January 2, 2017

Swiss investor S. Isiyah and his Sri Lankan partner, S. Venden, who is based in Switzerland, are investing Rs 900 million (US$13.5 million) to establish one of the most high-tech dairy farms in South Asia.

The partners originally traveled to Sri Lanka in 2014 to secure 200 acres for the initial phase of the project, however, a Minister within the previous government administration demanded 15 percent of the investment to go toward his “development fund” causing the partners to scrap their plan at the time. Now, with a new administration in place, the partners are once again undertaking the investment.

The project will be completed in two stages. Under the first phase, 150 acres of special grassland will be developed and 200 head of milk cows will be imported. Milk output under the first phase should begin within three months with the raw milk being sold to local Sri Lankan companies. Within the first four months of the first phase, the investors are targeting a reduction in Sri Lanka’s milk imports by 10 percent.

The second phase of the project is expected to begin nine months after operations begin, and will include the construction of a factory that will produce milk powder, butter, and cheese.

The business model will also include particularly high-tech aspects, including each cow being fitted with GPS technology in their ear that will track their milking patterns and location, and which will relay this data to managers in both Sri Lanka and Switzerland. The storing and transportation of raw milk will also be handled through high tech systems.

The farm also plans to generate electricity from its dairy waste, which will be provided free of charge to more than 100 local villages, and will include a solar-powered water tank that will extract water, automatically purify it using a special filter, and store it during the day to provide free drinking water, while also producing enough electricity for a local household.

Siren Song of Sri Lanka

Sri Lanka imports 60 percent of its milk requirements – a necessity that cost the country US$300 million in 2014. In order the become more self-sufficient the country would need to produce a daunting 600 million liters each year.

Meanwhile, U.S. per capita dairy consumption has remained flat over the past four years despite an increase in population of 0.8 percent, according to Paul Carbonneau, partner with McKinsey & Company, who surveyed 33 U.S. c-suite executives, 61 dairy companies, and 10 McKinsey dairy and retail experts to gauge industry sentiment and strategy direction. Over the same time period, dairy consumption increased by 6.1 percent in China and by 3.6 percent in India. Carbonneau explains this growth to Dairy Reporter saying it is simply a result of “Wealthy consumers putting new foods into their bodies.”

Flat growth in more developed, Western markets combined with high demand in the Asian region has made Sri Lanka a target with high potential for growth.

Wellard, Australia’s largest cattle exporter, has partnered with Sri Lanka’s National Livestock Development Board (NLDB) in a joint venture that will supply dairy cattle, infrastructure, equipment, and management expertise with the goal of increasing Sri Lanka’s dairy herd numbers and lifting the country’s average milk yield per cow.

Throughout the two phases of the joint project, Wellard shipped 4,500 dairy cows under two deals worth a combined US$34 million.

“We supplied Sri Lanka with quality Australian dairy cattle, farming infrastructure, plant and equipment, and farm management services,” said Colin Webb, Operations Manager, responsible for all breeding cattle Wellard exports from Australia and New Zealand. “The initial farms were part of a pilot project for subsequent development of large-scale dairy production in Sri Lanka.”

“Since the arrival of the first 500 cows, milk production has increased from 3 litres [sic] per day to between 18 and 21 litres [sic] per day. Fodder development had been the biggest challenge, but all three farms are now self-sufficient in fodder production.”

Nestlé has also made inroads in the emerging dairy market, launching its “Kiri Govi Diriya” dairy development program in Sri Lanka. The program, whose name means “dairy farmer development,” will train 3,000 dairy farmers and will provide 150 farmers with the milking equipment needed to realize growth of their business.

Nestlé is currently the largest collector of fresh milk in Sri Lanka, collecting milk valued at $24.6 million last year, however, domestic production is still not able to meet demand. The company has been actively developing the country’s dairy sector through the establishment of milk collection points and chilling centers, as well as heading up training programs centered on feeding and breeding of cattle, best production methods, animal health and farm management with the dual goal of lifting the country’s production levels and milk quality while also improve the lives of Sri Lanka’s smallholder dairy farmers.

-Lynda Kiernan