Project budget. It is composed of four sub-components: 2.1) Dairy Development; 2.2) Poultry Development; 2.3) Improved Food, Fodder and Vegetable Crops; and 2.4) Livestock Development with Kuchi. This component 2 aims at reducing poverty through enhancing food security with a strong emphasis on women-headed households and the vulnerable and marginalised within the rural communities by introducing appropriate livestock and agricultural practices and packages, and, to a limited extent, supporting value chain development and linkages to market. The last Component 3 is for Project Management, Policy Support and Young Professional Program. The Dairy Industry Development in Pulle Alam, Logar and Parwan Province Project (UTF/AFG/080/AFG) is developed and jointly implemented by MAIL/FAO to achieve the objectives of the Dairy Development sub-component 2.1 of Livestock and Agriculture Development Component 2 of CLAP. Dairy Market Study Pulle Alam Page 7

8 2. INTRODUCTION While there is strong demand for milk and dairy products in Afghanistan, dairying is still at an early stage of development. Farmers typically have one to three dairy animals producing five to ten liters of milk a day. The family needs are normally met first and surplus milk is domestically processed and locally traded or sold. Thus, milk is mainly produced by small-scale producers widely scattered in villages, although there is some semi-intensive production of milk in and around the major urban markets. Over the last nine years, the Food and Agriculture Organization of the United Nations (FAO) and Ministry of Agriculture, Irrigation and Livestock (MAIL) have demonstrated a number of successful and robust interventions in villages through integrated dairy development approach, particularly in Pulle Alam, Mazar, Kunduz and Herat Provinces. MAIL/FAO is currently implementing similar dairy development project in Nangarhar province under which the Integrated Dairy Schemes approach is being applied and farmers are encouraged to establish a network of communitybased milk producer cooperatives societies and the dairy unions. The major outcome of the MAIL/FAO dairy projects was increased rural food security, jobs created, income generation and empowerment of women through access to a regular and dependable raw milk market and value addition. At the same time, the encouraging and valuable experiences from the past Projects have also helped identify four major limitations to dairy industry development in Afghanistan as follow: There is a gap in the expertise in appropriate approaches to dairy industry development. There is incompleteness in the organizational structure and institutional capabilities of all institutions (agriculture, livestock, cooperative and private sector) involved in the dairy development of the country at all level of governance. Empowering and enabling them to enhance their contributions in the dairy value chain is still challenging. There is currently no support for Afghan innovation fostering and specifically for dairy industry development. On the basis of the successful on-going experience with Integrated Dairy Schemes in five Provinces and to address the dairy development issues of Afghanistan identified above, the MAIL/FAO/IFAD jointly developed Dairy Industry Development in Pulle Alam, Logar and Parwan Province Project (UTF/AFG/080/AFG) as sub-component 2.1 of CLAP. Its implementation started from 1 January The Project is expected to end in 31 December 2019 with a total project cost of US$ 10.5 million (IFAD contribution of US$ 8.5 million). The overall Project goal of Livestock and Agriculture Development Component 2 of CLAP is to reduce poverty through enhancing food security of vulnerable and marginalised rural communities in selected districts of Pulle Alam, Parwan and Logar Provinces through income and/or employment generation by enhancing access to production assets, skills, services and technologies for increasing agri/livestock production. The Project purpose of Dairy Industry Development in Pulle Alam, Logar and Parwan Province Project (UTF/AFG/080/AFG) is to increase dairy milk production and productivity, and improve dairy milk processing and marketing. It is expected to up-scale and expand the dairy industry development in Afghanistan. The Project Result Matrix sets the Projects goal as dairy milk production, processing and marketing increased, dairy coops, Dairy Market Study Pulle Alam Page 8

