EUROPE's DAIRY SECTOR HAS ITS EYES on WEST AFRICA / Colophon

EUROPE'S DAIRY SECTOR HAS ITS EYES ON WEST AFRICA / Colophon

June 2016

Study realised by Gérard Choplin, consultant, for Oxfam-Solidarité and SOS Faim Belgique

Contacts

Oxfam-Solidarité Thierry Kesteloot www.oxfamsol.be [email protected]

SOS Faim Belgique Jean-Jacques Grodent www.sosfaim.be [email protected]

2 1 / Challenges

EUROPE'S DAIRY SECTOR HAS ITS EYES ON WEST AFRICA

Challenges

On the face of it, Europe and This is one of the battlegrounds 1 West Africa are experiencing around the globe where mul- complementary situations in tinationals, whether private terms of their dairy sectors. companies or cooperatives, are Europe produces too much milk now vying to control the dairy with surpluses having increased market. sharply since the end of milk production quotas in 2015; while consumption is stagnating, as is So, in this context, its population growth. what will the role Conversely, West Africa has of agro-pastoral seen a major increase both in terms of demand for dairy prod- milk producers in ucts and population. However, local production only satisfies a West Africa be? small part of its consumption. Will production be forced to The European dairy industry is become industrialised around well aware that there are grow- major towns and cities? Bearing ing markets in West Africa. The in mind the high price volatility, main dairy companies in Europe current levels of global overpro- are already staking out their duction and low prices, will West territory, but how do they see African governments prevail in the future? their efforts to develop local dairy sectors in the face of the If ratified, will Economic Part- pressure exerted by the major nership Agreements (EPAs) European dairy companies that between the EU and West Africa have their eyes firmly fixed on make things easier? Africa?

3 2 / Background

Background

23 Dairy policy in Europe over the last 50 years

In 1968, a few years after the While mechanisation, and the creation of the Common Agricul- use of chemicals and hybrids, tural Policy (CAP), the European as well as the switching to corn- Economic Community (EEC) and soy-fed cows, significantly establishes a Common Market intensifies production, it is not a Organisation in milk and milk good idea to allow this system products (milk CMO), whose of guaranteed prices with no primary objective is to increase production limits to continue for production in order to ensure a further 10 years, as this would food security in the EEC, which lead to butter and milk powder was left traumatised following mountains, and the loss of con- World War II. A target price for trol of the EEC budget. Export milk and intervention prices for dumping faces protests from butter and milk powder are set third-party countries. each year. The EEC is forced to buy back any surplus whenever In 1984, the EEC decides to the market price falls below the introduce production quotas intervention price, without a limit by country and by dairy or on volume. The EEC's preferred producer to prevent the contin- practices translate into variable uous increase in production and customs duties that take prices control expenditure (interven- of imported products to the tion storage, export subsidies). EEC's internal target price. In the However, the European quota event of surpluses, public-pri- total is set at 10% above domes- vate storage of products bought tic consumption, which means back through intervention there is still a significant element releases market pressure and of surplus/export, which puts these products are tendered for pressure on prices. sale at reduced prices for export, food aid purposes or to the food industry. Export subsidies make up the difference between Euro- pean prices and global prices.

4 2 / Background

The GATT Uruguay Round nego- 1 / A producer organisation (or PO) A third of dairy may not exceed 33% of domes- tiations conducted between tic production and 3.5% of EU 1986 and 1994 lead the EEC, farms disappear production. in 1992, to institute a radical 2 / Les OP Lactalis font un change in terms of agricultural between 2007 and « constat d'échec » (Lactalis' POs acknowledge failure) – La France policy. These include phas- Agricole – 20/11/2013 ing-out of sector-specific CMOs, 2010. lowering of internal prices to 3 / Update of the study on the dairy sector. Belgium's National meet global prices (which in A third of dairy farms disappear Accounts Institute – FPS Econo- turn eliminates export subsidies) between 2007 and 2010. But my http://economie.fgov.be/fr/ binaries/Mise_a_jour_Etude_fil- and producer compensation via the EU stood firm in its neolib- iere_laitiere_tcm326-253253.pdf direct subsidies. As far as milk eral logic, despite a number of is concerned, the reform only European producers mobilising played a part during the 2003 against it. In an effort to appease CAP reform, which coincided them, in 2012 it agreed to a with the announcement of the reform intended to strengthen end of milk quotas by 2015. the negotiating power of producers with regard to dairies by In implementing the GATT/ encouraging the establishment WTO agreement, the EEC, which of producer organisations –with then becomes the European restrictions in terms of size1– and Union (EU), makes its producers offering optional individual con- compete with others (i.e. New tracts between producers and Zealand producers) that have private dairies. But because it is the lowest production costs in a surplus of a fresh product, it the world, thus giving up control is the dairies that impose their of production. It is confident in conditions2. the fact that the increase in population and living standards in Deregulation and a tendency to emerging countries will provide create contractual arrangements opportunities to place additional mark the end of a European European milk surpluses. public dairy policy. It is in fact dairy farms and supermarkets The sudden rise in prices in that call the shots, given that the 2007-2008 reassures the EU concentration and negotiating that it has made the right deci- power will always be greater sion in choosing deregulation as than the producers'. a strategy. To ensure a smooth introduction of milk quotas, the In Belgium, 50% of dairy farms European quota undergoes a disappear in just 12 years (2000- gradual increase of 7% by 2015. 2012).3 The situation has since deteriorated further. The price volatility brought about by global deregulation quickly thwarts the plans of an EU that is only too keen to allow itself to bow to the dairy companies that want to buy cheap milk. In 2008-2009, an international market reversal sends milk prices plummeting.

