The competitive landscape for dairy producers in Nigeria is set to intensify with the biggest dairy producer in Germany, DMK Group, entering the market through a partnership deal with Chellarams Plc.
Chellarams Plc and DMK have signed an agreement to form a new company, Chellarams DMK limited, which will manage the production, marketing, sales and distribution of a full range of dairy products, which are to be made locally in Nigeria.
DMK, which has been in business for over 12 years, is one of the biggest cooperative-based dairy companies in Europe and hopes to bring its expertise in supplying basic milk products and cheese through dairy ingredients to baby food, ice cream and health products to Nigeria.
The company has as its strategic expansion plan to earn attractive milk prices with long-term stability for its owners by expanding its product offering as well as trying to gain further market share both in the EU and other internationals markets.
In a letter to the Nigeria Stock Exchange, Chellarams Plc which is going to be DMK’s strategic partner in Nigeria states that, “The primary goal of the new venture will be to manage the production, marketing, sales, and distribution of a full range of dairy products across Nigeria. Therefore, this partnership will be well-placed to meet the growing demand in Nigeria for dairy products.”
Chellarams DMK Ltd intends to invest in a larger distribution network by partnering with key distributors; thus establishing a strong presence across all sales channels, such as modern trade, general trade and food services
There are no exact figures that capture the value of the diary market in Nigeria but officials at the Ministry of Agriculture and Rural Development estimate that Nigeria spends at least $1.3 billion annually in import of dairy products to compliment local production.
Promasidor Nigeria Limited, FrieslandCampina WAMCO Nigeria, and Chi Ltd dominate the Nigerian dairy market.
According to Euromonitor International, Promasidor had 29 percent of the retail value share of the market in 2016, which it won with its strategy of concentrating on smaller packaging for its products.
FrieslandCampina WAMCO Nigeria on the other hand, gained significant foothold with its signature brand, Peak Milk, which is noted for quality and creaminess.
On the other hand, Chi Limited, which has just began to clip out a share of the market for itself has used an aggressive media campaign and the introduction of several small packaged low priced milk and yogurt products to gain market share.
The introduction of new competition in the diary market may help to further force a drop in prices for dairy products as most producers are turning to local sources for raw material. Based on the strategy of DMK in its local markets, it is strongly anticipated that the company will rely heavily on local supply to meet its raw material need.
According to Euromonitor, “milk, in particular, still sees low per capita sales in Nigeria and so has scope for strong growth, particularly with manufacturers emphasising the need to prevent nutrient deficiencies such as calcium.”
The marketing research agency says that drinking milk products is expected to increase by a value cumulative average growth rate of 2 percent at constant 2016 prices over the next few years.
