The dairy supply chain in the Middle East – ‘todays milk today’
All day, every day, fresh dairy products including milk are delivered to thousands of outlets across the six Gulf Cooperation Council (GCC) countries in the Middle East to an ever growing population currently standing at 50 million consuming three billion litres per annum, growing at an annual rate of 7.5%.
In the Middle East this is a significant challenge. Daily temperatures frequently exceed 50 degrees celsius, there is a constant need for food security with no natural pasture lands, a rapidly-diminishing aquifer water supply drained by years of over use, the ever constant threat of foot-and-mouth disease, primary distribution trunks of up to 1,700km, which is equivalent to a daily commute from Dublin to Munich. Coupled with this, the supply chain has to cope with a Ramadan surge that makes the Christmas rush in Ireland seem like a mid-week top up at the local convenience store.
These challenges are overcome through a totally integrated supply chain that stretches from the plains of Argentina to the small corner shop in southern most Saudi Arabia allied to a focus on being the lowest cost producer end to end.
The Middle East market is dominated by eight key players who all use the same basic supply model:
- Super farms varying in size from 2,000 to 20,000 milking cows milked on a four times a day cycle with outputs averaging between 32-38 litres per day. The key to hitting these numbers being a combination of world class animal husbandry, genetics, temperature control via sophisticated cooling systems and rigorous cost control.
- Typically the farms are located adjacent to the processing units that have now all been centralised in mega facilities some capable of handling over 5 million litres per day.
- Traditionally, the key feed stock of Alfalfa Grass was all grown locally using massive irrigated pivot systems with all the other supporting items of corn, soya, bran and cotton seed being imported. However, the heavy crop production including wheat exports during the late 1990s and early 2000s this drained the countries water resources resulting in the companies now sourcing over 50% externally leading to dedicated crop production schemes in Africa and South America owned by the leading dairy companies either directly or in partnership.
- Added to this, local regulations in the Middle East regarding the ‘Production/Sell By Date’ in theory requires that the milk from the farm is processed, packed and trunked to distribution depots within 12 hours of milking.
- During Ramadan in the Middle East there are massive uplifts for the dairy staples of Laban, a fermented plain yoghurt drink and plain set yogurt. Consumption can increase by 10-times normal volumes during the month of Ramadan. This requires careful planning every year, as Ramadan follows the Lunar calendar, i.e., the timing of Ramadan will change from year to year.
- In order the manage these constantly changing supply and demand fluctuations, including a heavily weighted seasonal cycle driven by the temperature graph every year during Ramadan, dairy companies will use UHT facilities to stock pile excess milk, either in bulk for use in fermented products, or for direct sale.
- Having managed to get over the first few hurdles the product is then loaded onto a fleet of 2,000 refrigerated primary distribution vehicles and delivered to the 30 main population centres where there is a network of depots or branches out of which operate a vast fleet of traditional vans sales.
- The distances these depots are from the central plants can vary from a few miles up to thousands of miles where the challenges become managing the cold chain in temperatures of up to 50 degrees in high summer and minimising the rate of returned or out of date product. Dairy companies in these gulf countries have invested heavily in infrastructure to ensure that milk is maintained at four degrees celcius through out the entire supply chain. This is a key parameter, especially in countries where milk maybe subjects to a shelf life by regulation of not more four days. Consequently, you have a dairy supply chain across the Middle East formulated on the concept of ‘If today’s dated milk doesn’t sell today, it will not sell tomorrow’.
Stuart Bull is a senior supply chain professional with over two decades’ management experience with leading dairy companies in the Middle East, including Almarai, Exeed and Nada. He is the former Head of Supply Chain with Bord na Mona in Ireland.