5 2 / Background

In April 2015, milk quotas expire and more milk powder produc- and, as expected, European tion facilities while remaining production increases and prices dependent on exports, will the drop (see below). With Euro- EU have the foresight to change pean producers in the midst a dairy policy that is heading for of yet another endless crisis, the cliff? and with dairies building more

Collected liters Raw Milk of cows' milk evolution Price evolution in June 2016 compared to June 2015 in June 2016 compared to June 2015

CY 25% U.K. (-20%) Germany (-19%) Lithuania (-18%) Netherlands (-18%) Czech Rep. (-17%) 20% Latvia (-17%) Irleand (-17%) Belgium (-16%)

LU Slovenia (-16%) Denmark (-15%) 15% EU.28 average (-14%) Poland (-14%) NL Slovakia ((-14%)

Hungary (-14%) IE 10% Luxembourg (-13%) Estonia (-13%) Croatia(-13%) BG RO Italy (-12%) SI Sweden (-12%) PLBE DK 5% Austria (-10%)

DE Greece (-10%) LVAT

IT MTES EL France (-9%) EE

HU CZ Romania (-8%) FI Bulgaria (-7%) 0% FR Spain (-5%) SE LT Portugal (-5%) IT UK

HR Cyprus (-1%) SK Malta (+0%) PT Finland (+1%) -5% -30 -20 -10 0 10

Source : EStat - Newcronos Source : Member States (Reg. 479/2010)

6 2 / Background

4 / Ces accords que Bruxelles The European Union's West Africa impose à l’Afrique (The agreements that Brussels imposes on trade policy Africa) – Le Monde Diploma- tique – February 2005 As just seen with the CAP, trade EU and ACP countries, whose 5 / 16% of global trade, compared to 3% for the whole of Africa policy is critical to agricultural aim was to put an end to the policy. This is also the case for non-reciprocal tariff preferences, 6 / Network of Farmers’ and Agri- West Africa and its relations with whereby ACP countries would cultural Producers’ Organisa- tions in West Africa Europe. henceforth import European goods at reduced tariffs. Faced 7 / Interview with Cheikh Tidiane Dièye – Seneplus – ENDA-CAC- After several African nations with collective resistance from ID – 6 May 2016 – http://www. gained independence, the 1963 the ACP countries, the EU split seneplus.com/seneplus-tv/non- Yaoundé Convention was signed the negotiation into 6 regions, aux-ape between the EEC and 18 African one of which was West Africa. countries, which includes, inter alia, non-reciprocal trade preferences in terms of the tariffs The EU imposed applied to products from these a new agreement countries. In 1975, the Lomé Convention, which was ‘based on ACP countries, on partnership and solidarity’4, extended these provisions to 46 which was signed developing countries, adding the “Export Earnings Stabilisa- in Cotonou in the tion Scheme (Stabex) which is designed to offset the revenue year 2000. deficit of exports due to price fluctuations in global mar- From the outset, the African kets”. Between 1979 and 1995, states were reluctant to lose the term of the Lomé Conven- revenue from customs duties, tion was extended 4 times and without receiving anything in its scope enlarged to encompass return from the EU. Compared an even greater number of with the world's leading trade countries (African, Caribbean, superpower5, West Africa has and Pacific Group of States, also little weight and the EU will known as the ACP Group). apply pressure. But by late 2007, no African state has signed. But with the signing of the Gen- While many African civil society eral Agreement on Tariffs and organisations, including ROPPA6, Trade (GATT) at the Uruguay put pressure on their states not Round in 1994 and the creation to sign the EPAs, the EU, which of the WTO in 1995, the EU has lost much of its market imposed a new agreement on share in West Africa (a current ACP countries, which was signed 30% market share, down from in Cotonou in the year 2000 and 80% in 19757), issues an ultima- designed to comply with WTO tum to African leaders: if they rules, the first of which was to do not ratify the regional EPAs remove the Stabex system. by 1 October 2014, Ivory Coast, Ghana, Nigeria and Cape Verde The Cotonou Agreement exports will be taxed by the EU provided for the signature at entry. of an ‘Economic Partnership Agreement (EPA)’ between the

7 2 / Background

8 / Economic Community of West Compared with The EPA stipulates a 5% cap African States on duties for milk powder in 9 / Higher rates (up to 20%) are applied the world's leading West African countries. This on other dairy products, which are already exists in the form of the nevertheless less significant in terms trade superpower, 9 of the quantities imported. common external tariff (CET) West Africa has applied by ECOWAS, which favours low-priced supply for little weight. the urban poor. Therefore, there would be no significant impact Ivory Coast caved in first, at first glance, but increasing the followed by Senegal. These duty would as of now be impos- two countries make the other sible. This would prevent West ECOWAS 8 nations follow suit. Africa from being able to change Following 10 years of resistance its stance in order to prioritise from African countries, the local production. EPA is signed in 2014, with a deadline for ratification set for 1 The EPA gives ECOWAS no October 2016. All West African leeway in terms of trade with countries subsequently ratify the EU. Tariff reciprocity is a tool the agreement, with two notable that serves the interests of Euro- exceptions: Nigeria, the largest pean businesses better than it economy (accounting for 56% of does those of ECOWAS. It would the region's GDP) and therefore be easier for these companies to the most coveted by the EU, and export their products and ser- the Gambia. The EPAs would vices to West Africa. It seems far enable the EU to compete with from the endogenous regional Nigeria in the West African mar- development goals. ket. Signing of the agreement is far from a done deal, and it requires, in any case, ratification The EPA stipulates at the European level. Despite a 5% cap on duties Nigeria's refusal, the EU could enter into an interim agreement for milk powder with the other ECOWAS countries. in West African countries.