9 union, and federation created and enabling capacity and policy environment established. To achieve the goal/purpose, the Project is formulated with following four components/outputs: Project s components Component 1: Strengthening national capacity in dairy cattle husbandry, dairy processing and marketing at field, district and provincial level. Component 2: Developing institutional capacity among both public and private institutions. Component 3: Strengthening the capacity of women in dairy sector. Component 4: Facilitating the development of enterprise by setting up a vibrant and dynamic Afghan dairy industry. Output 4.1: A minimum of 30 tones of milk collected through village Milk Collection Centers (MCCs) everyday by involving at least 3,000 families in the Pulle Alam, Logar and Parwan Provinces and farmers regularly (weekly) remunerated for collected milk according to quality and quantity. Output 4.2: Expanded dairy processing plant established. Output 4.3: Enhanced dairy market linkages for increasing volumes and efficiencies of selected local dairy value chains. Output 4.4: Enhanced animal feed market linkages for increasing sales/utilization volumes. 2.1 Objectives of the Study The basic objective of the study is to assess the market situations of fresh milk and dairy products in Pulle Alam, Pulle Alam (Parwan province) and Pulle Alam (Logar province) markets Specific objectives of the study The specific objectives of this study are: 1. Identify and quantify dairy plants (local and mini) currently supplying milk and products to Pulle Alam (Logar province) city with their monthly/yearly sales volume of milk and products; 2. Determine the approximate amount and costing of raw milk being supplied directly by the producer farmers to the consumers in those cities; 3. Assess the size of Pulle Alam dairy market in terms of total consumption of milk and milk products; and the share of imported milk and milk products in the total demand of those cities; 4. Estimate the costs of milk production, processing and marketing and recommend whether locally produced milk and dairy products can compete with imported products; 5. Identify the issues, status and the positive aspects; as well competition of locally produced products with imported ones. 6. Estimate the fresh milk and products being exported to the neighboring border markets; 7. Identify opportunities and constraints for improved smallholder participation in these production and markets; 8. Identify and specify the consumer preferences for milk and dairy products (fresh local products vs. imported ones); and Dairy Market Study Pulle Alam Page 9

10 9. Identify consumer willingness (and ability) to pay for existing and potential other milk and dairy products. 2.2 Methods of Study Following steps and activities were undertaken to complete this study: a. The existing dairy market study report and information at the national level, along with FAO dairy market study reports were reviewed. (Refer Bibliography). b. Design questionnaire to collect data and information; c. A dairy market study plan was discussed and data collection was organized; d. Organize short training course to surveyors on using questionnaires forms and survey implementation methodology. The participants to this training are listed in Annex 2.2. e. Five different levels of stakeholders of dairy value chain were interviewed in structured questionnaires through project national staffs, project counterparts and national dairy market consultant. The respondents were purposively interviewed. Annex 2.2.A. f. The survey and data management were done with the help and cooperation of Government staff and other concerned people. Annex 2.2.A. 2.3 Limitations Following limitations are encountered while executing this market study: a. Reference data and information on the dairy market and marketing situation of Pulle Alam markets are not available as was required. This study in itself is a first such analysis of this market. b. Detail survey of the dairy value chain stakeholders, particularly of the processors in Pulle Alam market, could not be implemented due to security situations and time constrains. c. Memory bias of the respondents (whoever could be approached) is high as detail and friendly interview could not happen due to time and security situations. d. Security situations following the Presidential election in the country constrained the movements of the staff, especially of the international consultant. The later could not visit to Pulle Alam market. Such constrains contributed towards delays in the data gathering, analysis and preparation of the report as well. However, the quality of the analysis and the structure of the study report have been maintained in line with the objectives of the study but within the available data and information. Dairy Market Study Pulle Alam Page 10

11 3. DEMAND FOR FRESH MILK AND DAIRY PRODUCTS Two variables have been adopted to estimate the present and future potential demand for fresh milk and milk products in the studied markets for the purpose of this study. They are: the population and the present consumption pattern of dairy products as gathered from the consumers survey. 3.1 Size of the Market Population According to the Afghanistan population statistics, the settled population of Pulle Alam district in was 104 thousand 1. Most of them live in rural areas and only about 5.07 % or 5.3 thousand people lives in the urban area (Pulle Alam municipality). Annex With fertility rate of 6.3/women, the average family size is estimated at 8 members/family by UNICEF. Thus, the total settled urban household is estimated at only 663 which could be considered as the potential low size of the household consumer in the market for dairy products in Pulle Alam city. Because, other parts of the population like rural population, nomadic population category, and temporarily living population are excluded in this estimate. There has been very slow growth in the population of Pulle Alam municipality. During the last decade the population of Pulle Alam has increased by only 23.26%. The city population stagnated in some years and is growing almost at constant rate. Figure Figure Population of Pulle Alam Municipality: Afghanistan I n T h o u s a n d s Female Male Total Year 1 Afghanistan Statistical Year Book , Central Statistics Organization, Islamic Republic of Afghanistan, Dairy Market Study Pulle Alam Page 11

