Letter of Transmittal

19 March, 2020

Prof. Sheikh Morshed Jahan

Associate Professor
Institute of Business Administration
University of Dhaka

Dear Sir,

We, the students of Team A4 BBA 28th Batch, have prepared this mini report on “Micro
Small & Medium Enterprises: Dairy Sector of Bangladesh” that you had assigned to us as a
requirement for completion of our G102: Bangladesh Studies Course. We have studied the
history, background, value chain, and subsequent challenges that have followed through desk
research & field interviews with relevant stakeholders for the formation of this report.
Throughout this report, you will find an analysis of the Dairy MSME Sector, followed by
recommendations to improve the status quo.

This was a challenging task, but was also rather enlightening in the larger scheme. It has led
us to achieve a better understanding of the Dairy Industry in Bangladesh, its operation
module, and its many inadequacies. We are truly indebted to you for your moral support and
kind regard in this matter.

Please note that this report has been completed under your supervision and guidance. Under
no circumstances will this report be reproduced for any other BBA (IBA) course. No part of
this report will be shared or republished without your authorization.

Yours Sincerely,

Members of Team A4, BBA 28

Shams Ishraq (3)
Mehedi Hasan Mahir (5)
Abir Ershad (17)
Shirsha Rohan Roy (21)
Sams Uddin Biswas (25)
Ryan Ahmed (27)
Mashrif Hasan Adib (29)
Moazzem Hossain Khan (39)
Zinat Maliha (51)
Raisa Mahjabin (65)
Mohammad Zabir (67)
Adib Mahmud (69)
In Bangladesh, the dairy sector is largely dependent on small-scale operations and
subsistence farming. This sector has a huge potential for growth as the demand for milk and
dairy products is rising. To cope with this demand, farms need greater access to finance,
adoption of new technology and an efficient value chain. However, the dairy MSME sector is
being unable to exploit such opportunities and close the supply-demand gap. This report
discusses the current situation of the dairy MSME sector and the problems and obstacles
facing the industry. The main objectives of this report are to identify the challenges,
opportunities and to provide recommendations to allow the sector to expand and be more
profitable. Primary data has been collected by in-depth interviews with dairy farm owners,
dairy workers and concerned individuals. Moreover, articles and papers by scholars,
academicians and specialists on the sector have been consulted as secondary sources of data.
Major findings of the research are the knowledge gap in terms of strategic management,
supply-chain management and modern technologies. Financing is another significant
constraint.

