BR Research: How and why did you think of entering the packaged milk business?
Rashid Haleem: We came into the milk business in 2008 when we started a farm by the name Everfresh Farms. At that time Nestle was prompting investors to enter large scale dairy farming business, since they needed ultra clean pure milk from large scale farms.
The first step towards entering the milk business was to import cattle. So along with Engro and Sapphire Dairies, Everfresh Farms imported a sizeable amount of Jersey and Holstein-Jersey Cross breed cows from Australia; though these breeds essentially originate from Europe. We supplied raw milk to a leading processor for three years. Currently, we are supplying raw milk to two processors, besides supplying to our latest initiative--MilkVille, which currently provides fresh pure ultra clean cow milk to consumers of Lahore.
BRR: Why did you launch your own brand?
RH: That's because after six years of operations, it was inevitable for us to launch our own brand by taking prices in our own hands as there is the buyer's monopoly-monopsony-in the raw milk supplying market.
BRR: How is MilkVille different from other pasteurised and packaged milk in the market?
RH: What kind of milk is best for health? What should milk contain? What is not categorised as milk? The answers to these questions are generally not known by a majority due to lack of awareness in the country. Ideally, however, these are a few key things about milk every consumer should know of.
There are products available in the market that cannot be categorised as milk. Technically and legally these products might not come under non-conformity, and their labelling and packaging is such that a consumer with little knowledge would buy these as milk.
As pure as our family's intentions and goal to provide value added and quality product to consumers, MilkVille is purely farm fresh milk with no water, no powder and no preservatives added. Every process on the farm, including automated milking, is given rigorous on-site inspection under high hygiene conditions, where its record keeping requirements are very detailed. At the same time, production is maintained in such a way that no interference is done with the purity of milk. MilkVille is pasteurised milk that is first heated at 85 degree centigrade, and then swiftly cooled before it is packaged to keep it fresh for 5-6 days. Most brands collect milk whereas MilkVille produces its own milk.
BRR: What are some of the key concerns of packaged and pasteurised milk industry in Pakistan?
RH: One of them is related to the quick perishability of milk due to absence of cold chain infrastructure in our country. If the milk is not chilled quickly after heating process, the chances of bacteria multiplication to undesirable levels increases, making the milk unfit for some dairy products production. In Pakistan, the desirable threshold is often breached by huge margins.
Also, marketing acts as a key barrier to entry into the packaged milk industry. There may be products in the market that might not be 100 percent pure as they claim, but their brand building has been so successful that it becomes difficult to take a place in the consumer's mind. This also has to do with the taste that has grown on the consumers; it might take a long time for a new brand to get the consumer's approval who has been accustomed to the existing taste in the market.
Power shortfall and energy crisis, and logistics are a few other issues especially for pasteurised milk industry as it hampers with temperature regulation of milk and scalability, respectively. Due to these reasons, we have to be selective in distribution.
BRR: How do you define the market for packaged milk in the country?
RH: The market for packaged milk is changing. A literate and a relatively more aware consumer now prefer pasteurised milk over UHT milk. This was once the case for UHT milk; when it first came.
When income levels grow, awareness increases; with rising awareness, the consumption of UHT milk tends to fall like it happened in the developed countries; in a recent interview by CEO of a leading processor, he himself pointed out to a growing market for pasteurized milk in Pakistan over next five years. That is why you would see the market for pasteurised milk increasingly taking over the UHT milk market with products like Anhaar, Prema, MilkVille in Punjab, the province with the highest literacy rate. While the trend is not so common in other provinces yet, the preference for fresh milk can also be seen in Karachi with brands like Day Fresh.
Because of convenience and shelf life, UHT milk has high scalability, and thus has a vast supply chain. This is not true for pasteurised milk where the distribution of milk would be concentrated around the load centre only. So, one would see different pasteurised milk brand for different cities and provinces.
BRR: What are the advantages of pasteurised milk over UHT milk and raw milk?
RH: UHT milk is categorized as safe milk and does exemplify convenience. Even in countries like US and Middle East long life UHT milk is used for convenience purposes; people generally buy the 3-4 day shelf life pasteurised milk which is considered fresh and nutritious.
Where disease causing bacteria (pathogens) are killed during both pasteurisation and ultra-high treatment process, some good bacteria good for digestion and some vitamins get destroyed during the UHT process, where milk is treated at 135-140 degrees centigrade temperature.
When compared to raw milk, which is not treated at all, UHT milk and pasteurised milk is far better especially in countries where there is no facility to immediately cool the milk as soon as it is produced. The biggest concern is a high rate of adulteration in raw milk and poor hygiene standards.
Moreover, raw milk makes little economic sense for large scale consumption by urban population. In recent years, Turkey has passed a minimum pasteurisation law where no raw milk can be sold in the market.
BRR: Can you elaborate on the estimated market share of the different types of milks in the country?
RH: Raw milk still holds around more than 90 percent of the market, around five percent is with UHT milk and less than one percent for purely pasteurised milk. Within the pasteurised category there are brands that are packed in cartons and bottles, and there are brands that packaged in plastic that sell for less.
BRR: Why is it that the domestic livestock is not a preferred source for MilkVille or any other brand?
RH: Imported cows have better yields, which I think is primarily because a lot has been done in genetic improvement of the breeds internationally, which results in better yields. Unfortunately, this is not the case in Pakistan.
Secondly, the cattle in Pakistan is generally underfed, which eventually leads to poorer yields. Thirdly, there are no records of the cattle in Pakistan, whether it is for vaccinations, production or breed, whereas we can bet on the imported cattle because we get the relevant records for the animals.
Lastly, it is difficult to buy such large quantities of animals domestically from one place, or of the same type. The reason why we prefer imported cattle in this case is uniformity, genetics and standard.
However, it must be noted that the import of cattle is not growing right now; imported farms are in a difficult phase as the feed cost has risen tremendously, while the sale price remains subdued.
BRR: How many cows have you imported and what is Milkville's production today? What are your future plans?
RH: We have imported around 950 cows since the beginning, and our total count has now almost doubled to 1,700. With around 900 cows into milk at one point in time, we are producing between 18 to 20 tons of milk per day. We plan to take some important initiatives this year regarding new markets, new products, and different channels.