8 3 / Europe after the end of quotas

Europe after the end of quotas

European deregulation of dairy We are witnessing a headlong 3 production subjects producers rush towards bigger farms, with even further to the vagaries of more intensive production, using an international market fuelled milking robots, and where cows by surpluses from certain are kept in stables and no longer producing countries. New Zea- graze. However, the case of land's production accounts for Denmark shows how such farms only 2.5% of global production have significant production and yet for one third of global costs, are often highly leveraged exports. This country, with its by large investments, and are ‘multinational cooperative’ Fon- thus fragile and difficult to sell. terra and its quasi-monopoly Moreover, this makes no sense in of milk collection, sets global environmental and climate terms prices. in a Europe that has millions of hectares of permanent grassland 10 / EU Milk market observatory - In the EU, the sharp increase in storing large amounts of carbon http://ec.europa.eu/agriculture/ production (+7% in two years and that promotes biodiversity. milk-market-observatory/ from 2014 to 2015)10 combined 11 / This includes labour costs after with several other factors to Despite the economic, social and deducting government subsidies – Milk production costs – Febru- make prices fall well below the environmental impasse due to ary 2015 – EMB – www.european- production costs of most pro- the absence of a current dairy milkboard.org ducers. These include increased policy, the EU is proving to be 12 / http://www.clal.it/en/index. production in New Zealand steadfast. Some states, such as php?section=magazzino_smp and the US, a Russian ban on the Ireland of EU Agriculture imports from the EU, and a Commissioner Phil Hogan, want decline in Chinese imports. to double their production, argu- ing that they can produce more In March 2016, the average price cheaply than the other countries of milk in the EU was still down, and take their market share as at EUR 0.281 per litre, while the well. average production cost was around EUR 0.40 per litre11, As for the dairy industry, it has meaning a considerable daily a raw material at very low prices loss for farmers. Many small- and and, as the price of dairy prod- medium-scale producers stop ucts do not fall for consumers, production altogether. Some it increases its margins, even if it even commit suicide. Large must engage in fierce negotia- farms survive on bank loans... or tions with the supermarkets. This stop producing milk, as in the is how it secures the resources UK, where large herds are for to explore new export markets, sale. The only ones still standing as it has the largest stocks of are organic producers and those milk powder (800% increase who process and sell their prod- over one year without increasing ucts directly to local consumers. the price)12.

9 3 / Europe after the end of quotas

Evolution of Skimmed Milk Powder exports from the EU since 2009 *

800

600

400

691 648 200 515 520 376 407

229

2011 2009 2010 2012 2013 2014 2015

(*) Express in thousands of tons of skimmed milk powder, according to Eurostat

EU skimmed milk powder Fewer farmers, more factory exports have increased in recent farms, more milk, fewer produc- years and currently exceed the ing regions, more milk powder forecasts made before the end surpluses to sell off through of quotas. While the European exports. 'Dairy Europe' is going Commission forecast a steady into free fall and cannot be increase in exports of skimmed stopped as this risks destabi- milk powder in 2013 reaching lising dairy production regions 637 000 tons in 2023, this figure such as West Africa. So, should has already been exceeded we wait for a volcanic eruption (691 000 t in 2015). to occur in New Zealand before prices are raised?

10 4 / The West African dairy sector

The West African dairy sector

4 At present, 390 million peo- Livestock (meat, milk and 3 ple live in West Africa, half of derived products) continued them in Nigeria, which alone is to be a pillar of the economy expected to reach a population (ranked 2nd in Burkina Faso), of 400 million by 2050. With a particularly in the Sahel region. population growth rate among Pastoral and agro-pastoral dairy the highest in the world, West production play a major role Africa faces a major food chal- in food and rural life. “In the lenge: how to feed the next 800 Fulani language, milk is ‘kossam’, million people. So, how is Nigeria which means it is the very best going to respond to the continu- of foods.”14 In Mali, 30% of the ous increase in demand for dairy population depend directly on products? livestock. “With 7 million head of cattle, 16 million small rumi- In 2010, 44.9% of the population nants and 500 000 camels, Mali in West Africa is concentrated boasts one of the largest live- in urban areas. By 2050, this stock holdings in Africa”. 13 / Urbanisation en Afrique : changement et défis (Urbanisa- figure could reach 68%13. A high tion in Africa: changes and chal- level of urban concentration lenges) – EPFL – https://infos- Nowadays, about cience.epfl.ch/record/197883/ shows how little the agricultural files/0102_part1_pdf_Urbanisa- and rural economy appeals to 80% of the milk tionDefis_fr.pdf people, which continues to fuel 14 / Sur les sentiers du lait au Mali the rural exodus. It is easier for consumed in West (On the Trail of Milk in Mali) – governments to facilitate the http://jagros.be/ressources/ SentierLaitMali-BAT.pdf import of cheap foods –such as Africa comes from milk powder– to feed the urban 15 / Note d’analyse de l’impact des politiques commerciales région- poor, than it is to maintain the local production. ales sur la filière « lait local » rural population in rural areas en Afrique de l’Ouest (Analysis of the impact of regional trade by developing agricultural and Nowadays, about 80% of the policy on the ‘local milk’ sector trade policies that would enable milk consumed in West Africa in West Africa) – GRET – APESS them to live off their production comes from local production15, – 2015 and have access to the local and with significant variations 16 / GRET, op.cit regional markets. Conversely, depending on the country, 17 / Dossier Oxfam : agriculture these very same governments pastoral tradition or distance familiale et production laitière : have for a number of years also from import ports. “Domestic menaces et enjeux – volet 2 (Oxfam Case Study: Family wanted to develop the local production in Senegal caters for farming and milk production: dairy sectors. only a third of domestic demand, Threats and Challenges – Part 2) whereas in Burkina Faso, Mali 2007 and Niger most of the demand is covered in this way” says Amel Benkhala, GRET16. Most of the milk is consumed by the farmers and their families17. Only a small portion is sold and the rest of consumption, especially in urban

11 4 / The West African dairy sector

18 / Oxfam, op.cit areas, is based on imported milk If Kenya was able powder. to develop a local There seems to be a significant dairy economy it potential to increase milk production (the average yield per was because its cow is about 500 litres/year, compared to 6 500 in the EU). A customs duties number of micro-dairies started to emerge in the 1990s, but their were at 60%. development has encountered numerous technical obstacles: This is possible because customs irregular supply during the wet duties (CETs) on imported milk and dry seasons, seasonal move- powder in the countries of the ment of herds, poor genetic pool ECOWAS region are only 5%. of local breeds, difficulty main- If Kenya was able to develop taining cold chain integrity, lack a local dairy economy it was of infrastructure, grazing areas because its customs duties reduced by ever-expanding were at 60%. The challenge cities, and so on18. for ECOWAS governments is size, with them being caught between ensuring the supply for Increased milk the urban poor and developing demand opens up milk production. The implementation of the EPA would further opportunities to narrow their choices. local producers and importers.