Keywords: MSME (Micro, Small & Medium Enterprise), Value Chain Analysis, Triple
Triangle Framework (TTF), SWOT (Strengths, Weaknesses, Opportunities and Threats)
Analysis, In-depth Interview
Abstract ...................................................................................................................................... 3
1. Introduction ........................................................................................................................ 5
1.1 Background ................................................................................................................. 5
1.2 Objectives .................................................................................................................... 5
1.2.1 Broad Objective: ....................................................................................................... 5
1.2.2 Specific Objective: .................................................................................................... 5
1.3 Scope of The Study ..................................................................................................... 6
1.4 Limitations of the Study .............................................................................................. 6
1.5 Methodology ............................................................................................................... 7
1.5.1 Primary Data: ............................................................................................................ 7
1.5.2 Secondary Data: ........................................................................................................ 7
2. Literature Review............................................................................................................... 8
2.1 Definition; Small Medium Enterprises ........................................................................ 8
2.2 Brief idea on the Dairy sector: ......................................................................................... 9
2.3 The Triple Triangle Framework (TTF) .......................................................................... 10
2.4 Findings on Dairy Sectors based on Articles & Reports ............................................... 11
3. Project Report .................................................................................................................. 15
3.1 Dairy Value Chain ......................................................................................................... 15
3.2 SWOT Analysis ............................................................................................................. 16
3.3 Dairy Cluster Analysis: .................................................................................................. 18
3.3.1 Dhamrai Region ...................................................................................................... 18
3.3.2 Keraniganj Region .................................................................................................. 20
3.3.3 Miscellaneous MSME Corporations ....................................................................... 21
4. Conclusion ....................................................................................................................... 25
5. References ........................................................................................................................ 26
MSMEs like Dairy Industry provide a good opportunity for employment in the rural areas of
Bangladesh. A number of sectors in the Dairy Industry Value chain can work as the source
of employment for a large number of people. Small and marginal farmers across the country
may find alternative source of income through dairy industry. A great number of Dairy
industries are scattered throughout the country. The original clusters of dairy farms were in
and around Shahjadpur and Ullahpara Upazila of Sirajganj district, Bera Upazila of Pabna
district, Sreenagar and Munshiganj sadar Upazila of Munshiganj district, Phulbaria Upazila
of Mymensingh district, Kaliakoir and Kapasia Upazila of Gazipur district which were
considered as ‘dairy clusters’ of the country. But now, dairy farms of SMEs are spread all
over the country. Still, there are some zones where concentrations of farms are found to be
higher. Places where clusters of dairy farms are still found in Dhamrai, Keraniganj of Dhaka,
Khulna, Jessore, Kushtia, Bogra, Natore, Rajbari, Faridpur, Madaripur, Dinajpur, Rangpur,
Tangail, Kishoreganj, Narshingdhi, Brahmanbaria, Sylhet, Comilla, Chittagong. Milk
production of Bangladesh is 2.95 million metric ton (MMT) against the annual requirement
of 13.32 MMT (DLS, 2012) and the deficiency is about 78%. Bangladesh consumes the least
among the SAARC countries which is (55 ml/h/day). (Joshi, 2007) Huge production
deficiency per consumption requirement is prevalent for a very long time. A number of big
industries like BRAC, AARONG, Milk Vita have industrialized the dairy sector, but such
initiatives are not prevalent in the Dairy MSMEs in most of the dairy clusters of Bangladesh.

1.2.1 Broad Objective:

The broad objective of this study is to explore the opportunities and challenges of MSME
dairy industries alongside the different factors and dimensions of the triple triangle
framework (TTF).

1.2.2 Specific Objective:

To study the dairy MSME sector and identify the influence of different factors, according to
Triple Triangle Framework on the specific metrics of
• Firm Level Factors
o Capacity
o Culture
o Capacity
• Industry Level Factors
o Competitors
o Collaborators
o Customers
• Macro Level Factors
o Government & International Forces
o Technology
o State & Society
The scope of this research was limited to Dairy Industry, especially the raw milk production
sector of the Value chain. The Dairy Value Chain includes food suppliers, cattle breeders and
sellers, the dairy farms, processed dairy food makers, sellers and related companies, resellers,
customers, and other intermediaries in between.

The study aims to cover, as much as possible, of the components as the participants involved
in the Dairy Industry. It reflects as a picture of listing all the bodies, institutes, etc. working
either as contributors or competitors of Dairy industry in Bangladesh. This study on Dairy
industry will help to understand the prevailing value chain and potential for growth of the
dairy sub-sector.

Some limitations that have been faced are identified as follows:

• Questionable reliability:
MSME entrepreneurs in many cases could not provide reliable or sufficient data to
justify certain factors. There was also an insufficient and unreliable amount of data
from secondary sources.

• Time Constraints:
The time constraint also led to a lack of outreach for which a limited number of
primary sites could be surveyed. In addition, a single study would be insufficient in
analyzing the huge dairy MSME sector in the country.

• Funding:
This project paper was compiled for the completion of G102: Bangladesh Studies
course & was not funded by any organization or individual but rather through the
authors of this paper. Thus, leading to constraints in access to multiple areas.

• Miscellaneous:
Only the salient and outstanding features have been identified and analyzed using the
triple triangle framework (TTF) as it is not comprehensible for this study cannot cover
absolutely everything.
A comprehensive literature review was conducted covering historical growth, threats and
opportunities, competition dynamics, sustainable strategic advantage, and value chain
management of the local dairy industry focusing on local markets which provided the
participants a clear demonstration to establish a refined research methodology for effectively
undertaking the research.