12 In Pulle Alam, the annual increase of population has been very slow. It has ranged from 0.00% in three different years to 4.65% in the year , with an average annual growth rate of only 2.37 % during the last decade. Table Table Growth in Urban Population Pulle Alam Municipality, Logar: Afghanistan In 000 Municipality Pulle Alam Year Population Growth % Average Consumers of dairy products Consumption of milk and dairy products in Pulle Alam market is high. As many as 69.82% of the interviewed consumers purchase milk and milk products either daily or even twice a day (categorized as High user group ). And 16.32% of the consumer use dairy products three times or less a week (categorized as Low user group ). Only 13.86% of the total household, at present, do not consume dairy products and such non-users varied for different dairy products ranging from 33% for cream, yoghurt in cup and cheese cubes to only 6% for yoghurt. As in the case of non-user, the proportion of low user and high user also varied for different dairy products. Such information for Pulle Alam market is presented in Annex Based on these survey findings, the total urban households of Pulle Alam have been divided into three groups: a) Non-user of 92 households (13.86% of total household), b) Low user of 108 households (16.32% of total household), and c) High user of 1,296 households (69.82% of total household). Annex A. Accordingly, present potential demand for fresh milk and milk products have been derived for this study purpose. 3.2 Demand for Dairy Products The present potential size of the demand for fresh milk and dairy products has been estimated at two levels and of future potential demand at three levels to assess the size of the Pulle Alam dairy market Present potential average demand for dairy products General consumer The interview with the consumers has revealed that average liquid milk purchase in Pulle Alam was 1.39 Lit./day of pasteurized milk. Accordingly, the present potential demand for pasteurized milk is estimated at 572 Lit./day. Similarly, the demand for yoghurt bulk, second most important product consumed in Afghanistan, is about 815 Dairy Market Study Pulle Alam Page 12

13 Kg./day. The estimation of present average potential demand for dairy products based on the total average purchased quantity by the user groups of households in Pulle Alam city is presented in Annex These estimates are the high side demand estimation but at low volume because other parts of the population are excluded in this estimation. Thus, to meet only the potential average demand for pasteurized milk (572 Lit./day) and yoghurt (815 Kg./day), dairy processing units of about 1.3 Ton/day will be required for Pulle Alam market Present potential users demand for dairy products General consumer The above demand estimation is further refined to derive more realistic picture of present potential levels of demand for dairy products. This has been done by segregating the total consuming households into low user and high user groups and their respective average consumption. The details of their number and respective consumption level of different dairy products as revealed by consumers survey in Pulle Alam are presented in Annex A. Based on those variables, present potential users demand for dairy products in Pulle Alam market has been estimated. The details estimations are presented in Annex The consumers survey reveals as many as 78% of the total consumers household (517 HH) are high user and 11% are low user (73 HH) of pasteurized milk. The high user group, on the average, consumes 1.3 Lit./Day while low user group consumes 0.64 Lit./Day of pasteurized milk. Accordingly, the present potential users demand for pasteurized milk is estimated at 719 Lit./Day (672 Lit./Day of high user group plus 47 Lit./Day of low user group). Similarly, the demand for yoghurt bulk is about 891 Kg./day. Such demand estimations of dairy products are presented in Annex Those estimations are users low side demand estimation at low volume because other parts of the population as in the case of average potential demand estimation is excluded. Thus, to meet the present potential users side demand for pasteurized milk (672 Lit./day) and yoghurt (891 Kg./day), processing units of 1.6 Ton/day will be required. The estimated present and future potential demand for selected 12 dairy products that are commonly domestically produced (imported products excluded) are summarized in Table These products are being presently produced and sold by the farmers and few small household level dairy products seller in town. The lowest estimation of the required processing units to meet the market demand for those 12 products is of more than 3 Ton/day and very high estimation is of less than 5 Ton/day processing capacity. Dairy Market Study Pulle Alam Page 13

