COMPANY PROFILE MZUZU DAIRY

SPONSORED BY THE NEST AFRICA

Malawian milk processing start-up soars high despite the pandemic

At a time when many businesses are facing major financial struggles – with large numbers having to borrow working capital, revise production capacities or lay off staff – you might think that starting a business during the coronavirus pandemic would stand very little chance of success. The Food Business Africa team had a seat down with Denis Chitowe, the Founder and Managing Director of Mzuzu Dairy, a dairy processing start-up in Malawi that commenced operations just at the onset of the pandemic in November 2019.

By Catherine Wanjiku

Despite taking a one-year stint, from November 2018, to establish the business, David Chitowe, the Founder & MD of Malawian dairy start-up Mzuzu Dairy had not anticipated that the launch of the venture will be shadowed by the pandemic. Tough times built though people!

The dairy processing start-up dauntlessly commenced operations, availing innovative products in the market, after obtaining approval from the Malawi Bureau of standards in February 2020, providing a stable market for the small-holder dairy farmers in a region that has struggled over the decades to establish a viable dairy industry. “We started when COVID-19 was just coming in, it was tough because the economy was majorly affected. This meant that our growth projections and plans were impacted. However, over time, we managed to pick up with the business,” Chitowe informs Food Business Africa.

Mzuzu Dairy, majority owned by Denis Chitowe, alongside Accesserator BV, a Dutch impact investor owning 30% stake in the business, is based at Mzuzu town in the Northern region of Malawi, an area with the potential of having a thriving dairy sector. However, due to lack of a structured market for the small holder farmers’ raw milk for over 10 years, following the closure of Northern Dairy in 2010, production had dwindled, taking away a vital source of income to residents of the town, which numbers slightly more than 200,000 and its surrounding areas, where tea, coffee and rubber are the main cash crops.

“Because of the presence of few players in the industry, there was low uptake of raw milk by the off takers, which meant that farmers had little motivation to venture into dairy farming. The other problem was lack of technical expertise on best production practices and proper management of the livestock, coupled with lack of a proper breeding system. With this, a farmer who had the capacity of producing 30 litres per day was getting only 10 litres,” he explains of the dire situation of a destitute dairy sector.

This was the scenario that Mzuzu Dairy was getting into, with a focus on streamlining the value chain by providing a farm-to-market pipeline for the smallholder farmers in the region, and availing locally produced dairy products into the market, competing side by side with the imported goods, which are currently dominating the dairy aisles of Malawi.

SUPPORTING SMALL-HOLDER FARMERS To this end, the company has built a robust route-to-market system for the small-holder farmers, currently boasting of a network of 5,000 farmers. Mzuzu Dairy monitors their progress to ensure they maximize productivity and produce high quality milk, by deploying extension workers in the field, complementing the government’s support systems.

The company guides farmers on the best agricultural practices pertaining to animal health, nutrition, welfare and milking hygiene, among others, to ensure a sustainable and thriving dairy sector can be established in the region, which pales in comparison with the central and southern parts of the country where dairy farming is more established. Addressing the issue of low-quality of livestock, the MD revealed that the company is currently working on establishing a farm that would provide the right breeding stocks to the farmers, to boost their productivity.

The buck does not stop with Mzuzu Dairy enlightening the farmers on proper agricultural practises only, as the processing company has built the capacity of the milk producers, by encouraging them to form and join cooperatives. The cooperatives enable the farmers to aggregate their milk together, boosting their purchasing power.

Chitowe reiterates that by being part of the structured organization groups, the farmers have better link to finances, agricultural inputs and information. Currently, Mzuzu Dairy is guiding and supporting the dairy cooperatives in securing grants from a World Bank run initiative in Malawi, dubbed Agricultural Commercialization project (AGCOM). The financial assistance is aimed for procurement of more livestock and increasing milk yield in the region.

KEY NUMBERS

US$50,000

THE AMOUNT IN CASH THAT THE DAIRY RECEIVED FROM NATIONAL BANK OF MALAWI

EXPANSION DRIVE All these strategies are aimed to ensure that the supply chain responds to the rise in demand of raw milk requirements by the processing company, as they are currently embarking on an expansion drive.

