Summary
The opening of Arla’s repackaging plant in Senegal is expanding the companies milk powder exports to West Africa. Arla already enjoys expanding sales of UHT milk and is planning to export branded butter and cheese to Senegal. There are concerns this could undermine the development of local milk supply chains, in contrast to Arla’s commitments to avoiding harm to local farmers. Arla’s commitment to developing milk supplies in Nigeria needs to be extended to Senegal, in the context of an initiative to launch a locally applicable Code of Conduct for Responsible Corporate Trade and Investment in African Dairy Sector Development.
In May 2016 Arla opened its 5,000 tonne per annum milk powder repackaging facility in Dakar, Senegal. The facility will take bulk fat-filled milk powder and instant whole milk powder and repackage it into both affordable retail sized packages and consignments for industrial dairy processing companies. This is expected to create 20 new jobs. This investment forms an integral part of Arla’s 2020 strategy for the development of markets in sub-Saharan Africa, with a major focus on West Africa. (1)
The Senegalese dairy market is estimated to be valued at €250 million per annum and is growing at 5% per annum, in a context where domestic milk producers supply 30% of the market. Senegal is also seen as a gateway to regional markets such as Mali, Burkina Faso and Mauritania. Distribution both nationally and regionally will be handled by an Attieh Group subsidiary Agroline, which ‘has a very strong ambient and chilled distribution setup across Senegal’. (1, 2,3)
Arla already offers Dano long life milk in Senegal and has plans to introduce branded cheese and butter products to the Senegalese market. This forms part of a wider trend of a renewed expansion of EU dairy exports to Senegal, which dates from 2013, after a period of reduced export volumes from the EU. (3)
Senegalese Imports of Dairy Products from the EU (tonnes)
| 2002 | 2011 | 2012 | 2013 | 2014 | 2015 | ||
| Liquid Milk (0401) | 5,111 | 6,246 | 6,241 | 6,245 | 6,229 | 6,492 | |
| Milk Concentrate (0402) | 11,400 | 10,814 | 8,576 | 5,444 | 5,846 | 6,768 | |
| Whey (0404) | 117 | 89 | 75 | 42 | 67 | 244 | |
| Butter (0405) | 739 | 505 | 417 | 572 | 678 | 762 | |
| Cheese (0406 | 643 | 1,104 | 1,134 | 1,084 | 1,244 | 1,563 |
Source: EC market access data base (Country – Senegal; Product Codes – 0401, 0402, 0404, 0405, 0406; years – 2002 & 2011-15)
Overall Arla is looking to increase revenues in Senegal to €32 million by 2020 from zero in early 2016. Similarly in Nigeria, where it has also established a joint venture arrangement, Arla is looking to expand its sales revenue from €80 million in 2015 to €240 million in 2020. (6) This needs to be seen in a context where the Nigerian government is looking to ‘double milk production over the next three to four years’ and Arla has committed to supporting the Nigerian governments efforts to develop milk production. (8)
The West African market represents a substantial part of Arla’s sales target of €460 million by 2020 for sub-Saharan Africa as a whole. In the first 6 months of 2016 Arla’s sales volumes in sub-Saharan Africa were up 26.4%, compared to a 6.8% growth in sales volumes in the Middle East and North Africa. (3)
In its press release (1) announcing the opening of its Senegalese plant Arla highlighted the human rights assessment report it had compiled in preparation for its investments in Senegal. (7) The first draft of this report came in for some criticism, with the report arguing investment in Senegal would have little impact on domestic milk producers, since Arla’s repackaging unit would primarily serve the expanding supermarket network in urban centres, a market component not currently served by domestic milk producers.
| Arla’s Recent Innovations and Corporate Engagement in Sub-Saharan African Dairy Sectors
July 2013 Arla announces ‘a new mobile milk powder packaging facility out of three 40-foot containers’, as a means of testing new markets for milk powder in Africa. September 2013 Arla announces formation of a joint venture in Cote d’Ivoire with the soup packaging company Mata Holdings, for the packaging and sale of milk powders using its new mobile unit. 2014 Arla announces plans to invest DKK 60 million in Africa in rolling out its new mobile processing unit concept. 2015 Arla announces new milk powder formula for manufacturing of ‘high quality specialty cheeses without fresh milk’. August 2015 Arla announces a joint venture with the Attieh Group to strengthen its distribution network in Senegal. August 2015 Arla announces a joint venture with the Tolaram Group to strengthen its distribution network in Nigeria. February 2016 Arla signs letter of intent to support the development of milk production in Nigeria May 2016 Arla’s Milk Powder repackaging facility in Dakar, Senegal opened. |
Indeed, the initial draft argued the investment would have ‘a positive impact on human rights’, since it would see the ‘introduction of high quality standards of food safety and increasing access to nutritious products at an affordable price’. This would then contribute to ‘the improvement of health and food security amongst low income groups in Senegal’.
However in the subsequent November 2015 revised impact assessment Arla acknowledged the concerns expressed during stakeholder consultations ‘regarding the potential negative impact of Arla’s future business model….Since Arla’s business model in its first stage will be based primarily on imports and repacking of imported milk powder’. It recognised that a larger role for Arla in the market ‘might contribute to further lessening the government’s incentive to invest in the sector due to the easy availability of imported milk powder which can be bought at lower prices and which can meet the urgent local demands’. (7)
Arla further recognised that its investment model ‘might incentivise processers to use imported powdered milk, instead of sourcing locally, in the production of other dairy products’. With this leading to a situation where Arla ‘become an integrated part of the complex systemic factors, which is linked to the continuous underdevelopment of the dairy sector by amplifying the current difficulties’. (7) This it was held could then potentially create ‘linkage to adverse human rights impact on the dairy farmers involved who are dependent on income and nutritional value from raw milk production and sales’.
