From EconomicTimes. Story by Raji Reddy Kesireddy.

Indian dairy firms are trying to tap opportunities in the East African milk processing markets where demand has surged amid rapid urbanization and rising income levels.

This comes at a time when several global dairy giants are looking for acquisition possibilities in Eastern Africa and leading local milk producers are trying to consolidate their market share through aggressive buyouts.

Many Indian businessmen already have large exposure to African agriculture and allied sectors including floriculture and hybrid seed production.

India is the world’s largest milk producer with a production of around 140 million tonnes.

Indian dairy firms will beeline to African markets, given the highly attractive profit margins, according to JB Sivakumar, dairy sector analyst at India Ratings. “(Compared to) single-digit profit margins in India, African milk processing markets offer 15-20 percent margins,” he said.

Billionaire Ravi Jaipuria, whose Devyani Food Industries sells Cream Bell ice cream, was among the first Indian business people to enter Africa’s dairy sector nearly a decade ago. The company recently sold its stake in its Uganda dairy joint venture, Sameer Agriculture & Livestock, to Kenya’s largest milk producer, Brookside Dairy, which was controlled by President Uhuru Kenyatta’s family.

Hyderabad-­based Dodla Dairy and Punjab­based Amos Dairy are the latest Indian firms to enter the African markets with processing plants, while a few others are weighing options.

Dodla Dairy last year acquired milk processing assets in Uganda and now sells around 10,000 liters of milk daily in that country.

Africa is an opportunity for the next level of growth, especially at a time when Dodla is witnessing margin pressure in the Indian market owing to price wars in the liquid milk market, according to managing director D Sunil Reddy. “African expansion will help us understand new markets and help expand our presence globally,” Reddy said. “The profit margins will be at least double in Uganda compared to India.”

Amos Dairy had last year invested nearly half a million dollars to set up a milk processing plant in Uganda. The plant commenced operations recently. Punit Pruthi, managing director at Amos Dairy, said the company is now exporting processed milk products from milk surplus in Uganda to other countries in Eastern Africa.

“Kenya is a big market and is a milk deficit country and Rwanda, South Sudan and Congo offer similar opportunities,” he said. “In fact, West African economies, which heavily depend on milk imports, also offer attractive business opportunity but we need to compete with the strong European brands.”

Parag Milk Foods, which is exporting products to African markets, is also weighing options to enter the market with a processing plant, said its chief marketing officer Mahesh Israni.

Raw milk is a difficult product to trade, especially given the tropical temperatures in Africa and the lack of refrigeration infrastructure, according to a June 2010 World Bank report on East Africa’s community’s dairy market. “That is why, we are focussing on long-shelf-life milk products in tetra packs, which also offer better margins,” said Sunil Reddy.

Read more at EconomicTimes.