1.5.1 Primary Data:

A few dairy farms, each of small, medium and large segments were visited by the participants
to analyze their operational methods and business model.

Majority of the primary data has been gathered from the following:

1. In-depth interviews of entrepreneurs and employees pertinent to the dairy industry.

2. Contacting key informants of the dairy clusters in Dhamrai and Keraniganj for further
evaluation of the management practices.
3. Interview of Local Upazila Nirbahi Officer and Livestock Officer to evaluate policy
applications.
4. Interview of vendors in the local markets to analyze the value chain.

1.5.2 Secondary Data:

Secondary data were obtained through desk research by the participants, focusing on relevant
scholarly articles and government reports on livestock farms and value chain management,
both online and offline.

The main sources of secondary data include:

1. Numerous internationally published research papers from relevant journals.

2. Statistical yearbooks.
3. Annual business reports of local enterprises.
4. Reports from the local governments encompassing dairy clusters.
5. Reports from international and national NGOs.
6. Government Policy Documents including SME Policy 2019 and National Industrial Policy.

A detailed questionnaire was developed based on the Triple Triangle Framework and their
implications in the local dairy industry’s operational activities and value chain model. The
questions encompassed details on the Firm Domain, Industry Domain and the Macro
Domain. The firm domain included emphasis on Capital, Culture and Capacity of local
livestock farms. Additionally, the questionnaire focused on the Industry Domain where local
entrepreneurs provided information on Customer behavior, Competitors in the market and
Collaborators in the value chain. Lastly, the Macro Domain provided information on larger
factors affecting the market, including Globalization, Technological advancement, State and
Society.
2.1 Definition; Small Medium Enterprises

To define SME only on the basis of amount of investment and number of employees is really
a tough job. There are so many factors related to categorize SME for different industries since
different industry have different character. Even than most of the organizations as well as
countries prefer to categorize on the basis of the above two factors. Some of the definitions
are given below:

2.1.1 European Union (2003); SMEs are defined as enterprises, which have at most 250
employees and an annual turnover not exceeding 50 million Euros. Further, there is the
distinction of small enterprises. They have fewer than 50 staff members and less than 10
million Euros turnover and micro-enterprises (less than 10 persons and 2 million Euros
turnover).

2.1.2 World Bank (2006); Medium enterprises are defined as enterprises, which have at
most 300 employees and an annual turnover not exceeding 15 million US dollars. Further,
there is the distinction of small enterprises — they have fewer than 50 staff members and up
to 3 million US dollars turnover and micro-enterprises have up to 10 persons and $100,000
turnover.

2.1.3 Industrial policy (2005); SME definition has been in terms of fixed assets and no. of
employees of three major sectors: service, manufacturing and trading but the present
definition which was recommended by Better Business Forum and accepted as a uniform one
by Ministry of Industry and Bangladesh Bank included Cottage and micro industry as SME in
Bangladesh. Bangladesh Bank has revised the SME definition through its ACSPD Circular
No.08, dated 26th May, 2008 and then through its SME SPD Circular No.01, dated 19th
June, 2011. Accordingly, the medium manufacturing concern are defined as the enterprises
which have total fixed assets of BDT 1000-3000 lac and no. of employee is 100-250 and
small manufacturing concerns which have total fixed assets 50-1000 lac and total number of
employees is in between 25 to 99.
Researchers desire to add few parameters to define SMEs over and above the amount of
investment and number of workers such as required method and technology, technical
complexity of production, degree of professional, skilled, semi-skilled, unskilled team players
requirement including knowledge and skills, target market segment, customer expectation
regarding product and services, waste management activities and socio-economical culture of
the nation.
Dairy farming is an important and potential agricultural sector in Bangladesh. Cattle, buffalo,
and goat are mainly considered as dairy animals in Bangladesh. In Bangladesh, there are
about 23.78 million cattle, 1.47 million buffaloes, 3.34 million goats, and 25.77 million sheep
(BBS 2017). Among the total of 6 million milking cows, 85–90% of them are indigenous and
10–15% are crossbred (DLS 2013). The crossbreds and purebreds are mostly Sindhi,
Sahiwal, and Holstein Friesian breeds. In Bangladesh, cows are the main source of milk.
About 90% of the produced milk in the country comes from cows, 8% from goat, and the
remaining 2% from buffalo (DLS 2013). Annual milk production was 3.97 million tons
during 2005–2016 with an average annual growth rate of 13.5% Smallholder producers
dominate the dairy sector in Bangladesh. More than 70% of the dairy farmers are
smallholders and produce around 70–80% of the country’s total milk. Domestic supplies are
still lagging to meet the FAO recommended per capita daily consumption of 250 ml.
Dairy cattle rearing has been increasingly viewed as a source of alleviating poverty in
Bangladesh. It is also turned as a means of improving the livelihood of landless and small
households and acts as a critical cash reserve and steady cash income for many landless and
marginal farmers.

