Sri Lanka Dairy Market Analysis

Sri Lanka is a South Asian nation with a developing dairy industry, which 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, mainly comprising smallholder farmers. The country's milk production volume stands at around 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, with processed products including 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, with milk powder and whey production reaching approximately 80,000 metric tonnes per year. These products play a crucial role in the nation's food economics and contribution to the export sector.

Key Dairy Enterprises

Significant dairy enterprises in Sri Lanka include:

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

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

Dairy Farms

Notable dairy farms include:

• 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, with key imports being 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. The exit will lead to shifts in the local supplier landscape and potentially increase reliance on other import sources or alternative suppliers for meeting domestic consumption needs.

This divestiture aligns with Fonterra's strategy to focus on its core businesses globally, which includes selling its consumer businesses worldwide to concentrate resources on their New Zealand-based operations.

Conclusion

Sri Lanka's dairy market is at a transitional phase with Fonterra's divestment. With ongoing efforts to boost domestic production and reduce import dependency, 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: 2025/01/13

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