Sri Lanka Dairy Market Analysis

Sri Lanka, a South Asian nation, has a developing dairy industry that has seen significant contributions from international players. The country's dairy sector, however, faces challenges in meeting local demand due to limited domestic production and reliance on imports.

Milk Production and Dairy Cattle

As of recent estimates, Sri Lanka has a dairy cattle population of approximately 1.2 million, primarily comprising smallholder farmers. The country's milk production volume stands at about 450 million liters annually, which is significantly below the national demand.

Milk Processing Volume

The milk processing capacity in Sri Lanka is about 300 million liters per year. Processed products include liquid milk, cheese, and milk powder, catering to both domestic consumption and export markets.

Cheese, Milk Powder, and Whey Production

Sri Lanka produces about 6,000 metric tonnes of cheese annually. Milk powder and whey production reaches approximately 80,000 metric tonnes per year, playing a crucial role in the nation's food economics and contribution to the export sector.

Key Dairy Enterprises

• Pelwatte Dairy Industries
• Milco (Pvt) Ltd.
• Ambewela Products (Pvt) Ltd.

These companies are instrumental in domestic milk processing and product diversification.

Dairy Farms

• Ambewela Farm
• New Zealand Farm
• Polonnaruwa Milk Industries

Export and Import of Dairy Products

Sri Lanka exports approximately 20,000 metric tonnes of dairy products annually, mainly to neighboring countries. However, the country imports over 100,000 metric tonnes of dairy products to satisfy local demand. Key imports include milk powder from countries like New Zealand and Australia.

Significant Dairy Market Event

A major event impacting the Sri Lankan dairy market is Fonterra's decision to divest its operations in the country. Fonterra, a significant global dairy player, has been providing key dairy products to Sri Lanka. This divestiture aligns with Fonterra's strategy to focus on its core businesses globally, including selling its consumer businesses to concentrate resources on their New Zealand-based operations. The exit will lead to shifts in the local supplier landscape, potentially increasing reliance on other import sources or alternative suppliers to meet domestic consumption needs.

Conclusion

Sri Lanka's dairy market is in a transitional phase with Fonterra's divestment. Ongoing efforts to boost domestic production and reduce import dependency are crucial as Sri Lanka is poised for developments in its dairy industry. Stakeholders will need to adapt to the changing dynamics and consider strategic alliances to sustain growth.

Modified: 2025/02/05

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