In the year 2015–2016, livestock sector contributed 2.01% to the national GDP and
contribution on agricultural sector GDP was 17.45%, among which the GDP of milk and milk
product was BDT 26,533 million (BBS 2017). This sector meets the demand for animal
protein partially in the form of meat, milk, and milk products. The dairy sector offers good
opportunities for on-farm and off-farm employment, especially at the rural level. The
livestock sector generates 20% of full-time employment in Bangladesh (DLS 2013).
Generally, dairy farms in Bangladesh follow traditional production and farm management
especially in feed management, disease management, adoption of AI, etc. Farmers follow
traditional feeding systems, around 59% of the farmers feed their cattle in the traditional way,
even they feed concentrates only to the lactating animals rather provide all the cows
following recommended ration. About 54% of farmers fed their cattle with concentrate
considering the standard daily amount and following recommended mixing ratio. Dairy
farmers are not aware of using modern disease management as well as the use of improved
insemination for cows. Only 25.6% farmers adopted artificial insemination method for
breeding their cow in some pocket area. Poor adoption of vaccination and de-worming
measures are in practice, only 50% of farmers have taken these preventive measures, and
30% farmers treated their cows by veterinary doctors. Though dairying has been turned into a
profitable business in recent years, farmers are not aware of the key factors affecting the dairy
productivity and farm profitability. But the milk productivity and profitability depend on
different factors like feed management, cattle disease management, vaccination, de-worming
of cattle, dairy farm size, breed of a cow, and others factors. The research literature is scanty
in Bangladesh on this ground especially on assessing the effect of farm size on profitability in
smallholder dairy farms. (Apurba Kumar Datta, January 2019)
The TTF has been developed by Professor Sheikh Morshed Jahan which has been published
in many national and international research journal as an analytical tool for SMEs
performance which is a well-accepted tool to help market development strategist in carrying
out SMEs performance analysis, intervention and any other assessment in a systematic and
comprehensive fashion.
According to him, there are two sets; the first set of Cs is internal and the second set of Cs is
external. The first set of the 3Cs is the extended version of resource-based school of thoughts
(added is cultural orientation), while the second set of 3Cs is the compressed version of
Porter’s Five Forces Model. Putting together the both 6Cs micro-framework he also added
another three macro forces to complete the triple-triangle framework as an ideal tool for the
analysis of enterprise competitiveness and challenges.

