Written By Syed Md. Rakeen, Team MBR

The dairy industry has withstood several economic shocks in recent years and maintained steady growth. The industry started off on a small scale and gradually expanded over the years, with many dairy farms now up and running in different areas of Bangladesh. Being a source of food and a means of subsistence, the industry holds enormous power to create a transformative effect on the country’s economy. The sector has undergone tremendous development recently, with technologies and innovation playing important roles in enhancing production, market access, and sustainability. According to the Department of Livestock Services, the dairy market size in Bangladesh is estimated at USD 2.47 billion and is projected to grow by over 5% every year. The market size is large enough to attract both domestic and foreign direct investment to maximise its potential.

According to the Department of Livestock Services, the amount of milk production in Bangladesh was 119.85 lakh metric tonnes against the demand for 152.02 lakh metric tonnes in the financial year 2020–21. This gap between supply and demand was then filled by importing milk powder in bulk quantities, primarily from Australia, New Zealand, Holland, Denmark, and Poland. In a bid to accelerate the growth of the sector, the government is launching a BDT 4,280 crore project under the banner of the Livestock and Dairy Development Project with the support of the World Bank. All these are intended to merge traditional methods with modern technologies to ensure that Bangladesh is at the forefront of milk producers globally.

Global Outlook of the Dairy Industry

The global dairy industry is predicted to expand by 2% annually over the next five years. A rise in population will result in more demand for dairy nutrition across the Middle East, Africa, and Asia-Pacific countries. With the demand for dairy products increasing globally, consumers are becoming more health-conscious and selective in picking dairy products while looking for options produced sustainably. The nations of the European Union dominated the production of cow milk in 2022, as shown in Figure 02, racking up a staggering 143.9 million metric tonnes, indicating that dairy has been a significant component of daily meals for the people in Europe.

According to the Food and Agriculture Organisation of the United Nations, Asia is the world’s biggest milk producer, with the majority of the output coming from Pakistan, India, Kazakhstan, China, Uzbekistan, and Japan. However, Bangladesh is ranked lowly among all the milk-producing countries, indicating that the industry requires more investment and government support to maximise its potential. As shown in Table 01, neighbouring countries like India and Pakistan produce almost 4–5 times the amount of milk produced in Bangladesh per cow in every 305 days, indicating a significant lack of inefficiencies in extracting milk.

The Value Chain of the Dairy Industry in Bangladesh

Currently, the value chain of the dairy industry can be classified into two models: the informal, traditional market model and the formal processed market model. A report by the International Farm Comparison Network states that almost 91% of the milk is traded informally, while only 9% is sent to industrial processors. In the informal model, the milk is directly sold to consumers by the farmers, whereas in the formal segment of the market, mostly cooperative models are imitated, where the farmers constitute cooperatives, and the cooperatives help channel the milk to industrial units, which eventually reach the consumers. In the formal segment, automation can play a crucial role in the collection of milk, the processing of milk, and the production of end products, aiding in achieving economies of scale and reducing cost per unit.

As said earlier, traditional channels dominate the dairy industry in Bangladesh, and the most significant cattle for milk production in Bangladesh are cows, which account for 90% of the total milk obtained by farmers.

Though only 9% of the total milk production goes into the formal value chain, it is the most suitable model to produce more value-added items. Hence, industrial milk processors are moving their collection points closer to milk-producing zones due to milk’s sensitivity to temperature and storage duration. Also, this helps fulfil the requirements of the consumers, as they are more concerned about quality and freshness these days. These collection points are typically equipped with modern refrigeration technologies and milk testing facilities, enabling dairy farmers to receive payments depending on the fat contents of the milk.

As there is a wide gap between supply and demand, the gap is filled with various imported dairy products, which is why massive amounts of foreign milk powder are entering the local market. Although the government is strongly promoting the growth of the local dairy industry, progress has been observed to be sluggish. In recent years, the country’s increasing industrial demand and domestic consumption have made it dependent on imported milk powders. Boosting domestic milk production can help reduce the dependence on import channels, provided the price of domestic products remains competitive.

Leading Industrial Dairy Processors in Bangladesh

Major industrial processors such as Milk Vita, Aarong Dairy, and PRAN control 88% of the processed dairy product industry. The primary target consumers are predominantly urban consumers who desire a wide selection of brands, qualities, and products. People can access processed goods via retail stores, supermarkets, restaurants, and hotels.

Incorporating Innovation in the Dairy Industry

Product Diversification

The development and growth of Bangladesh’s dairy sector have been hugely dependent on product diversification. Offering a wide variety of value-added dairy products has allowed major dairy producers, including PRAN, Aarong Dairy, Farm Fresh, and Milk Vita, to capitalise on the changing tastes and preferences of consumers. This diversity of products not only serves various consumer categories but also aids in maintaining a competitive advantage in the market.