14 Table Estimated Present and Future Potential Demand for Selected Dairy Products Pulle Alam, Logar: Afghanistan (Year: 2014) Product Unit Present Potential Future Potential Demand Average side/low volume Demand User side/ Low volume Low side High side Very high side Fresh raw milk Lit/D Pain liquid milk (pasteurized) Lit/D Butter Kg/D Ghee Kg/D Paneer Kg/D Ice cream individual pack /Day Ice cream family pack /Day Local yoghurt bulk Kg/D Pasteurized yoghurt/ cup Kg/D Cream Kg/D Butter milk (dough) Lit/D Quark/ Chaka Kg/D Total The above estimates are based on the present consumption (demand) pattern which is constrained by non-availability of dairy products in the market and very limited outlets for fresh and local products. Improvements in these situations will result in increments in the number of consumer, number of dairy products consumed as well as in the volume of their purchases. Beside, the consumption of fresh milk and dairy products is very important food item for an Afghan. Their significance as important food item is reflected in the weight assigned to this product category while deriving the Consumer Price Index of the country. All food item in total is assigned 61.3% weight in calculating CPI while Milk and milk products (eggs are also included in this category) alone is weighted at 5.6 % which is third after Bread & cereals (28 %) and meat (6 %). The milk and milk products thus constitute a very important item in total food consumption in Afghanistan. However, the small size of urban population, it s very slow growth and very rural nature of the Pulle Alam district, it cannot be expected that the Pulle Alam will generate good potential demand for processed dairy products Consumers basket of dairy products The composition of dairy product consumption basket of the consumers (users side low volume estimation) in Pulle Alam city is depicted in Figure Three dairy products yoghurt, fresh milk and pasteurized milk alone constitute 73% in the total consumer basket. Yoghurt is the single most important dairy product that comprises 27% of the total dairy consumption basket. The consumption of dairy products in Pulle Alam market is very limited both in terms of quantity and variety of dairy products. Dairy Market Study Pulle Alam Page 14

15 Figure Composition of General Consumers Consumption Basket of Dairy Products, Pulle Alam Market: Afghanistan Butter milk 16% Quark/Chaka 10% Paste. Milk 22% Butter 1% Ghee 1% Cream 4% Yoghurt 28% Paneer 18% Present demand for dairy products Institutional consumer Different from general consumer is the category of institutional consumer who also contributes in determining the market size of the dairy products. But the size of their demand for dairy products in Pulle Alam market appears very small. Yoghurt and fresh milk is used by all of them. The survey indicates that these institutional consumers are using only five different dairy products. The details of their quantity used and price paid are presented in Table A certain deviation between the average and the maximum/ minimum values could be noticed. This is due to the wide difference in the quantity needed by them due to the nature of their business. The police need large quantity of dairy products while the hotel uses small quantity as required. Similarly, deviation in the prices paid by these consumers is also high because some institutions bought through annual contract while others bought on daily basis from the market. Table Quantity of Dairy Products Purchased by Institutional Consumers Pulle Alam Market, Afghanistan Quantity/Price Quantity per Buying event Price (Afs.) Products Max. Min. Average Max. Min. Average Fresh Milk (Lit.) Yogurt (Kg.) Butter Chaka(Kg.) Cream (Lit.) Dairy Market Study Pulle Alam Page 15

16 The composition of consumption basket of institutional consumers is depicted in Figure Fresh milk is the main product used by the institutional consumer comprising of 65% of the total consumer basket. This is followed by yoghurt constituting 19% of total consumers basket. Figure Composition of Institutional Consumers Consumption Basket of Dairy Products, Pulle Alam Market: Afghanistan Butter Cream 2% Chaka 6% 8% Yoghurt 19% Fresh Milk 65% All interviewed institutional consumers expressed their willingness and readiness to buy local products. Most of them buy their required dairy products from the farmers directly while some purchased from local shops. The quantity demanded and the composition of consumption basket of institutional consumers also brings out two important implications: a) this segment of market is still very small in Pulle Alam; and b) yoghurt is highly demanded processed dairy products Future Potential demand for dairy products General consumer Three levels of future potential demand have been estimated based on the survey results: a) low side potential demand, b) high side potential demand, and c) very high side potential demand. The first level of potential demand is estimated with the assumption that factors like increasing income and awareness about dairy products will persuade the low user households to consume quantity being consumed by high user household, and the high user group will maintain their present consumption level. The details of such estimated quantity of different dairy products are presented in Annex 3.2.2, and such estimations of 12 dairy products that are usually produced and marketed domestically are presented in Table The estimates reveal that a 4 Ton/day processing unit will be more than sufficient enough to meet the low side future potential demand of those 12 products. The high side future potential demand is estimated as medium term demand expansion and it includes the existing estimated demand and the amount that the non-user households will consume the quantity presently consumed by the low user households. The very high side potential demand is estimated as long term demand expansion and it includes the existing estimated demand and the amount that the non-user households will consume the quantity presently Dairy Market Study Pulle Alam Page 16