Figure: The Triple Triangle Framework (TTF)

TTF uses three triangles, each summarizing the factors that affect business competitiveness at
different levels. The inner triangle – with each of the three sides symbolizing either capacity,
or capital or culture –explains the internal, largely controllable dynamics of 3Cs. The middle
triangle with each of its three sides symbolizing either a customer, or a competitor or a
collaborator – describes the immediate, industry-level context in which 3Cs work. The outer
triangle – with each of the three sides symbolizing either technology, or state or society and
global forces – presents the macro environment, a largely non-controllable setting in which
3Cs have to operate.
Many researchers have work on the analysis of SMEs activities using different management
tools like SWOT, PESTEL, and Porter’s Five Forces Model which are widely used.
However, The TTF is a comprehensive and new tool for SMEs performance analysis which
has been also used by United Nation ESCAP (Economic and Social Commission for Asia and
Pacific, April 1, 2011) on Enabling Environment for the Successful Integration of Small and
Medium Sized Enterprises in Global Value Chains, Studies in Trade and Investment No. 70.
(Jahan, 2017)
So, we are interested to analyze our survey findings on the dairy sector on the basis of TTF
domains & dimensions partially.
 :

Article Author/ Objective Article Author’s Paper Author’s Findings

Name Source Findings
Dairy Sohel Parvez How • Formulating • Providing easy & low-
Industry in (The Daily Bangladesh new Dairy cost credit facility for
Bangladesh Star) can be made Development farmers
: Prospects self- Board & • Increasing facilities
& sufficient in policies. for animal husbandry
Roadblocks dairy sector • Lessening the & treatment
tax to import • Imposing higher tariff
new on powdered milk
technologies &
equipment
associated to
dairy
• Improving
cattle breed
capable of
producing 20
litre milk daily

How far is Mohammad Will Key constraints for • decreasing the cost of
Bangladesh Mohi Uddin enhancing increasing milk milk production
from (The Daily tariff be a production: (which is 37% higher
achieving Star) sustainable • Lack of land than global rate)
self- technique to availability
sufficiency develop dairy • Limited feed &
in Dairy sector or not fodder
Industry • Lower milk
production
efficiency
Marginal The Daily Star How easy • Shortage of • The farmers urged the
dairy Business bank loans & chilling centres government to
farmers Report establishmen are causing increase tariff on
demand t of chilling deterioration in import of powdered
easy bank plants can the quality of milk in bulk quantity
loans help farmers milk produced so that local producers
to boost milk in remote areas do not face uneven
production & competition
preservation.
Demand Sohel Parvez If demand • Creating • Expanding the dairy
for dairy (The Daily for dairy stronger wealth sector can result into
products to Star) products can and middle- employment & attract
grow grow double- class economy foreign investment at a
double digit, buoyed results in large scale
digits by rising increased dairy
income and consumption
expanding
middle class
Fodder Star Online How flood & • Cattle farming • Many cattle farmers
crisis hits Report other & dairy is the (during floods) in the
cattle disasters can main source of villages resort to
rearing & affect dairy income for char selling their cattle at
milk- production farmers but this low prices as they fail
production is being to manage fodder for
in flood- severely their cattle.
affected affected due to
districts lack of disaster
combating
resources
Call for Star Business Whether duty • If the duty on • The uneven duty will
Raised Report increment the imported hit the sector hard and
Duty on will have any powdered milk will have far-reaching
Imported far-stretched is not increased, impact on tons of
Powdered impact on the dairy people, who are
Milk dairy sector industry will involved with the
soon be ruined sector
Steps Star Business If • High production • To realise the potential
Required Report emphasising cost of per litre of dairy in
to Achieve the role of milk is the main Bangladesh, steps like:
Potential of institutionalis obstacle in the decreasing production
Dairy ed markets dairy industry, cost, subsidy to
Industry for dairy while quality is farmers and raising
product another issue. awareness among
results in people are needed.
farmers
delivering
quality milk
and dairy
products
when such
markets
flourish
WB Star Business How to • Climate change • Dairy development
Approves Report combat the impacts on also has the potential
$500 Loan upcoming livestock to create more and
for Dairy & crisis of milk production & better jobs for women,
Livestock & dairy hampers the youth, and the
items due to development of vulnerable in rural
increased dairy areas.
demand production
• Mitigating risks
by creating an
enabling
environment for
livestock
insurance will
reduce the
vulnerability of
smallholder
farmers as well
as enhance
productivity
A Study on Md. Abid Ul To identify • Government • Both formal and
Milk Value Kabir, Md. existing milk and private informal value chains
Chains for Sirajul Islam value chains sector initiatives coexist where milk
Poor and Md. Hasib and the milk can play a role collectors and chilling
People in Reza consumption in increasing centres have a lead
Bangladesh behaviour of milk production role.
poor people and • Behavioural change
prioritizing consumption communication is also
women and through greater vital to build
children as investment awareness of milk
they are the • At the consumption.
most household level,
vulnerable in milk purchase
both rural decisions are
and urban usually taken by
areas men in rural
areas, whereas
in urban areas
women take
part equally in
the process
 Dairy A.K. To address • The demand for • It would be necessary
Industry in Shamsuddoha; the industry’s milk is growing to take policy
Bangladesh Geoff W. problems at a faster rate measures for
Problems Edwards effectively, than supply providing strong
and sources of because of the institutional support to
Prospects market rapid increase increase domestic
failures and in population, production and reduce
of creating a the imbalance between
government widening supply and demand
policies in imbalance
contributing between
to its poor demand and
performance supply
are discussed
in this paper.
Dairy The Daily Star Examining • Milk • Household dairy
Intake the impact of consumption availability might also
Reduces dairy fuels linear have negative effects
Stunting consumption growth in the on breastfeeding in the
Among and crucial first first year of life of a
Children in production 1,000 days of child
Bangladesh on child an infant's life,
nutritional which is lacked
outcomes by children of
while Bangladesh due
comparing to unavailability
the influence of milk
on
breastfeeding
Adoption MA Quddus To determine • High level of • Farmers need more
of dairy the causes of technology knowledge on
farming adoption and adoption has a improved technologies
technology non-adoption direct impact on through training,
by small of high milk yield and availability of reliable
farm yielding household’s technical assistance,
holders’ breed, the income low price of
practices level of generation as concentrate feeds,
and practices and well as dairy increased and timely
constraints constraints in development provision of medicine,
adopting the increasing AI facilities
improved & providing pure
technology breed.
Source: The Daily Star
 Value chain involved the process or activities by
which a company adds value to its products. This
primarily includes the inbound logistics,
operations, outbound logistics, marketing and
sales, and services.