To address this Arla called for the promotion of multi-stakeholder dialogues locally and internationally to inform framework conditions for a balanced dairy sector development, including through promoting a Code of Conduct for Responsible Corporate Trade and Investment in African Dairy Sector Development. (7)
At the end of February 2016 in Nigeria Arla went further, with commits being made in dialogue with the Nigerian government to supporting the development of local milk production in Nigeria. (8)
Sources:
(1) Packaging-gateway.com, ‘Arla Senegal Milk Powder Packaging Facility’
http://www.packaging-gateway.com/projects/arla-senegal-milk-powder-packaging-facility-dakar/
(2) just-food.com, ‘Arla opens milk packing site in Senegal’, 18 May 2016
http://www.just-food.com/news/arla-opens-milk-packing-site-in-senegal_id133306.aspx
(3) Arla, ‘Consolidated half-year report 2016’
http://docs.arla.com/halfyearreport2016/EN/
(4) Dairyreporter.com, ‘Arla-boosts-West-African-distribution-backbone-with-JVs-in-Nigeria-and-Senegal’ 1 September 2015
http://www.dairyreporter.com/Manufacturers/Arla-boosts-West-African-distribution-backbone-with-JVs-in-Nigeria-and-Senegal
(5) Arla, ‘Mobile milk powder packaging facility for Africa’, 30 July 2013,
http://www.mynewsdesk.com/arla-foods/pressreleases/mobile-milk-powder-packaging-facility-for-africa-890880
(6) Arla, ‘Two new joint ventures to start up in West Africa’ 31 August 2015
http://www.arla.com/about-us/news-and-press/2015/pressrelease/two-new-joint-ventures-to-start-up-in-west-africa-1209493/
(7) Arla, ‘Assessment of human rights in Senegal’
http://www.mynewsdesk.com/arla-foods/documents/assessment-of-human-rights-in-senegal-48352
(8) Dairyreporter.com, ‘Arla-commits-to-helping-Nigerian-dairy-industry’, 25 February 2016
http://www.dairyreporter.com/Markets/Arla-commits-to-helping-Nigerian-dairy-industry
(9) Dairyreporter.com, ‘Arla works with Nigeria on developing its dairy sector’, 18 April 2016
http://www.dairyreporter.com/Markets/Arla-works-with-Nigeria-on-developing-its-dairy-sector
(10) Danone, ‘Danone in Africa’, infographic,
http://www.danone.com/en/for-all/mission-strategy/our-strategy/a-global-presence/Infographic%20Africa/
| Comment and Analysis
While in Senegal domestic milk production accounts for only 30% of local dairy products, this is substantially higher than the West African average of 10%. There would thus appear to be scope for more commercial development of local milk production in Senegal. The operation of Danone in Senegal is a case in point. Since 2005 Danone has not only been supporting the local dairy company Laitiere du Berger in bringing together 800 dairy farmers to deliver between 1,200 to 6,000 liters of milk a day for processing (depending on the season), (10) but has also been supporting the development of a processing model which uses local fresh milk in the production of high value products and imported milk powders in the production of dairy products for the mass market. This experience could potentially hold lessons for the development of Arla’s involvement in the Senegalese dairy sector. Indeed, the Danone experience suggests scope exists for Arla to extend to Senegal the initiative it launched in Nigeria, committing itself to supporting the development of local milk production. If Arla were to commit itself in Senegal to supporting the development of local milk production, this would reduce the possibility that a situation would emerge where Arla ‘become an integrated part of the complex systemic factors…. linked to the continuous underdevelopment of the dairy sector’. However, as Arla has implicitly suggested this would require a sector-wide initiative to promote multi-stakeholder dialogues and develop a locally appropriate Code of Conduct for Responsible Corporate Trade and Investment in African Dairy Sector Development. It remains to be seen whether in the coming months and years Arla will move in this direction and work to develop local milk supplies. As representatives of Latiere du Berger have acknowledged there is a role for both local fresh milk supplies and imported milk powders, with the selective use of milk powders in response to expanding demand contributing to the financial viability of local milk sourcing (see box). In contrast however it should be noted that the development of retail-ready dairy product manufacturing exclusively on the basis of imported raw materials, is a recipe for the marginalization of local milk production and the delinking of dairy sector value added processing from the local agricultural base. This would greatly reduce the employment and rural development benefits which could potentially flow from rapidly expanding urban demand for dairy products. This experience raises a broader question of relevance in the post-Cotonou discussions, namely: the importance of promoting responsible European private sector investment in African agro-food sector development, so that it expands both formal sector employment and rural income earning opportunities. An expansion of formal sector employment and rural income earning opportunities would appear to be vitally important in getting to grips with the root causes of the migration flow which are such a dominant concern to EU policy makers in the framing of the post-Cotonou discussions, with ACP countries.
|
| Key words: Dairy, Arla, Corporate, Senegal, Nigeria, Post-Cotonou Area for Posting: Dairy, Corporate, Post Cotonou, West Africa |