17 consumed by the high user households. To meet these high and very high potential demands for dairy products 4-5 Ton/day capacity will be required Share of imports in total existing demand Very few dairy products in limited quantity are imported into Pulle Alam market by the importer/ wholesaler. There are few wholesaler and retailer in Pulle Alam selling imported dairy products. Most of them are getting their supplies from the importer/wholesaler located in Kabul. Table Quantity and Seasons of Milk Products Import Pulle Alam: Afghanistan Lit./Kg/ day % of total average side demand Lit./Kg/d ay Winter Lit./Kg/d ay Autumn Lit./Kg/d ay Spring Dairy product Lit./Kg/day Summer Butter Quark/Chaka Butter milk Information on import of dairy products and sold in Pulle Alam market are very small. The total quantity imported of all dairy products by those interviewed traders is presented in Table The available data reveal that the quantity of import of butter amounted to 23% and of quark/chaka 35% of the total average demand. On the other hand import of butter milk amounted only 1.08% of the total average demand. These three products are also domestically produced and sold in Pulle Alam market. Therefore, the competition from imported products is highly limited to a very few products and not very strong in Pulle Alam market. Also, dairy products are not exported from Pulle Alam Import season The traders indicated the seasonality of the imports of three dairy products in the market. The seasonal variation in the imports of butter milk and quark/chaka is very discernible. Larger quantity of this product is imported during summer than in other seasons. There are very little seasonal variations in the imports butter. Figure K g / L i t / D a y Figure Seasonal Variation in the Imports of Dairy Products Pulle Alam: Afghanistan Winter Autumn Summer Spring Butter Quark/Chaka Butter Milk Dairy Market Study Pulle Alam Page 17

18 3.3 Consumers Preference Consumers preference for imported vs. local dairy products All interviewed consumer preferred local dairy products against imported ones and all consumers buy fresh milk directly from the farmers. Even all the interviewed importer/wholesaler also confirmed that consumers prefer domestic products because of their good and fresh quality. It could be argued that all consumers prefer local products because imported processed products have not penetrated in Pulle Alam market. Table Table Consumers Behaviors on Purchasing of Dairy Product: Pulle Alam, Logar, Afghanistan In % of Respondents Pulle Alam A. Preference Local Product 100 Imported Product 0 B. Buying Directly from Farmer 100 C. Condition to Buy Local Product Hygienic 83 Good quality 92 Good packing 54 Longer keeping 67 Price Consumers purchasing of domestic vs. imported products The survey reveals following consumers purchasing behavior: a) In case of products which are not produced locally (UHT milk products, powder milk, flavored milk products and cheese cube) the consumers do not have a choice and buy only imported products; b) In case of traditional and locally produced products (such as fresh milk, ghee, paneer, yoghurt and Chaka), all the consumers buy only domestic products; c) In the case of products which are domestically produced as well as imported: i) majority of the consumer purchase local products and proportionately larger quantity (pasteurized milk, butter and cream); and ii) only few imported products are purchased by majority of the consumers but not necessarily in proportionately larger quantity (cream cheese and butter milk). Table These situations and findings are further elaborated below in terms of share of imported and local products in consumers basket. Dairy Market Study Pulle Alam Page 18