Increased milk demand opens up opportunities to local producers and importers. For the pastoral and agro-pastoral economies to be able to tap into this growing market, first the milk made from imported milk power would have to be more expensive than local milk. But for a long time it has been the opposite. EU dairy firms have been able to export their surpluses without limit and at very low prices. In fact, what they did was buy milk from European producers at prices below their production costs, which is tantamount to dumping. For instance, in Burkina Faso, milk powder nowadays is 3 times cheaper than local milk (see section 5).

12 4 / The West African dairy sector

If agro-pastoral production is // In some basins such as 19 / É tude relative à la formulation du programme d’actions détaillé to be developed, several other the Senegal River Basin, de développement de la filière issues must be considered: the intensification of dairy lait en zone UEMOA (Study on the drafting of a detailed action production could come into plan for dairy industry devel- // To mimic the texture of whole competition with rice pro- opment in the WAEMU region) milk, currently about a third of duction, as they both need – CIRAD-UEMOA – 2013 – Page 31 – http://www.repol.info/IMG/ imported skimmed milk pow- irrigated perimeters. For the pdf/rapport_final_etude_lait_ der is mixed with palm oil, time being, rice appears to be uemoa.pdf as it is cheaper than milk fat. taking priority. 20 / The breast milk substitutes And yet Africa is producing market is substantial, with global annual sales amounting more and more palm oil. This With the exception of Benin and to just under USD 45 billion. By could hinder a price increase Ghana, West African countries 2019, these sales are expect- of imported milk powder and are yet to fully implement the ed to reach USD 70 billion, an increase of over 55%. L'ONU be harmful to the health of ‘International Code of Marketing juge insuffisantes les lois pour consumers. of Breastmilk Substitutes’20, even protéger l'allaitement dans la plupart des pays (Laws to though it was adopted 35 years protect breastfeeding deemed // A few intensive dairy farms in ago, which still leaves too much inadequate in most countries, says UN) – 09/05/2016 – http:// periurban areas –with higher room for dairy multinationals to www.un.org/apps/newsFr/ yielding cows that are either persuade mothers not to breast- storyF.asp?NewsID=37190#. imported or bred with local feed and instead buy infant milk VzbciTWLSUl breeds, using cottonseed or powder21, to the detriment of the 21 / See country-by-country table soybean cake– have cropped health of children. of how measures have been implemented – Appendix 2 up in recent years, mostly by – http://apps.who.int/iris/bit- local agri-entrepreneurs. “This The increase in population stream/10665/206008/1/ 9789241565325_eng.pd- is a relatively old dynamic, means that milk production f?ua=1&ua=1 yet one that has developed trends in West Africa will rapidly over the past fifteen depend not only on domestic years”19. It is possible that and regional political wills, but major European dairy firms also on European dairy policy might find this model useful and the implementation of trade and decide to start running agreements between the two large factory farms, at the regions, all of which falls under expense of agro-pastoral pro- the influence of the global mar- duction, provided, however, ket dominated by New Zealand, that the price of European not to mention the possible milk powder picks up a little. effects of global warming on the But will the two production duration and severity of the dry models develop in a comple- seasons. mentary manner or, as in the case of Europe, will one kill Assuming that the major Euro- off the other? pean dairy firms have already considered all of these factors in possible scenarios, the nature of their interest in this African region becomes apparent.

13 5 / The European dairy industry's ambitions

The European dairy industry's ambitions

Keen on securing a raw mate- So, will the West 53 rial at a low price, the major European dairy firms, whether African market private companies or cooperatives, instituted the deregulation come under the of European production in 2003, staking their money on growing control of milk export markets. multinationals? In the global battle for milk, these firms are determined to The priority of the major Euro- secure their place in these mar- pean firms in the short and kets, through a series of merg- medium term is to sell their sur- ers, acquisitions, partnerships plus milk powder, especially as and others mechanisms. In view the Russian market is closed and of the significant population the Chinese market is unpre- increase in West Africa over the dictable. The sharp increase in coming decades, the parallel European production puts those increase in demand – so long as companies under pressure and it can be met – is sure to whet in competition to find outlets. appetites.

Exports of skimmed milk powder from the EU to West Africa have been increasing for 10 years:

2005 2010 2012 2014 2015 21.007 29.646 34.906 44.457 39.718

expressed in thousands of tons – European Commission

22 / https://www.frieslandcampina. But the point is becoming estab- The ‘social responsibility’ of com/en/organisation/a-glob- lished in local milk processing. these companies represents a al-player-in-agri-food/ Today, dairy companies are growing part of their communi- concerned about their image, as cation campaign, as is the case they are faced with accusations of Friesland-Campina's, entitled: of dumping milk powder onto ‘Contributing towards food sup- the markets in ‘developing’ ply security with a local focus22 countries and with the desire of on its website. some West African governments to develop local dairy industries.

