The Global Dairy Platform (GDP), a consortium of the largest dairy companies in the world, sought to transform the dairy sector in East Africa. In parts of this region, malnutrition stunts the growth of one-third of children under five, and millions of smallholder farmers earn less than $5 USD per day. If GDP could raise employment rates and increase people’s access to nutritious foods, they could have a massive impact. To create the change required, GDP engaged Land O’Lakes’s social impact venture arm, Venture37, which had deep dairy expertise and over 40 years of development experience. Venture37 invited Bain to join the partnership because of their longstanding social impact work together.
The three organizations designed and piloted a new strategic approach starting in Tanzania. If that model was successful, they could then roll it out and adapt it to other countries, possibly including Kenya, Ethiopia, Rwanda, and Uganda.
Many of East Africa’s small and mid-sized dairy processors occupy a fragile part of the market known as the “hidden middle.” They’re often too small to be included in mainstream policy and investment programs and are underserved by commercial lenders and investors who prefer larger businesses. Yet they are also too big to benefit from microfinancing.
These businesses also often find it difficult to secure a reliable supply of inputs, to reach markets, and to hire experts. As a result, they struggle to grow profitably. Yet these businesses, particularly those that intentionally source from and strengthen the capacity of smallholder farmers—a stance known as being farmer-allied—play a critical role in the ecosystem. They provide a market outlet for these dairy producers, who, when successful, provide the region with nutritious, safe, and affordable milk products.
Bain originally articulated this sector transformation strategy in a 2019 report, How farmer-allied intermediaries can transform Africa’s food systems. To put this strategy into action, GDP, Venture37, and Bain launched a consortium named Dairy Nourishes Africa (DNA) and committed to a long-term collaboration to transform the dairy sector.
Just as DNA was poised for implementation, however, the COVID pandemic unfolded. By July of 2020, many food processing businesses were shutting down or scaling back operations, putting workers on forced leave, or conducting layoffs. This impacted the livelihoods of their smallholder farmer suppliers even further.
How should the product mix and route-to-market evolve as a result of COVID?
How could they reduce complexity and cost by simplifying their operations and product portfolio?
What immediate cash generation levers could these businesses pull?
How should DNA manage cash to ensure on-time payments to farmers?
What strategic investments should DNA be making today?
The Dairy Nourishes Africa coalition set out to define its objectives for the next 15 years, conduct country-level diagnostics to identify a starting point, and identify key points of leverage in farmer-processor-consumer relationships. It set out to do this as COVID rapidly unfolded, and processors and smallholder farmers began to need immediate support.
Venture37 provided technical assistance and better access to inputs to help the smallholder dairy farmers continue producing. Bain developed strategies to help the processors increase their profitability and restabilize after having lost so much business in the early pandemic. Some of this work involved go-to-market innovations, like supplying milk and much-needed nutrition to low-income consumers and schoolchildren.
DNA also worked to strengthen the overall dairy sector and raise awareness. A DNA-supported radio campaign designed to increase consumer demand for safe, processed dairy reached 275,000 people during National Milk Week. Bain also delivered training workshops alongside the Tanzania Dairy Board and Tanzania Milk Processors Association which reached 65 dairy processors. These workshops provided tools and practices to help these businesses adapt and recover.
The results from the pilot dairy processor program have been encouraging. “Before Dairy Nourishes Africa (DNA) stepped in, we thought we would have to close in two months,” said the CEO of the dairy processor. “We now can’t tell the story of our business without saying ‘DNA.’” Building upon that success, DNA is now collaborating with the Tanzania Agricultural Development Bank to implement the multi-year Tanzania Inclusive Producer-Processor Partnership (TI3P) program, funded by the Bill and Melinda Gates Foundation.
This has been a multi-year collaboration to bring world-class private sector leadership, technical expertise, and deep experience to build transformative public-private partnerships, and the work is ongoing.