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Costly USD, higher inflation hurting dairy industry
Says executive vice-president of Arla Foods
AKANDA MUHAMMAD JAHID
The current economic crisis caused by the higher rate of the US dollar and an elevated level of inflation are affecting the dairy industry in Bangladesh, said Simon Stevens, executive vice-president (international) of Arla Foods, which owns Dano brand.
In an interview with The Daily Star recently, Stevens said the rate of the US dollar has increased by 30 percent against the taka in two years, causing difficulties in opening letters of credit and intensifying import challenges faced by businesses.
“Besides, the continuous inflation rate of over 9 percent is affecting production costs and consumer purchasing power, making it challenging for dairy producers and consumers to limit production costs and affordability.”
According to him, the higher inflation on both global and local fronts has impacted the cost points of products.
“We are keeping our pricing as low as possible to reflect the tough economic situation in Bangladesh. However, we also have to recognise that we cannot afford to make losses. Therefore, we need to fix prices to recover the exchange rate fall.”
Arla Foods is a Danish-Swedish multinational cooperative based in Viby, Denmark.
Stevens says Arla is the only company in Bangladesh that controls its entire value chain to ensure the best quality milk.
“We have initiated some affordability measures for our consumers. Dano is driving innovative affordability across the industry with its multiple affordable SKU (stock-keeping unit) options. People now have more alternatives to choose from.”
He also talks about the key challenges Arla experiences in Bangladesh.
“We are facing challenges from parallel imports and fake products imitating Arla products. Due to Dano’s popularity, some entities copy labels or produce fake products with cheap ingredients, creating barriers in three stages.”
“Firstly, this is hampering our brand reputation. Secondly, due to parallel import, the government is missing out on significant revenue. Thirdly and finally, the cheap unstandardised products are endangering public health.”
Although law enforcement agencies have been proactive in tracking down these products and creating a significant difference, the root cause remains a challenge, he said.
The top official describes Bangladesh as a priority market for Arla where it has been witnessing continuous growth for the past few years.
“We are present in around 130 countries. The fact that Bangladesh is projected as a priority among these is an indication of the country’s growth potential in the dairy industry.”
Currently, Bangladesh’s economy is going through a rough patch. But Stevens said the nation’s resilient nature is expected to help it bounce back.
Dairy consumption in Bangladesh is relatively low compared to other markets, but growth per capita will increase affordability and accessibility for middle-income individuals, he said.
“However, this process may take 10 years or so.”
In Bangladesh, Arla Foods is implementing a project to help 10,000 local farmers adapt to the global company’s farming model, promoting a green transition towards more efficient dairy practices.
To this end, Arla Bangladesh Ltd is partnering with local giant Pran Dairy, Solidaridad, Integrated Dairy Network Bangladesh, SEGES Innovation, and the Danish Agricultural and Food Council to address issues in milk productivity, quality, and economic output in the local dairy value chain.
“Additionally, we believe that imparting global knowledge to the local dairy sector is the way forward, and Arla Bangladesh has already submitted a proposal to the Department of Livestock for a dairy development pilot project,” Stevens said.
“We are interested in working with both public and private sectors to fulfill our commitment to the dairy sector.”
He said Arla is committed to introducing innovative nutritional products and ensuring affordability at the bottom of the pyramid.
“We have introduced affordable sachets at Tk 10 and Tk 20, providing them with at least one glass of dairy goodness daily. We are also investing in plant expansion and research and development for new product lines.”