Nestle to Invest Rs 8-10bn to Double Milk Production in Sri Lanka

28th November 2010, www.sundaytimes.lk

Nestle Lanka Plc, Sri Lanka’s largest private collector of fresh milk, plans to invest between Rs 8 to 10 billion rupees in an accelerated growth plan over the next five to eight years aimed at, among other objectives, sourcing all its fresh milk requirements from Sri Lanka.

“At the moment, 40% of the milk for our milk powder (all produced locally) comes from here and the balance is imported, as there is insufficient fresh milk supply. We want to double the number of farmers from over 14,000 whom we collect or buy milk from and thus double production,” Alois Hofbauer, Managing Director, Nestle Lanka Ltd told the Business Times.

“The more milk we buy from local farmers, the better it is for the country,” he said, explaining the company’s plans in the post-war era. The company daily purchases of 125,000 litres of milk through 115 chilling centres and over 1000 collection centres in the country. Plans are underway for extensive dairy development in 2011.

Commenting on the budget in which dairy farmers have been assured a price of Rs 50 per litre from less now, Mr Hofbauer said while the budget looked good and provided more disposable incomes that could ‘set the economy rolling’, local milk prices need to be competitive with world prices otherwise it would cheaper to import milk food.

The Nestle local chief, who was joined by External & Public Affairs Manager Bandula Egodage in the interview, said the company has been aggressively opening chilling and collection centres in the Northeast of the country over the past year.

Mr Hofbauer said there are thousands of stray cows in former battle zones like Killinochchi in which ownership needs to be established and re-domesticated to provide a regular income for people. “Dairy farming is much better than agriculture as it provides a daily income unlike from crops,” he said, adding however that there is a need to lift production from a current 1.2 litres per day per cow against 30 litres per day per cow in the West.

The Swiss-based company has been in Sri Lanka for over 100 years and considers itself more as a local company. “I don’t think the term ‘multinational’ applies to us in the true sense of the word – we are perceived by most of our local stakeholders as a truly Sri Lankan company with a Swiss heritage,” he noted, adding “a considerable portion of our profits are utilized for investments for growth and development.”

This year the company contributed an estimated Rs 2.5 billion directly to the rural economy this year through raw material procurement for fresh milk and coconut products. Last year Nestle paid Rs 4.1 billion in taxes.