The inbound logistics is concerned with the

movement of the milk from the farmers to the
dairy companies that add value to the milk, such as
BeShuddho or Fortuna, both of which fall under
SMEs.

The Operations part involves this value addition,

which may include chilling the milk, or processing it in ultra-high temperature (UHT), and
then bottling or packing it for supply. While large companies like PRAN or Aarong usually
provide the milk in tetra packs or plastic packets, SMEs like Fortuna and BeShuddho use
plastic bottles and glass bottles respectively which helps to keep the markets separate.

The outbound logistics part encompasses all the activities related to getting the products to
the final customers, which may involve individuals, households or local shops. For large
companies like PRAN, Aarong and Milk Vita, this stage may involve a number of marketing
intermediaries like wholesalers and retailers before reaching the final customers. This causes
the profits to be appropriated by these middle-men while the farmers get very low prices for
their supplies. (Heifer International Bangladesh) For SMEs, however, the number of middle-
men is lower. For instance, BeShuddho marketing intermediaries after the operations stage
involve delivery men that deliver the bottled milk to the final customers. This indicates a
shorter value chain for SMEs in the dairy industry.

The Marketing and Sales efforts of SMEs in the dairy industry are not very significant.
Usually social media is used for advertisements and promotions, alongside word of mouth.
Because SMEs in the dairy sector often lack sufficient returns, as supported by our survey,
they cannot fund large scale promotions, which often limits their growth and market size.
Finally, the service stage involves any and all activities undertaken by the business after the
product is sold. This may include but is not limited to responding to customer queries and
taking any corrective measure necessary. For instance, after delivering the milk, BeShuddho
sends it delivery people the next day to collect the glass bottles back from the customers so
that it can be reused and recycled afterwards.