Milk Vita: Since 1973, the state-owned company Milk Vita has led the dairy sector in Bangladesh. Milk Vita has expanded its selection of products throughout the years while staying true to its mission to produce highquality dairy products. Pasteurised milk, powdered milk, flavoured milk, yoghurts, ghee, butter, and ice creams are in the company’s product basket. Milk Vita has successfully maintained its position as a major participant in the Bangladeshi dairy market by growing its product lineup.

PRAN: Beyond the usual milk and yoghurts, PRAN Dairy, a division of the PRAN Group, now offers a wider range of products. It currently produces a wide range of dairy products, including flavoured milk, yoghurt drinks, UHT milk, ghee, and cheeses. PRAN has responded to shifting customer needs by launching these value-added products and gaining a considerable share of the market.

Aarong Dairy: BRAC’s venture Aarong Dairy is wellknown for its premium dairy goods. Aarong Dairy has expanded its product line to include pasteurised milk, yoghurts, ghee, butter, and cheeses. In addition, it offers a variety of flavoured milk and yoghurt drinks, satisfying the rising need for dairy products that are portable and handy.

Farm Fresh: Farm Fresh, a brand of Akij Food & Beverage Limited, has gained recognition by providing a variety of dairy products that appeal to healthconscious consumers. In addition to pasteurised milk, it offers UHT milk, butter, and ghee. Farm Fresh also caters to consumers by providing flavoured milk, milkshakes, and yoghurts.

Processing Technologies

Artificial intelligence and big data analytics have already been incorporated into dairy farming to a small extent. Dairy farming can be made more efficient by ensuring improvements in computing power, widespread connectivity, biotechnological research, geographic information systems, and other capable technologies.

Eon Group is the first to launch an automated pasteurised milk factory in Bangladesh. Machines execute the entire processing activities, such as milking, pasteurisation, and product packaging. Nahar Agro is also one of the farms with the most advanced technologies. On this farm, the usage of IoT sensors is helping track cows’ feeding, health, medication, and breeding. Technologies are aiding massively in enhancing milk production per cow, reducing cow deaths, and ensuring their good health.

Breeding by Artificial Insemination

Artificial insemination is crucial in improving the diverse breeds of cattle, specifically engineering them to produce more milk. Cross-breeding local cows with high-yielding cows such as Sahiwal, Holstein Friesian, Jersey, etc., can produce satisfactory results. Artificial insemination can even help to extract 4.5 litres of milk from cow breeds that previously used to produce only 2 litres of milk. This technique is now spreading in rural areas of the country. According to the Central Cattle Breeding and Dairy Farm, the artificial insemination of cattle contributed BDT 45,224 crore to the national economy in the financial year 2020–21. Due to the technique’s ability to increase milk production per cow, it should be made more popular with a plan to boost the dairy industry.

Confronting Challenges and Devising Solutions

The dairy industry is facing several challenges due to the ongoing unpredictability of the global economy coupled with domestic obstacles. Prices of animal feeds and medicines have shot up due to the challenges posed by both the COVID-19 pandemic and the Russia-Ukraine war, resulting in higher prices at the consumer level. However, the milk price has stayed the same for farmers. The uncertainty in the global economy has doubled the price of imported powdered milk. Also, the warm climate and high degrees of humidity in Bangladesh make it unsuitable for high-yielding cows.

The sector’s most significant hurdles are the lack of trained labour, the lack of quality milk, the shortage of veterinarians, the inability to process and store milk, and the huge gap between the selling price of the farmers and the buying price of the consumers. It is to be noted that the country’s dairy market is mostly constituted by unprocessed liquid milk, and the processed segment, which contains products such as cheeses, butter, etc., is highly dominated by imported brands. A major portion of the demand for processed products is met with imports. Increasing import duties on processed dairy products and exempting import taxes and duties on capital machinery required to produce processed dairy products can help the processed segment flourish.

As an increase in demand for powdered milk is observed every year, establishing local powdered milk-producing units with the help of investment-friendly policies is crucial to reducing dependence on imports.

Bangladesh’s dairy industry portrays a striking example of how innovation and tradition may coexist to produce a vibrant and long-lasting endeavour. The combination of traditional practices and cutting-edge technologies has boosted growth, increased production, and enabled product diversity to meet changing consumer preferences. Through creative product offerings and marketing techniques, top dairy product providers, including PRAN, Aarong Dairy, Farm Fresh, and Milk Vita, have significantly transformed the industry. Notwithstanding the difficulties the dairy industry is facing, it has managed to build a resilient route to a promising future because of its embrace of innovation. The industry’s continued evolution and adaptation promise to support the nation’s food security and economic growth and encourage other sectors to adopt a similar fusion of tradition and innovation. The Department of Livestock Services has estimated that Bangladesh will be able to be self-sufficient in the dairy industry before the year 2030. To promote the growth of the dairy industry, policies must be formulated to curb the massive imports of dairy products. The dairy industry even possesses the potential to be an avenue for exports in the future, as the dairy industry has been a promising sector for some time now. By implementing investment-friendly policies, Bangladesh can turn that potential into reality in the coming days.