14 5 / The European dairy industry's ambitions

Current presence of European dairy companies in West Africa

23 / Some large companies such as In 2015, the largest European Nigeria, as we have seen, is by DMK (D), Savencia (F) do not dairy firms were, in order of far the largest market in the operate in West Africa turnover: Nestlé (CH) – Lactalis region. Five major firms are 24 / Excerpt from the report “L’in- (F) – Danone (F) and Friesland- already operating there: dustrie laitière en Afrique de l’Ouest : histoire, stratégies et Campina (NL), Arla Foods (S) perspectives” (The dairy indus- and Sodiaal (F). They all23 have a // In 2015, Arla entered into a try in West Africa: History, Strat- egies and Prospects) – Christian presence in West Africa. 50/50 joint venture with the Corniaux – CIRAD-PPZS, 2015 Tolaram Group (Singapore) to In 2009, the Belgian cooperative form TG Arla Dairy Products 25 / http://www.commodafrica. com/07-09-2015-la-coopera- Milcobel/Belgomilk set up a LFTZ and distribute Arla tive-laitiere-danoise-arla-sim- Belgian milk powder processing products in Nigeria. “For Arla plante-en-afrique-de-louest plant in Bamako. Small sachets to succeed in Africa we must 26 / Agromedia.fr – 30 March 2016 of Incolac are sold in Mali, Bur- succeed in Nigeria”, said kina Faso, and so on. Steen Hadsbjerg, head of Arla 27 / Jeune Afrique – 15 March 2016 – Fan Milk, un tremplin verglacé in Sub-Saharan Africa. pour Danone (Fan Milk, a slip- While it does not cover all coun- pery springboard for Danone). tries in West Africa, the map // In acquiring 13% of Wamco's p.1724, which dates from 2015, additional Peak units for gives us a partial, yet significant EUR 180 million last year, insight. FrieslandCampina gained controlling interest (68%) While some companies like and subsequently set up Nestlé have been operating in FrieslandCampina Wamco Nigeria, Ghana and Senegal (FCW) to import milk powder since the 1960s, the majority and evaporated/condensed of investments date from the milk. In 2010, FCW began 2000s and even more so the operating local milk collection 2010s. The two most recent centres with the support of examples jump to mind. On the the Nigerian government. one hand, Arla acquired 75% of the Attieh/Agroline Group // In 2013, Danone went into in Senegal in late 2015, which partnership with the Abraaj was rebranded as Arla Senegal Group (Dubai) and acquired SA25. Its milk powder packaging 49% of Fan Milk International, plant began operations on 17 which boasts a network of May 2016. On the other, the Bel 30 000 milk distributors using Group (F) launched, as recently bicycles and carts across 6 as March 2016, a ‘Laughing Cow’ countries (Benin, Burkina Faso, manufacturing plant in Abidjan Ivory Coast, Ghana, Nigeria for both the Ivory Coast26 and and Togo: 250 million people) other markets. to deliver ice cream products made from imported milk Let us look at the case of Nige- powder. “This is an incredible ria, Senegal and Burkina Faso. base for us to work from, with assets that push us to go beyond ice cream snacks”, said Pierre-André Térisse, Executive Vice-President for Danone's Africa division.27

15 5 / The European dairy industry's ambitions

For Danone's Chief Executive Senegal, where milk powder has ence, which sparked an outcry Officer, Emmanuel Faber, “this for a long time arrived in the port among producers as soon as transaction represents a major of Dakar and represents much of they identified the sponsors of step in Danone's expansion the consumption of milk in the the study. in Africa”28. The newspaper country, is home to all the major Jeune Afrique summarises firms: Following the failure of pro- Danone's strategy as follows: jects to set up public dairies in to acquire well-established // Sodiaal has been in partner- Bobo-Dioulasso and Ouagadou- local firms that will enable ship with Kirene since 2005 gou (Soprolait) since the 1980s, it to develop private labels to sell local milk and reconsti- the Union of micro-dairies, WUP- and new products cheaply, in tuted milk (Candia UHT milk), B, remains wary of the authori- addition to securing cost syn- ties' constant efforts to develop ergies. As envisaged back in // Lactalis is in a partnership large dairies near major cities, 2013, Danone took over 51% of with Meroueh and sells French to the detriment of the local Fan Milk in March this year. brands and Laicran milk micro-dairies. It was an alleged powder, case of ‘land-grabbing’ intended // Nestlé has been in the region to set up herds of ‘exotic’ cows for about a century (Nido milk // In 2008, Danone acquired 25% for intensive production. On powder) of Laiterie du Berger, which 30 April 2016, during National had achieved great success Farmers' Day celebrations in // Glanbia (IRL) has been in part- with its yogurt product Tenkodogo, Mamadou Cissokho, nership with PZ Cussons since Dolima, made from local milk. Honorary President of ROPPA 2003 in order to sell products Since 2014, it has added as noted that: “The government is made from Irish milk powder. much as 50% of imported milk not here to set up dairies. That is powder to meet demand. not its job. It must ban imports // In 2015, the EU exported from outside the ECOWAS to Nigeria 22 613 tons of // Glanbia is in a partnership with region. That is its job.”30 skimmed milk powder from F, Satrec to distribute milk pow- NL, D, IRL, B, and PL, among der and yogurt, The public dairy Fada-Ngouma others, and 27 757 tons of only processes local milk into whole milk powder from NL, // Nestlé distributes Gloria evap- fresh milk and yoghurt, but it DK, IRL, S, D and so on. orated milk, operates below its capacity of a potential 3 000 litres/day and // Arla Senegal SA, operating is looking for partners. Fada, a through the Attieh Group's micro-dairy producing only 200 Agroline network, has a ‘hub’ litres a day, works well. that is to serve as a platform to expand to Mauritania and 28 / Communiqué de presse de In 2015, the EU Danone du 24 octobre 2013 Mali.29 (Danone press release of 24 October 2013) – http://www. exported to danone.com/fileadmin/Danone_ In Burkina Faso, where most of Abraaj_-_Fan_Milk_FR_01.pdf the milk sold comes in the form Nigeria 22 613 tons 29 / Jeune Afrique – May 19, 2016 – of milk powder and other dairy Sénégal : le danois Arla Foods products imported through the of skimmed milk met en route sa première usine (Senegal: Danish giant Arla ports in Ivory Coast or Ghana, Foods' first plant is now up and European dairy companies have powder, and 27 757 running). not (yet) invested directly on tons of whole milk 30 / Face à face Président du Faso site. But in 2015, Arla discreetly – Paysans (President of Burkina commissioned a study on the Faso comes face to face with powder. the Farmers): Les vérités de possibility of setting up indus- Mamadou CISSOKHO (Mam- trialised processing facilities for adou CISSOKHO's truths) – http://www.roppa-afrique.org/ local milk, to take the place of spip.php?article334 the micro-dairies already in exist-

16 5 / The European dairy industry's ambitions

1 Sodiaal - Tiviski 7 Nestlé 14 Friesland Campina - Wamco Nigéria (Candia, UHT milk)* (Gloria, condensed, Milk Decree, (Peak, powder) Collected Milk : 1991-2003) 2 Sodiaal - Kirène 15 Nestlé (Candia, UHT milk)* 8 Sodiaal - Eurolait (Nido, powder) (Candia, UHT milk) 3 Lactalis - Meroueh 16 Belgomilk - Disnepal (Laicran, powder) 9 Aria - Mata Holdings (Incolac, powder) (Dano, powder) 4 Lactalis - ISPEL 17 Lactalis - MaliLait (Bridel, UHT milk) 10 Aria (project) (Lait frais, yogurt)*

