Kenya’s dairy industry can take many steps to improve productivity and boost earnings, says food packaging company Tetra Pak in a recently published report.

“South Africa produces less milk than Kenya but earns so much more,” states the report. “This is partly thanks to a robust marketing strategy – 89% of South African milk is marketed through formal channels, and almost all the fresh milk sold is pasteurised. Only about 30% is marketed through formal channels in Kenya.”

According to Tetra Pak, the key to productivity growth of Kenya’s dairy industry lies in the development of modern processors. “These processors are best able to create value-added products and they are much more effective, due to their substantial scale and technology advantage.”

Factors currently undermining the growth of Kenya’s dairy industry include the “informality of the sector, the lack of consumer awareness, and informality in downstream retail channels, coupled with inefficiencies in raw milk supply.”

East Africa is the region in Africa that produces the most milk, with about 6,500 million litres turned out in 2009. Kenya is the largest producer in East Africa and the third biggest milk producer on the continent with approximately 4,200 million litres in 2009.

Tetra Pak notes that although the environmental conditions in East Africa are well-suited for dairy production, the industry has been characterised by low productivity, with each cow producing on average 1,500 litres per year.

“Low advancement of milk handling due to lack of sufficient quality checks predisposes milk to contamination further undermining production levels. Regulation in the sector remains weak with poor enforcement of the legislation banning hawked milk,” says the report.

The high number of middlemen between producers and consumers, chipping away at farmers’ returns, is also an issue that needs to be addressed in Kenya’s dairy industry.

In addition, Kenya has an undeveloped cooling sector with only about 200 cooling centres in 2008, many which are not in use.

The report says that despite these challenges, Kenya’s dairy industry holds considerable potential. “In milk consumption terms, Kenya ranks only behind Mauritania and Mongolia globally among developing nations.”

It is also expected that developing countries will see significant economic expansion as well as the growth of the middles class in the next 20 years. A corresponding growth in demand for dairy products and other processed foods is anticipated.