Milk Vita looks for a shot in the arm from private firms

Milk Vita – a milk and dairy products company owned by the Bangladesh Milk Producers Cooperative Union Limited – has decided to contract out the management and operation of some of its production units to private enterprises.

The contractors will be responsible for the management and running of its UHT milk, condensed milk, and bottled water businesses by reviving its idle factories.

Omor Chan Banik, managing director of Milk Vita, told TBS, "The shuttered factories could not be reopened due to poor management and strategy. Now we are going to involve private entrepreneurs to operate them."

Earlier this month, the company invited expressions of interest (EoI) for repair, maintenance and operation of four factories that include two UHT milk plants, one condensed milk plant, and one can-making plant and installation and commissioning of a bottled water plant.

Of these factories,  the can making plant, the condensed milk plant, and one UHT milk plant are at Baghabari Ghat in Sirajganj, one dairy plant is at Sirajganj, the second UHT milk plant and the second dairy plant are at Dhaka, and the water bottling plant is at Shibpur of Narsingdi.

Officials said a shortlist of the applicants will be made after verifying their ability.

Profit sharing will be determined considering various factors including production capacity, marketing arrangements, land rent, brand value etc, they added.

After agreements are signed the selected entrepreneurs will have to produce and market products under the Milk Vita brand name, they say.

According to the EoI advertisement, selected entrepreneurs have to bear the operating costs required to start the factories. They also have to bear the costs of the modernisation of factories and necessary repairs. Milk Vita will have no financial involvement in these respects.

The contract period will be five years or negotiable. The entrepreneurs can use the Milk Vita marketing chain or can hire their own marketing force.

Milk Vita will not be involved in the running of the businesses and the selected private entrepreneurs and/or firms will run the businesses independently at their own expenses, said Mustafizur Rahman, additional general manager of Milk Vita.

The shuttered 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 built a plant in Narsingdi's Shibpur three years ago. The company bought modern machinery from the USA to start production but could not start the plant as they did not have trained workers.

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

According to industry insiders, the present market size of bottled water in the country is around Tk1,000 crore.

Mustafizur Rahman said, "Milk Vita wanted to increase business diversification. But the company does not have the skills needed to run these businesses."

Current business of Milk Vita

Milk Vita started production under cooperative management in 1973. It has 11 factories across the country. Each factory 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 is currently manufacturing and marketing 22 dairy products including milk, curd, rasgolla, labang, matha, flavoured milk, butter, ghee etc.

The company had a turnover of around Tk500 crore in the 2020-2021 financial year, up from about Tk300 crore two years ago.

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

The country produced 1.19 crore tonnes of milk in FY21. However, all the brands market pasteurised milk and UHT milk by processing 7.5 lakh tonnes of milk every year.

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 its competitors.

The company had also started chocolate and ice cream factories for product diversification, but they also are non-operational.

The company is planning to transfer these factories to private management too, officials said.