5 Danone - LDB 11 Danone - Abraaj 18 Lactalis - Cotim (Dolima, yogurt)* (Fan Milk, ice cream) (Laicran, powder)

6 Glanbia - Satrec 12 Glanbia - Sicoma 19 Sodiaal - Eurolait (Vitalait, powder, Ardo, (Vivalait, powder) (Candia, UHT milk)* yogurt, Bestlait, powder) 13 Glanbia - PZ Cussons 20 Nestlé (Nutricima, powder) (Nido, powder Gloria, condensed)

Nouakchott 1 Mauritania

2 3 Senegal Niger Dakar 16 12 17 18 19 4 Koalack 5 Mali 7 6 Niamey Bamako Burkina F a s o Ouagadougou Kano Guinea Benin Kaduna Conakry Sierra Freetown Leone Ivory T Nigeria Coast o Ghana g 15 14 Bouaké Ibadan o Liberia Yamoussoukro Lagos 13 11 Monrovia 11 11 10 Benin City 10 11 Cotonou Accra 12 Lome 8 Abidjan 20 11 Aba 9 Port Harcourt

European company - West African company (Brand - type of dairy product) Example : Sodiaal - Eurolait (Candia - UHT Milk) * Company collecting local milk

17 5 / The European dairy industry's ambitions

Linked with Date Capacity Collection Main Name 31 Country European created on (l ME/d)* local milk dairy products company Laiterie Senegal 2006 15 000 yes yogurt, dégué*, thiakry* Daneene du Berger *yogurt-based dessert

Kirène Senegal 2005 10 000 yes UHT milk Sodiaal

Satrec Senegal 1992 — no yogurt, milk powder Glanbia

Arla Senegal Senegal 2015/2016 5 000 tons/year no Dano milk Arla

fromage blanc, MaliLait Mali 1994 60 000 yes Lactalis pasteurised milk, yogurt fromage blanc, Eurolait Mali 2005 20 000 yes Sodiaal pasteurised milk, yogurt 7 to 10 000 tons Sicoma Mali 2000 no milk powder Glanbia of milk powder/year Mali, Disnepal 2004 — no Incolac milk powder Belgomilk Burkina Faso UHT and pasteurised Tiviski Mauritania 1987 30 000 yes Sodiaal milk, yogurt, cheese

Eurolait Ivory Coast — 40 000 yes UHT milk, yogurt Sodiaal

condensed milk, milk Friesland Olam Ivory Coast 2014 — yes powder / Pearl milk Campina

Mata Holding Ivory Coast 2013/2015 2 000 tons/year no Dano milk Arla

evaporated and Nestlé Ghana 1957 — no condensed milk, Nestlé milk powder

Fan Milk Nigeria + 5 2015 — no ice cream Daneene

7 to 10 000 tons Sicoma Togo 2000 no milk powder Glanbia of milk powder/year 1954 and Friesland Wamco Nigeria — yes milk powder then 2015 Campina

(*) actual production is sometimes much lower

The European dairy industry's ambitious plans for West Africa

The trend has been noteworthy for the French agri-food indus- 31 / Modified table taken from the CIRAD-PPZS report – op. cit. in recent years. West Africa is try... The strategy essentially of great interest to European consists of hunting in packs and 32 / Pierre Gattaz, Chairman of ME- food companies. During his visit setting up French subsidiaries DEF– Agra Presse Hebdo – Issue no. 3545 – p. 46 – 9 May 2016 to the Ivory Coast in late April sustainably”, says the leader of 2016, the leader of the French MEDEF”.32 Employers' Federation (MEDEF) delivered a clear message: “Ivo- rian agriculture is an Eldorado

18 5 / The European dairy industry's ambitions

“Actors from industrialised countries While it cannot be denied that the European dairy industry will be able to take advantage of the has its eyes set firmly on West Africa, particularly when imbalance between supply and demand considering the increase in in developing countries to ensure their investment in recent years, such investments have remained own growth”. moderate. It seems appropriate that caution should be exercised when considering the volatility of milk prices worldwide, the pressures on the West African 33 / Sodiaal 2020 report – p. 45 In its ‘Sodiaal 2020’ report, dairy market, and geopolitical Sodiaal is explicit: “Actors from uncertainty36. 34 / Danone prépare son avenir en Afrique (Danone lays the industrialised countries will be groundwork for its future in able to take advantage of the One of the main issues is to Africa) – The World – 24 February 2016 imbalance between supply and ascertain what the role of local demand in developing countries chains of production and pro- 35 / European Association of Dairy to ensure their own growth”.33 cessing will be in the future. Will Trade It is a question of “anticipat- European companies invest in 36 / The drop in oil prices and the ing market developments by the processing of local milk as terror inflicted by Boko Haram in northern Nigeria are taking pre-empting new areas. The it is suggested in their com- their toll on the country. merger and acquisition strategy munication plans and in their is today undoubtedly at the very approach to social responsibility, heart of the strategy of all major or will they favour on-site use groups.” of their growing European surpluses? Most of them try their According to Emmanuel Faber hand at both. (CEO of Danone), “Africa is the continent of the future. Today, we are investing in the continent One of the main as we did in Asia 15 years ago.”34 issues is to Eucolait4 said during its 2013 ascertain what the General Assembly that “there will be a considerable potential role of local chains demand for infant formula in Africa, where the number of of production and babies and infants is likely to grow rapidly”. processing will be in the future.

