Dairy farmers milk millions with cooperative

An association of 35 dairy farmers producing 32 litres a day in the 1990s has transformed into a Sh452million empire that has increased farm gate prices for farmers while insulating them from market vagaries like glut.

“When I came in January 2007, I found a rural based organisation that was being run on an ad-hoc basis with no real structures or systems. At that time the organisation was producing between 15,000-20,000 litres per day and it had stagnated at this level for four years,” said Mr Duncan Muya, the general Manager.

Wakulima, now housed at its new Sh12 million four-storey headquarters, was started as a self help group in 1990. At the time, the membership was reeling from the collapse of a co-operative that sank in the mid-1980s. None of them wanted to embrace the idea of starting another co-operative and so the members who were mostly from Shamada village in Mukurwe- ini decided to form a self help group to collectively sell their milk.

Just like many struggling establishments, everything was done informally and when members wanted to start a project they raised the money from among themselves. Their chairman, Mr Muhika Mutahi, a councillor who later became the Mukurwe-ini MP between 1992 and 2002, donated his pick-up vehicle for two years for milk deliveries. When volumes increased, they raised funds and bought a truck.

From 35 members producing 32 litres of milk per day, the group grew to 6,000 members and by 2006 it had become too large to be licensed as a self-help group. The government asked the members to transform into a co-operative. This was a hard-sell to most members, who were yet to get over the earlier experience. They formed a public limited company, which was registered in December 2006 as Mukurwe-ini Wakulima Dairy Limited.

Mr Mutahi chaired the board whose first task was recruiting a general manager to professionalise operations and boost milk production. Mr Muya, an accountant by training and an MBA degree holder, was the general manager at Limuru Milk Processors for seven years. He has experience in audit, banking, and insurance.

When he was on board, he started with weekly field visits to train farmers on how to conserve silage for the dry season as a way of generating higher yield and benefiting from high prices offered by processors. “All our farmers use zero-grazing and we taught them how to plant Napier grass which is very nutritious and how to preserve it for use during the dry season. To control the quality of milk, we hired extension officers who check the milk at field level and created a fully fledged laboratory at our headquarters so that when we have problems of quality we are able to address them immediately,” he said.

The company’s revenues went up by huge margin from Sh313 million in 2008 to Sh452 million last in 2012.
The company reorganised milk collection so that no farmer travels more that 2km to a collection point. “This is important because the topography of this district is very bad with very steep hills that can discourage farmers if they have to carry milk for long distances,” said Mr Muya.

The firm reorganised its agro-vets department so that stores where farmers bought feeds were close to them. It has 10 agro-vets in the district. In 2008, the company started its feeds factory, which Mr Muya says “has enabled us to sustain quality of feeds to our farmers and we’ve been able to subsidise prices which has cushioned them from abrupt price increases by other suppliers.

” Bora Feeds was built at a cost of Sh18 million and has proved to be a wise investment with earnings almost comparable to those from milk. “Over 70 per cent of our production is being sold to other markets as far as Kilifi in the coast region,” says Mr Muya.

As part of the restructuring exercise the company’s four departments- AI (artificial insemination) and veterinary, Agro-Vets, Dairy and Bora Feeds were made independent profit centres. These key strategies resulted in enhanced milk production currently at 30,000 litres and Mr Muya expects this to rise to 45,000 in the next three months and 60,000 in the next year.

“Only 40 per cent of our farmers have taken up our new strategies of good dairy management and silage conservation. Once more of them adopt these practices, milk production will go up. We have started a fully fledged training department to concentrate on training farmers,” says Mr Muya.

Increased milk production especially during the dry season and the good prices that the company is able to fetch for its farmers has attracted attention from farmers outside the district with people seeking to join from Tetu, Othaya and Mathira. Future plans include a possible entry into milk processing.

“The real money in the dairy industry is in value-added products. While prices of fresh milk keep fluctuating depending on the season, the prices of yoghurt and ‘lala’ (sour) milk are constant. By going into processing, we will have control of both ends of the market — the farmers (supply side) and the retail end,” says Mr Muya. The company has already made some strides in penetrating the retail market and reducing its dependence on milk processors by selling raw milk directly to consumers in Nyeri and Mwea.