Sebeta Agro Industry was established in 1998 as the first private dairy processing firm in Ethiopia, located near Addis Ababa. Its objectives were to process and market dairy products domestically and for export, as well as produce animal feed and other food items. Initial opportunities included being an early entrant into the market and available raw milk supply. However, challenges included gaining the trust of raw milk producers and retailers unfamiliar with private sector products, low traditional dairy prices, and lack of skilled labor. While opportunities for dairy processors remain due to population and economic growth, ongoing challenges include managing seasonal milk supply and demand fluctuations, high production costs, and competition from the informal sector and imports.

1. Sebeta Agro Industry National Dairy Forum Addis Ababa, Ethiopia, 23-24 November 2010

2. 1. Brief Background Establishment First private sector processing firm established as a result of the new economic policy. Located near the town of Sebeta – 20 kms from Addis Ababa. Established by the couple Ato Mohammed Ahmed W/ro Muluka Adem Acquired investment license in November 1995 and engaged in project work until March 8/1998. Started production and marketing on April 9/1998.

3. Objectives Processing and marketing of dairy products both for domestic & external markets. Animal fattening and supply to domestic markets and export. Processing and marketing of animal feed. Processing of other food items (Fruit juices and nectars are already offered to the market).

4. Product Mix Products of Sebeta Agro Industry carry the brand name – “Mama’s” Major products offered to the market include:- Pasteurized milk, UHT milk Pasteurized butter Various varieties of cream Different varieties of cheeses (both North and Southern European recipes) Yoghurts 100% natural fruit juices and nectars.

5. 2. Initial Scenario – in the beginning Sebeta Agro came into existence with the emergence of the new economic policy of the Government that supports private sector participation in development. Through the years, Sebeta has had opportunities and surpassed several challenges.

6. 2.1 Opportunities Market entry whilst competition from the formal market was least, only one major competitor in the picture. Supply of raw milk was relatively available compared with the raw material requirements /installed capacity, product mix etc./ at the time Though intense collateral requirements, bank credit was available with relative ease. Support of the project from Federal and Regional Authorities, Investment Agencies, Local Government. Advanced processing technology facilities capable of producing quality and standardized products.

7. 2.2 Challenges Serious challenges on both the raw material and the product markets were experienced. Raw Material Related Raw milk market had been predominantly held by a public company for over half a century. Producers trust of the new private company as to its sustainability, payment guarantees and fear of dissociating with age old clients was difficult. Both the company and private ventures were unfamiliar to rural producers. Establishment of collection networks in terms of viable locations, technology installation and delivery system was challenging.

8. 2.2 Challenges cont’d Seasonal fluctuations in milk throughput scarcity experienced between the periods of April to late June. Surpluses vis-à-vis market demand between August to early October.

9. 2.2 Challenges cont’d b) Product Market Challenges Unfamiliarity of the retail outlets, institutional buyers with private sector producer. Unsure to give a try to new brand product relatively unknown by the consumer.

10. 2.2 Challenges cont’d Low price tradition for dairy products that had been artificially set previously. - Subsidized consumer during imperial period - Price controlled – loss incurring public supplier during the Derg. - Parasitic retail outlets with better margins at the expense of milk producers and processors. - High cost of distribution Dairy products are distributed door to door.

11. 2.2 Challenges cont’d Human Resources Unavailability of skilled manpower in dairy processing installation and maintenance of plant & equipment Quality control and product adaptation

12. 3. Opportunities & Challenges 3.1 Opportunities to Dairy Processors. a) Demographic factors - Ever growing population (80 million now) - Large youth segment - Urbanization & change in lifestyles. - Improved awareness on diets etc.

13. 3. Opportunities & Challenges cont’d b) Economic factors - Open economy and growth that help enhance purchasing power. - New investments (hotels, cafes etc.) with contributions to creating demand. - Encouraging investment policy Tax holidays Loss carry forward scheme duty and tax exemption for capital goods. VAT exemption for fluid milk

14. 3. Opportunities & Challenges cont’d c) International Assistance on livestock development - Credit guarantee scheme USAID - NGO involvement (SNV, Land O’Lakes) d) Export Potential - Neighboring countries (Sudan, Djibouti, Somaliland) potential markets. - Regional integration programs (COMESA, IGAD)

15. 3.2 Challenges facing the diary industry 3.2 Challenges facing the diary industry Management of surplus milk during flush seasons and providing sufficient products during dry weather spell. Inadequate through put (raw milk supply) in terms of volume, quality and sustainability to explore exports or product diversification. High production costs Feed Packing materials Taxes & land rent Inputs Others (like fuel. Spares, currency exchange rates) Lack of regulatory interventions Quality & standards Public health safety concerns

16. 3.2 Challenges facing the diary industry Predominance of the informal sector Unfair competition Unregulated raw material channels where informal sector including middle men handle bulk of raw milk. Venerability due to unrestricted imports competition whilst there is no export. - Annual average of imports stood at ETB 65.3 million per year (2003-2009) - In 2009 alone it has surpassed the average and reached ETB 106.2 million. Market behavior Unacceptability of wide range of dairy products; demand mainly for milk, butter and ayib. Cultural factors inhibit production Fasting seasons (averaging 230 days) impact market. Culture of drinking only black tea/coffee reduces chances to increased demand. Low Nutrition Awareness No habit for utilizing processed products like cheese, yoghurt etc. Feeding babies up to 6-9 months only and moving to adult ration afterwards. Adults utilize milk as a mix in hot beverages not viewed as food requirement.

17. 3.2 Challenges facing the diary industry Needs for lactating mothers, the elderly and contribution to general health and fitness not understood. Creating center for appropriate information on raw milk (raw material availability), market behavior and features (demand profile) Stake holder participation in dairy development.

18. Thank You !!