The express wish –not always fulfilled– of most West Afri- can governments to develop the local industries came up against the major price differ- ences between local milk and imported milk. In Burkina Faso, for example, a litre of local milk costs about 650 CFA francs per litre, whereas reconstituted

19 5 / The European dairy industry's ambitions

37 / Nestlé to roll out modular milk only costs 225 CFA francs. local milk market, by developing factory system in Africa – Even if producers are paid an their ability to process European www.agritrade.cta.int – 18 August 2014 appropriate price for local milk milk powder on site. (about 350 CFA francs per litre), 38 / http://www.mata.ci/arla they are still unable to compete When you have local initiatives 39 / Agritrade – 27 October 2013 with imported milk, especially such as Laiterie du Berger in because imported milk labelled Richard Toll, Senegal, which as ‘Burkina milk’ is allowed to be become successful selling yogurt sold. The drop in milk powder made from local agro-pastoral prices since 2015 thus poses a milk and then reach a point clear danger to local industries. where they can no longer meet demand, what happens is that In the coming years, West Africa Danone takes an interest and will not be able to produce acquires a 25% stake in the dairy enough milk to meet the grow- which now uses 30% or even ing demand for dairy products 50% of Danone milk powder to to match population growth and produce Dolima yogurt. increase urban concentration. Imports and local production are In 2014, Nestlé developed a forced to coexist, yet the inter- mobile modular plant intended ests of African producers are not for Africa to process milk pow- the same as those of European der at a cost 50% lower than industrial manufacturers. that of a normal plant. It is, as Nestle says, “a fast, flexible and cheap way to penetrate Multinationals are markets”37, as well as a less risky operating in the investment. long term and Arla has done something similar: in partnership with Mata Hold- keeping track ings (through a joint venture entered into in 2013)38, in 2015 it of the local milk developed in Ivory Coast “a new mobile packaging station which market. operates from three 40-foot containers powered by solar During the period in which panels to ensure a 12-hour pro- global milk prices peaked in duction cycle, under controlled 2013-2014, before the end of the temperature conditions. This quota system, local milk in Africa plant can process an annual had become very attractive and 2 000 tons of milk powder, can much sought-after, which led to supply 8 million litres of milk to competition between milk multi- the market, and is considered nationals to mark their territory. a low-cost way to leverage the Whereas European and global massive demand for milk in overproduction can be said to Africa”39. The development of have probably shifted priorities such low-cost units by Arla and since the end of the quota sys- Nestlé decreases the financial tem –the African market is here risk undertaken by companies. first and foremost to take on European surpluses–, multinationals are operating in the long term and keeping track of the

20 5 / The European dairy industry's ambitions

Arla has big FrieslandCampina has its eyes set on Nigeria, which could, ambitions for West according to the Chairman of Africa, where it FCW “become a world leader in milk production in the next few intends to increase years”42. But with local milk costs in 2015 at more than twice the its revenues price of imported milk, the country is seen primarily as a destina- fivefold by 2020. tion for milk powder exports.

Arla has big ambitions for It is not only price trends but 40 / Jeune Afrique – 4 September West Africa, where it intends to the strategies of competitors 2015 increase its revenues fivefold by that will influence the firms' 41 / L’Afrique au cœur des priorités 202040. With over 12 700 pro- investments, with the growing de Danone pour 2015 (Africa, ducers (Denmark, Sweden, Great West African demand remaining a key priority for Danone for 2015) – www.ecodufaso.com–16 Britain, Germany, Belgium, Lux- a strong indicator. December 2014 embourg and the Netherlands)

42 / Agritrade, sept. 2014 that will produce an additional One of the ways to cope with 1 million litres a year, it seeks to demand while relying on local increase its revenues fivefold in production is to create large the region by 2020 to EUR 460 industrialised farms near towns million through its partnerships and cities. That is what Danone in Nigeria and Senegal. In Nige- did in Egypt, where it built a ria, Arla Dairy Products LFTZ factory with capacity for 2 500 Enterprise wishes to triple its cows, fulfilling 40% of Egyptian turnover, from EUR 80 million at demand. This does not seem to present to EUR 240 million by be the method of choice in West 2020. Africa for the time being, but it does exist and may come to be Danone is in a strong position. applied if global prices were to Last year, it created the ‘danone. rise. communities’ fund and set up a hub in Africa: “This new multi-sector hub has been set up to accelerate Danone's development in this strategic region”,41 said Danone, which for the time being is more focused on the North Africa and Southern Africa markets, where there is perhaps more purchasing power. Fan Milk, which only processes imported raw materials, and Laiterie du Berger, operating from mixed supply, will be Danone's platform for conducting business in the region. According to Emmanuel Faber, “Africa is a major focus of expansion for Danone”.

21 6 / Outlook

Outlook

63 Currently, everything contributes towards increased exports of dairy products from major European firms to West Africa:

// A sharp increase in the // The impending signature of population of West Africa EPAs which would put a 5% envisaged in the coming cap on customs duties appli- decades, cable to dairy products from Europe, // Large and ever-increasing quantities of surplus milk within // West African governments the EU since the end of the milk prioritising low-priced supply quota system, although nothing for the urban poor, is being done to improve the system in place, // Countless restrictions being applied on development of // Rock-bottom milk prices agro-pastoral dairies to supply worldwide, towns and cities,

// West African agro-pastoral milk // Global warming which may currently costs significantly lessen the potential for produc- more than imported milk tion in West Africa. powder, // …

And yet other factors contribute to the increase of local production:

// A willingness displayed by // The social responsibility of a majority of West African European firms seeking to governments to bolster local show that they promote local production chains, development,

// A willingness by African pro- // Competition between Euro- ducers and their organisations pean firms to establish them- to boost production and local selves in local industries, staking processing, their money on a future where markets will be more strained and will have higher prices.

22 6 / Outlook

// The potential yield increase of Milk is a product like no other. African cows. Its nutritional, economic, social and cultural role in pastoral and // … agro-pastoral life deserves real regulation through public policy. These two trends are not neces- Despite the pressures and restric- sarily contradictory since even tions already mentioned, there is if local production is developed, a real potential to develop milk it would still not be enough to production in West Africa. meet the growing demand of the population in West Africa. But The question remains, as in the if nothing is done in Europe to case of Europe, as to which dairy control production and also if the production model to implement. global price of milk remains as low Should we prioritise pastureland as at present, it will be difficult to for grazing and pastoralism as develop local production. well as the micro-dairies linked to it? Or should we instead develop There is The major European dairy milk factory farms on the outskirts companies are preparing for all of cities by reproducing a model a real potential eventualities. They are setting up from the North with very negative their business in West Africa to features, which does without to develop milk repackage/distribute milk powder farmers and grazing? as well as processing local milk. production in Could the rural population, which The EU dairy and trade policies still represents more than 50% of West Africa. right now serve the interests of West Africans and prefers to live dairy firms rather than the inter- and work in the country rather ests of the producers and taxpay- than emigrate to Europe, have ers/consumers. more weight in decision-making?

