Milking profits in East Java
Milking profits in East Java
Duncan Graham, Contributor, Surabaya
The Westernisation of Indonesian lifestyles is helping lift
incomes for thousands of East Java dairy farmers.
Working with the provincial government and the agriculture
department of Western Australia, they have boosted milk
production. Now they are manufacturing their own brands to meet
the demand as Indonesians turn to dairy foods.
"At last we've become price makers instead of being price
takers," said Fuad Ardiansyah, 30, manager of the new Sekar
Tanjung milk processing plant at Purwosari.
"Being at the mercy of buyers has always been a problem for
Indonesian farmers, particularly those producing perishable
foodstuffs.
"When yields are good, prices fall. When yields are poor
prices go up. Farmers had to take what was offered. They were
seldom able to save money or upgrade facilities. That situation
has now changed for members of our co-ops."
Six dairy co-ops in the Malang and Pasuruan regions, each with
about 7,000 members, have pooled their dividends to build their
own Ultra High Temperature (UHT) milk-processing plant.
The factory, about 90 minutes drive south of Surabaya, has
created new jobs for 100 local workers. It runs three shifts 24
hours a day.
The Rp 45 billion plant was set up with loans from the East
Java and Indonesian governments using funds allocated to help
cooperatives. No money was borrowed from banks.
Although it has been operating for less than four months, the
venture has been so successful that plans to install more
packaging machines in 2010 have been brought forward to this
year. This is despite having no advertising budget.
"Indonesian tastes are changing. There's a shift from
powdered milk to UHT milk," Faud said. "Consumers are more
concerned over their health. They recognize UHT milk is cheaper
and easier to use. Like Westerners, people have less time and
prefer fast foods.
"The shift is marginal, maybe two to three percent a year. But
with 250 million people that's a lot of new customers."
Faud's father, Mohammed Koesnan, was one of the first farmers
to seize opportunities presented by the East Java-Western
Australia Sister-State agreement. This provides exchange visits
for progressive professionals and businesspeople.
Visiting Australia, he was surprised that dairy cows produced
25 liters of milk a day. Around Malang the yield was seven
liters.
He imported Friesian cows from Australia when dairy farms in
that country were being rationalized to make the industry more
efficient. Small enterprises were closing and quality cattle were
on the market.
Most East Java dairy farmers have three to five milking cows.
Australian herds are numbered in the hundreds.
Milk production jumped once the new cows had settled in, but
the only buyer was the Nestle factory in Pasuruan, which makes
dried milk powder.
Faud, who studied marketing at the University of Auckland in
New Zealand, puzzled how to sell the extra milk and improve
returns. Every year production was increasing by around 15
tonnes.
Five years ago he recommended the cooperatives build their own
plant. They agreed and set aside dividends for capital. All had a
role in the planning.
The new factory has been designed for study tours by schools,
community groups and government departments to promote milk
consumption. To maintain hygiene, visitors are not allowed in the
milk processing rooms but can watch operations through big
windows. The laboratories, which constantly monitor quality, can
also be viewed.
Packaging machines imported from Sweden seal milk in sterile,
multi-layered paper and foil packs. These contain 150 or 180
milliliters of plain or flavored UHT milk.
The packs, under the brand names Idola (with a logo like the
Indonesian Idol TV program), Sekar (Flower) and Juara (Champion)
are designed for the youth market. They are distributed through
the Indonesian co-op network and schools.
Sekar Tanjung also packages for other manufacturers who cannot
get enough milk.
"There's a great need to build health awareness in the
villages and kampungs, and slowly this is happening," said Faud.
"There are some free milk programs for poor schools supported
by overseas aid agencies, and we are starting to retail UHT milk
via kaki lima (mobile food carts that traverse the streets of
most Indonesian cities)."
During the past 14 years the Western Australian agriculture
department has been sending veterinary surgeons and dairy farm
experts to help the cooperatives raise standards. This service
has been free.
"I'm very optimistic about the future," said Faud. "Everyone
supports Indonesian co-ops because they know profits go back to
the members. The healthy food message is getting through and
we're in a great position to benefit."