Milk Vita's plan to revitalise shuttered units stalls as pvt investors shy away

Infographic: TBS

Milk Vita – a milk and dairy products company owned by the Bangladesh Milk Producers Cooperative Union Limited – has faced setbacks in its efforts to revitalise its dormant production units through private partnerships.

These units have remained closed for 8-10 years, and the company sought to contract out their management and operation to private enterprises to turn them profitable once again.

However, even nearly two years into inviting investments from the private sector, Milk Vita has been unable to attract any funds for these ventures.

In September 2021, Milk Vita invited expressions of interest (EoI) from private entrepreneurs for the repair, maintenance and operation of five factories, including two UHT milk plants, a condensed milk unit, one can-making plant, and a bottled water plant.

The can-making plant, the condensed milk plant, and one UHT milk plant are located at Baghabari Ghat in Sirajganj, while the second UHT milk and water bottling plants are at Shibpur in Narsingdi.

Upon seeing the advertisement, several local companies, including Akij, Bengal, Partex, and Pran, along with a foreign company, expressed keen interest, high officials from ilk Vita told The Business Standard.

Some of these companies even conducted studies and visited the factories. However, despite initial enthusiasm, none of them have committed to making substantial investments due to concerns about expected returns, the officials added.

Dr Md Mahfuzul Haque, acting general manager (Marketing) of Milk Vita, said, "Milk Vita considered reopening the old and closed factories to generate better revenue. While major companies did show interest and visited the factories, none of them put forward a final investment proposal."

Dipankar Mondal, managing director (Joint Secretary) of Milk Vita, said that they are eager for investments as they continue to incur expenses for the non-operational factories. The company is actively seeking public-private partnerships (PPP) and new investments to make these loss-making units operational and profitable, he added.

Discussions with some Milk Vita officials revealed that several companies engaged in multiple meetings and price negotiations following factory inspections. During these discussions, Milk Vita proposed the idea of profit-sharing with the interested companies.

The management suggested repairing or installing new machines and marketing products under the brand name "Milk Vita". However, the companies hesitated to invest, as they believed the profit potential from these factories would not be significant.

An employee from a leading dairy product manufacturing and marketing company in the country, speaking anonymously, told TBS that the returns from investing in the "abandoned Milk Vita factories having rundown machinery" would be minimal compared to the required investment, further discouraging any final investment proposals.

The closed-down factories

Milk Vita's condensed milk plant can process one lakh litres and its three UHT milk processing and packaging units have a daily capacity of two lakh litres.

All of the four factories have remained closed for around 8-10 years.

The company had also tried to break into the bottled water business and to that end built a plant in Narsingdi's Shibpur more than four years ago. It bought modern machinery from the US to go into production but could not start the plant as it did not have trained workers.

Milk Vita has strong competitors in such big firms as Coca-Cola, Ifad, Partex Group, Transcom, Meghna, Acme and Pran. These companies have been doing well in the bottled water business.

"We could not run the factories mainly due to the lack of capacity. We failed to go into production even after investing in setting up the units," said Mahfuzul Haque, acting general manager of Milk Vita.

The current business of Milk Vita

Milk Vita went into production under cooperative management in 1973. It has 11 factories all over the country and each of them has separate plants for manufacturing multiple products.

The company is run by farmers' associations across the country and supervised by the Ministry of Local Government, Rural Development and Co-operatives.

It currently manufactures and markets 22 dairy products such as milk, curd, rasgolla, labang, matha, flavoured milk, butter and ghee.

The company targeted a profit of Tk1.5 crore in fiscal 2022-23. Similarly, in the preceding two years, the company achieved a profit of Tk1.5 crore each year. The company collects about four crore litres of milk annually and processes and markets milk and milk products. During the last two years, the company's sales of dairy products amounted to Tk95 crore.

The company provides high-yielding grass seeds, semen of improved cattle varieties, and medical services to the farmers for free every year.

Milk Vita is one of the market leaders in the pasteurised milk sub-sector. Latecomers such as Aarong, Pran, Akij, Aftab and Rangpur Dairy are its competitors in the market.

Company officials say Milk Vita products have a huge market. But being a government-run company, it cannot be agile enough to change its marketing strategy like that of its competitors.