19 Table Consumers Purchasing Preference for Dairy Products Pulle Alam, Logar: Afghanistan Purchase (% of respondent) Local Product % Total Imported Product % Total No Dairy products Unit Local product Imported product Quantity Purchased Quantity Purchased 1 Fresh raw milk Lit Pain liquid milk (pasteurized) Lit Plain liquid milk - UHT Lit Milk powder - whole Kg Milk powder - skim Kg Flavored liquid milkpasteurized Lit Flavored liquid milk - UHT Lit Butter Kg Ghee Kg Cheese cubes Kg Cheese slices Kg 12 Cream cheese Kg Paneer Kg Ice cream individual pack Pack Ice cream family pack Pack Local bulk yoghurt Kg Pasteurized yoghurt/ cup Kg Cream Kg Butter milk Lit Quark/ Chaka Kg Most consumers expressed that the local products will take large share in consumer basket if quality of local products improved and handled very hygienically. Some considered good packing with expiry date in their packing could help local products to compete in the market. Table A further analysis of consumers expectations of local dairy products is presented in Section below Share of import in consumers consumption basket The consumers were asked to report the quantity of local and imported products that they buy. Such information clearly reflects the competitive situations of imported and local products in the market. The data indicate that: a) Some products which are not produced domestically, therefore consumers buy the imported ones. And the question of competitiveness in the market does not arise for those products. b) Similarly, products which are not imported into Pulle Alam market, therefore consumers buy the domestic only. And Dairy Market Study Pulle Alam Page 19

20 the question of competitiveness in the market does not arise for those domestic products as well. c) In case of those products which are imported into Pulle Alam market as well as domestically produced, different products comprise different shares in consumers total consumption basket. From the perspective of market competitiveness : i) imported butter milk has better competitive position than local one; ii) domestic and imported cream cheese and ice-cream family pack have equal market share; iii) domestic cream, pasteurized milk and butter have stronger competitive position than the imported ones. These shares are reported in Figure Figure Share of Import in Total Purchase of Dairy Products Pulle Alam, Logar: Afghanistan Quark Fresh milk Yoghurt plain Paneer Ghee Butter Pasturised milk Cream Ice-cream family Cream cheese Butter milk Import Local Ice cream indi pack Yoghurt cup Flavored UHT Powder skim Flavored milk Liquid UHT Cheese cube Milk Powder 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% In % Consumers buying preferences of dairy product The price of the product does not seem to be the foremost consideration for the consumers in buying the dairy products. The consumers consideration in buying dairy products in order of importance is presented in Table The consumers give most importance to taste/color of the product while buying dairy products. Their second most consideration is the advertisement of the products. They also tend to give priority to personal selling of the products. Sales promotion of the product in the market is their fourth priority. The close scoring of other considerations or factors by the consumers indicate that they are not much concern of other than above mentioned four factors, or they are virtually indifferent. Dairy Market Study Pulle Alam Page 20

21 Table Consumers Consideration in Buying Dairy Products Pulle Alam, Logar, Afghanistan Highest score of 5 Market factors Pulle Alam Score Rank Taste and color Safety and quality Brand / Manufacturer Product labeling/manufacture date Packaging Reasonable price Access easily Reliable, famous Sales promotion/incentives Advertising Personal selling Traders perception on consumers preference All the responding traders (wholesaler/importer) expressed that the consumers tend to prefer local dairy products because they are of good quality and own domestic products. Table Table Wholesaler/Importer s Perception on Consumers Preference of Imported and Local Dairy Product Pulle Alam, Logar: Afghanistan Local Because Imported Because Consumer prefers Selling local dairy products product 100 % Good quality. Own product. Yes 89 % Only local yoghurt and quark/chaka product - - No 11 % Almost all the traders (89 % of the interviewed) handling imported dairy products are selling local products as well and in a substantial quantity. The local products that they selling are fresh milk, yoghurt, ghee, butter, cream and butter milk. 3.4 Prices of Dairy Products Consumers Willingness to Pay The purchase price and selling price of different imported dairy products reported by the wholesaler/importers are presented in Table 3.4. The wholesaler/importers margins for different imported dairy products varied within a range of 4.80% (for butter) to 23.44% (for quark) in Pulle Alam market. The retail margin (difference between wholesaler/importers selling price and price paid by the consumers) for different imported dairy product is either zero or very low. This phenomenon is noticed because the same Dairy Market Study Pulle Alam Page 21

