Addis Ababa, Ethiopia (09 July 2022)

Between 2015 and 2050, demand for milk and beef in Ethiopia is estimated to grow by about 5.5 million tones and 0.9 million tons, or a 145 and 257% increase, respectively, with similar or higher growth rates anticipated for the demand for other animal source foods, according to FAO. Radical transformation is needed to meet such demands, but this change is anticipated to be rapid and, to some extent, unpredictable that existing policies and strategies might become inadequate in a few years’ time.

Any policy reform designed to encourage the adoption of best practices by actors along the livestock value chain should be founded on a thorough understanding of their business model. As a result, in Ethiopia, Africa Sustainable Livestock 2050 collaborated with the Ethiopian Society of Animal Production (ESAP) to understand and record the various business models along the cattle dairy overall supply chain nodes in two pilot (learning) districts – Ada’a and Sululta, which included both urban and rural administrations. The following are the key findings regarding the 3 major players in the industry.

Milk Producers- perform a range of activities from farm inputs preparation including buying of dairy cows or procurement of other critical inputs to handling and marketing milk.

  • Value Proposition: quality milk production and timely delivery
  • Key activities: routine husbandry activities (breeding, feeding, health monitoring) and milking, handling, transporting and marketing of the milk.
  • Partners: Feed suppliers and other input suppliers, veterinarians, government extension workers, cooperatives, NGOs, and customer
  • Customers: milk collectors/traders, milk processors and individual milk consumers, in order of importance
  • Channel: direct contact and word of mouth, telephone and scheduled meeting
  • Costs: feed costs (comprise up to 89% of the cost of production), salary and wage, veterinary and breeding costs, transportation, and utilities.
  • Resources: Feed, drugs, milking and collection utensils, sanitation materials, labor
  • Revenue streams: milk and milk products, sale of culled animals, and manure
  • Profit/Markup: 0.15-birr profit per every birr of cost (15% markup)

Milk Collectors- responsible for the trading of milk from producers to other actors

in the chain.

  • Value Proposition: delivering adequate volume and quality of milk on a regular basis
  • Key activities: testing for quality; seeking information on quantity, quality, hygiene, fat content, and adulteration; buying, assembling, and re-selling to different chain actors.
  • Partners: smallholder dairy producers, transport service providers,
  • Customers: mainly milk processors located in Addis Ababa and the surrounding cities, informal milk retailers, and urban milk shops
  • Costs: milk costs (lion share), transportation costs (secondly), testing and hygiene costs (smallest portion) A
  • Resources: Milk production potential, vehicle, milk collection utensils, milk chiller, labor
  • Revenue streams: bimonthly payment from milk processors and milk shops is the only and direct revenue stream
  • Profit/Markup: 0.18-birr per every birr spent (18% markup)

Milk Processors

  • Value Proposition: diversified milk products supply in regular time delivery with flexible payment systems
  • Key activities: milk chilling, pasteurization, packaging, product making, quality assessment, and milk standardization.
  • Partners: Milk suppliers, Ingredients suppliers, packaging suppliers, hygiene chemicals suppliers, government regulatory bodies and NGOs as supply chain support
  • Customers: supermarkets and minimarkets, kiosks, hotels and restaurants, and institutions
  • Costs: milk costs, packaging and ingredients, salary and wages, transportation costs, utilities (water and electricity), hygiene and sanitary supplies.
  • Resources: milk supply, ingredients supply for products, packaging materials, factory premises, processing machines, skilled staff, and working capital.
  • Revenue streams: pasteurized milk, yogurt (flavored, plain), cheese (cottage, provolone, mozzarella, Gouda), cooking butter, table butter, cream, etc.
  • Profit/Markup: 0.13-birr profit per every birr spent (13% markup)

The study concluded that ALL actors along the dairy value chain maintain a profitable business but that marginal changes in production practices could definitely improve profitability. Further, two business models have been observed as emerging functions in the dairy value chain.: chilling milk by cooperatives and individual milk collectors that transport milk over 400 km distance to processors (unlike the usual 100 km radius milk collection) and diversification of milk products to long-life milk products and functionality foods for export (unlike the conventional milk products).

To read the full research report, download the document using the link below:

Africa Sustainable Livestock 2050: Business models along the cattle dairy value chain in Ethiopia (


The opinions expresses here in the post "The Milk Industry in Ethiopia: Where it is Now and Where it is Headed" are those of the individua's contributor(s) and do not necessarily reflect the views of Business Info Ethiopia , BIE Intelligence PLC, its publisher, editor, or any of its other contributors.


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