The dairy has recently obtained a long-term loan facility worth US$50,000 from the National Bank of Malawi, a development financial institution in the country. “The funding has been channelled towards procurement of additional machinery, which will see us increase our daily processing capacity by 20,000 litres per day,” stated Chitowe. Other than boosting the company’s processing capacity, the investment will enable Mzuzu Dairy to expand its range of products to ice-creams, ghee and fresh cream, an addition to its current

Mzuzu offerings, which include fresh milk, bottled yoghurts and Chambiko – a traditional Malawian drink.

The company is also seeking to install a new yoghurt cup filler to enable them avail its nutritious and tasty yoghurts in smaller tubs of 150ml, targeting children under the age of 5 years. The machineries are expected to arrive in the country by the end of June 2021.

LAUNCHING INNOVATIVE PRODUCTS

During the sit down with the Mzuzu Dairy MD, it was clear that the start-up leverages on innovation to set itself apart from its peers. He apprised about the new kid in the block dubbed Fresh-Yo. The drink is a nutrient-dense yoghurt made up of milk and orange flesh sweet potato.

Excitingly talking about the product, he stated, “This is a product that has high nutritional value that is aimed to address the malnutrition challenge among children under the age of 5 years and is also beneficial to the elderly, expectant and lactating mothers.”

The product has not yet fully launched in the market, as the company is currently working on obtaining the relevant certifications from the Malawi Bureau of standards. Once the dairy processor gets the go ahead from the regulatory body, the company will avail Fresh-Yo across all retail outlets in the country, including in the country’s largest retailer, Shoprite.

The new product has come at an opportune time, as the World Food Program estimates that four out of every 10 children in Malawi, are affected by chronic malnutrition. The condition is a serious challenge with 37% of the children affected by stunting, while only 8% aged 6-23 months having the minimum acceptable dietary requirements.

Further meeting the consumer’s needs and as a response to the company’s recently conducted market research and assessment, Mzuzu Dairy is working on a new yoghurt brand that will incorporate sorghum. He notes that this will be a perfect alternative to energy drinks and supplement products in the market and can be enjoyed by all consumers across the board.

MITIGATING COVID-19 CHALLENGES

Having operated for barely two years, Mzuzu dairy has encountered its fair share of challenges, but the management has been upbeat in finding solutions. Denis notes that one of the outstanding challenges they encountered while trying to break

WE ENVISION BUILDING OUR NETWORK OF FARMERS TO 15,000 AND GETTING A MINIMUM OF 30,000 LITRES OF MILK PER DAY TO PROCESS INTO VARIOUS PRODUCTS

the ice during the pandemic period was the disrupted market access of raw materials such as packaging that they were sourcing from South Africa, a region that was experiencing lockdowns, boarder closures and movement restrictions. “The market was also slowing down as retailers were weary of stocking large volumes of dairy products given the perishable nature and uncertainties of lock-downs. This also highly affected the farmers’ earnings,” he notes.

The company innovatively mitigated the challenges by clinching a COVID response grant from UNDP through an accelerator program – Growth Africa. The resource provided them with working capital that has kept its operations afloat. Further to that, the business had enrolled into several online courses that equipped the management with the necessary skills and knowledge pertaining to managing a young business such as Mzuzu Dairy during the pandemic period. Denis signed up for courses at the African Management Institute and got the opportunity of becoming a Mandela Washington finalist in 2020.

EYES ON THE FUTURE

Despite of the rough start, the future is bright for the dairy start-up. “We plan to expand and become a leading dairy processing company in Malawi. We will expand our market and export to the SADC region and beyond. We are looking forward to going into long shelf-life products like UHT milk and yoghurts, and high value dairy products, like butter. Further to that we envision building our network of farmers to 15,000 and getting a minimum of 30,000 litres of milk per day to process into various products. Our target is to have as many innovative products on the shelf as possible.”

With a focus on undertaking its operations sustainably, Mzuzu Dairy is planning on introducing reusable milk packaging, reducing its use of plastic packaging that are attributed to environmental pollution. This will also reduce the price of the product, making it affordable to most consumers. The company is working towards building a strong team of professionals who will spearhead its growth. FBA