22 importer/wholesaler is retailing as well. Table 3.4. In terms of price margins, the consumers are not paying high price for the imported products. Table 3.4 Wholesale, Retail Price and Margin of Imported Dairy Products Pulle Alam: Afghanistan Wholesaler/Importers Price Afs. Consumer Paid Retail Price for Product Purchase Price Selling Price Margin % Imported Products Afs Retail Margin % Liquid UHT Milk Lit Powder milk whole Kg Butter Kg Ghee Kg Cream cheese Kg Paneer Yoghurt.Kg Cream Lit Butter milk Quark/Chaka A comparison of average price paid for imported and local dairy products by the consumers could not be made in the case of Pulle Alam market. Because the available dairy products in the market are either completely imported or completely domestic. Table 3.4.A. Dairy Market Study Pulle Alam Page 22

23 Table 3.4.A Price Differences in Local and Imported Dairy Products Paid by Consumer Pulle Alam, Logar: Afghanistan Price paid for local product Afs No Dairy products Unit Average Price Afs Fresh milk Lit Plain liquid milk (pasteurized) Lit Price paid for imported products Afs 2 Plain liquid milk - UHT Lit Milk powder - whole Kg Milk powder - skim Kg Flavored milk pasteurized Lit Flavored milk UHT Lit Butter Kg Ghee Kg Cream cheese Kg Paneer Kg Local bulk yoghurt Kg Cream Kg Butter milk Lit Quark/ Chaka Kg The price alone is not an important consideration while buying the dairy products. Their most important concern is the good color and taste of the products. Table It indicates that consumers are willing and ready to pay premium price (high price) for the domestic dairy products. 4. SUPPLY OF FRESH MILK A wide variation in the yield per cow and total production per household are reported by the farmers. An attempt has been made below to estimate the total production and marketing practices of milk by the farmers. 4.1 Milk Production The present average milk production in a day from different breeds of milking cow and during summer and winter is presented in Table 4.1. Farmers, on the average, own 1.60 milking cows/hh of all three breeds considered. The average milk yield per cow per day of exotic breed is higher than cross breed and of cross breed is higher than local breed. Also, the survey confirms that the yield per cow per day of all the breeds considered is higher during summer than in the winter. Based on those indicators, total milk production of three Project districts (Baraki Barak, Pulle Alam and Moh. Agha) is estimated. at 379,394 Lit./day. Table 4.1. Dairy Market Study Pulle Alam Page 23

24 Table 4.1 Estimated Milk Production, Logar Province in Three Project Districts 2 Logar Province 3 Province Yield/Day/Cow Lit. in Logar Breed/Yield Summer Winter Average A. Local breed milking cow 2.2/HH Total number of local cows in 3 Project districts 27,686 Total milk production from local breed Lit. 204, , ,161 B. Cross breed milking cow 1.1/HH Total number of cross breed cows in 3 Project districts 12,011 Total milk production from cross breed Lit. 153, , ,534 C. Exotic breed milking cow. 1.5/HH Total number of exotic breed cows in 3 Project districts 3,682 Total milk production from exotic breed Lit. 77,690 49,707 63,699 Total milk production Lit. 436, , , Marketable Surplus The marketable surplus of fresh milk of the farmer on the average is 83.27% of total production in three Project districts of Logar. The remaining 16.73% is consumed by the farm family. This is simply calculated by deducting only the household consumption of fresh milk of the farmer from their total milk production. Other milk based products produced and consumed by the farmers derived from their fresh milk production is not included here. In fact, farmers are selling other dairy products as well. The marketed surplus of fresh milk is estimated at 52.91% of total production. Table Table 4.2 Marketable Surplus of Milk of Responding Farmers, Logar Province Province Milk Production Lit/Day/HH Consumption Lit/Day/HH Marketable Surplus Lit/Day/HH Marketable Surplus (% of total production) Marketed Surplus 4 (% of total) production Logar The marketable surplus of milk in three Project districts will thus be 334,132 Lit./day and marketed surplus will be 200,737 Lit./day. This amount will be sufficient to operate a very large multi-purpose dairy processing unit. 2 Baraki Barak, Pulle Alam and Moh. Agha. 3 Cattle population derived from Department of Livestock Development 4 Marketed surplus is the actual amount of milk sold by the farmers in Pulle Alam market. It does not include fresh milk utilized by farmers to produce other dairy products for self-consumption and sell. Dairy Market Study Pulle Alam Page 24