As we have seen, whether in Will the Nigerian government Europe or West Africa, milk pro- resist EU pressure and refuse to ducers are forced into an impos- sign the EPA? If so, will the other sible and absurd situation. On the West African governments refuse one hand, the EU's deregulation the establishment of a partial EPA of the dairy industry leads to very with them? low prices that drive family farms, in particular, out of business, the very same that sustain rural life and add value to grassland regions used for milk production. On the other, West African producers have limited access to their local market because of the dumping of imports and large European companies getting their hands on the market, anticipating future growth.

23 6 / Outlook

To move beyond this impasse, // Investing in processing and The challenge for and not leave European and the promotion of agro-pas- African farmers in the hands of toral local milk, including in West Africans and the dairy industry, the EU can schools, and informing the their governments take action by: public about the superior nutritional value and taste of is to regain control // Aligning its trade policy with local milk, the ‘development’ goals for of the regulations Africa; this entails the non-im- // Fostering the development plementation of the economic of producer organisations so that they do ‘partnership’ agreements, and encouraging dialogue which will favour European between all stakeholders not hinder the dairy firms rather than local within dairy production, development of family farmers, // Fully implementing the Inter- agro-pastoral // Regulating milk production to national Code of Marketing prevent structural surpluses of Breast-milk Substitutes so production. and ensuring producer prices that large dairy firms are not are sufficient to cover their allowed to undermine breast- production costs, feeding and promote their milk powder. // Stop industrialised production in large factory farms, // …

// Promoting means of produc- Even if these measures are tion that prioritise permanent adopted, given the increase in grasslands for grazing, population and weak local supply, milk powder imports will continue // … to arrive for some time. The challenge for West Africans and their West Africa can act by: governments is to regain control of the regulations so that they do // Rejecting EPAs and establishing not hinder the development of tariffs and duties on milk pow- agro-pastoral production. der that are sufficiently high and varied, as requested by “First and foremost, the coun- ROPPA. Using revenue to bol- tries where a sharp increase in ster the development of local consumption has been recorded dairies (infrastructure, electric- should be the ones to produce ity, processing, and so on) milk to meet their needs, including through investments from // Improving the yield of herds large foreign groups. This raises without allowing large factory the question of the distribution 43 / From the conclusions of the farms take over with their of margins throughout the value research : ‘Dynamique des bas- exotic cow breeds, 43 sins laitiers entre mondialisation chain.” et territorialisation’ - collective work - Voies lactées - 2015 // Banning imported dairy products from having local brand names or logos,

24 7 / To find out more

To find out more, go to:

// L’industrie laitière en Afrique // The evolving EU-Africa dairy 37 de l’Ouest: histoire, stratégies trade: EU corporate responses et perspectives (The dairy to milk production quota industry in West Africa: History, abolition – Agritrade – Special Strategies and Prospects) Report September 2014 – Christian Corniaux – CIRAD- // Sodiaal 2020 – https://produc- PPZS, 2015 http://www. // Nestlé to roll out modular teursdelaitsodiaal.fr/sodiaal/ inter-reseaux.org/IMG/pdf/ factory system in Africa – Agri- CMS/Flashs/livre_2020/index. RapportCiradIndustrielsLaitDa- trade – August 2014 html#/1/ nida.pdf // Europe laitière (Dairy Europe) – // Afrique de l’Ouest : comment // Autosuffisance : l’Afrique André Pflimlin – Editions France développer la filière du lait local cherche sa voie lactée (Self-suf- Agricole – 2010 (West Africa: How to develop the ficiency: Africa seeks its very local milk industry) – Défis Sud – own milky way) – Jeune Afrique // Chances et menaces du nou- SOS Faim – March/April 2016 – 23 July 2015 veau programme laitier du Burkina Faso (Opportunities // Study of Measures against // Dynamique des bassins laitiers and threats of the new dairy Market Imbalance: What Per- entre mondialisation et terri- plan in Burkina Faso) – Bur- spectives after Milk Quotas in torialisation (Dynamic dairy kinaLait – 2010 the European Dairy Sector? – basins between globalisation Collective work – February 2016 and regionalisation) – Collective // Sur les sentiers du lait au Mali – French Ministry of Agriculture Work – Voies lactées – 2015 (On the Trail of Milk in Mali) – http://jagros.be/ressources/ // Dossier : vouloir le lait et l’ar- // Beyond the Milking Parlour: SentierLaitMali-BAT.pdf – 2009 gent du lait (Case Study: To An Analysis of European Dairy have one's milk and drink it too) Company Involvement and // Agriculture familiale et pro- – Défis Sud – SOS Faim – Dec. Strategies towards West Afri- duction laitière : menaces et 2015-Jan. 2016 can Dairy Sector Development enjeux (Family farming and – Morten Emil Hansen and milk production: Threats and // African dairy markets to see Paul Goodison. – 'Milky Way to Challenges) – Oxfam Solidarity diverging prospects – agri- Development' project – 2015 Belgium – 2008 money.com – Jan. 2016 // Analysis of the impact of // Ces accords que Bruxelles // Les cartels du lait (Milk cartels) regional trade policy on the impose à l’Afrique (The agree- – Elsa Casalegno – Karl Laske – ‘local milk’ sector in West Africa ments that Brussels imposes Editions Don Quichotte – 2016 – GRET/ APESS – 2015 on Africa) – R. M. Jennar – Le Monde Diplomatique – Febru- // Les Accords de partenariat // L’Afrique au cœur des priorités ary 2005 économique (APE) de plus en de Danone pour 2015 – décem- plus contestés (The increas- bre 2014 (Africa, a key priority ingly contested Economic for Danone for 2015) – Decem- Partnership Agreements ber 2014 – agenceecofin.com (EPAs)) – Momagri – http:// – ecodufaso.com www.momagri.org/