To conclude, because the dairy industry is not a substantially large industry in Bangladesh as
of now, the value chain does not include too many elements. Moreover, because there is less
scope of value addition to milk, this value chain is limited.
SWOT analysis is the analysis of a company’s internal Strengths and Weaknesses and the
Opportunities and Threats posed by its external environment. They are elaborated below:

Strengths: The vast livestock population of Bangladesh can be considered a strength for the
dairy industry, and should be utilized properly to ensure maximum returns. Bangladesh has a
livestock population of 160 million. (Bangladesh Journal of Animal Science) Unlike many
other natural resources which will be depleted over time, a sustainable livestock production
system can be beneficial for the dairy industry.

Weaknesses: Bangladeshi cows are low in yield providing 2-5 liters of milk per day, as per
Md. Muniruzzaman, the executive director of PRAN Dairy Ltd. To tackle this, a new breed
of cow may be developed through artificial insemination to increase the yield to 14-15 litres
of milk per day. (The Daily Star, 2018) Large scale production will reduce the average costs
of farmers and thus increase their returns, making the dairy sector more efficient as well as
profitable.

Another weakness is the lack of knowledge of dairy farmers regarding scientific dairy
farming, clean milk production and the value chain. To further increase efficiency, it is
important to raise awareness in this regard, which may require campaigns targeted at dairy
farmers.
Opportunities: The major opportunity facing the dairy industry is provided by the shortage
of milk within the domestic economy. As of 2018, Bangladesh has to import more than
100,000 tons of powdered milk and dairy products, spending Tk. 2000 crore a year as per
Bangladesh Bureau of Statistics and Bangladesh Bank. (The Daily Star, 2018).

If SMEs in the dairy industry can produce enough and efficiently to fill this gap, it could
result in sufficient returns for them, which could also ensure the growth of the business as
well as the industry as a whole.

Threats: Most of the SMEs in Bangladesh use manual methods of extracting milk, as per the
survey conducted. Cost-effective technologies and mechanization is seldom used by dairy
farmers, which indicates a lack of efficiency and a lack of competitiveness over the large
dairy companies in Bangladesh or the foreign companies from which we import milk to fill
the deficit in domestic milk production. Failure to adapt to technological advancement will
cause SMEs in the dairy sector to lag behind over time.

Quality Assurance is another threat to the SMEs in dairy industry. It is important to make
sure that the milk is BSTI certified to ensure that it is up to the standards for consumption.
However, because dairy producing SMEs are not highly profitable, it is difficult for them to
continue paying regular license fees for obtaining and maintaining the certification.
Therefore, lack of quality assurance may cause SMEs to be closed down, which is a major
threat right now for Fortuna, as per Fortuna’s chairman.
3.3.1 Dhamrai Region
The Dhamrai Dairy Cluster is one of the most prominent regions hosting Dairy Enterprises in
Bangladesh. We embarked to this region & composed the following:

3.3.1.1 Micro Enterprises

Micro dairy farms are the most common in the Keraniganj area due to lower land and
employee requirements. These have a capital of less than Tk 1 cr. housing 5-30 cows, goats
or sheep depending on breed and capacity. Most of them run on loans. Their production
stands vary greatly due to variety of cow breed and capacity, but all seem to have sufficient
demand to be sold out regularly. Their customers are local people and sweetmeat shops.

Harun Dairy Farm:

Harun Dairy Farm has been operating for 20-25 years.
Mr. Harun was the owner of this farm and was proud of how it was his own family managed
self-entrepreneur farm. This farm also talked about how they received sporadic subsidies
from the government, however Mr. Harun emphasized how he was the person who organized
the brunt of the finances himself. HDF also had one employee to look after the cattle in
durations when Mr. Harun was busy, in addition to his son and wife who work with him as
well. Similar to Helena farms, HDF also told us about how they had no issues with
competition and how all the milk that they produced was sold on a daily basis and procured
them an income of about 1.5 daily. HDF also sold their milk mainly to villages and also other
sweet vendors. HDF had 4 Cows and 4 calves however had capacity of more.

Mr. Harun said he could not expand further due to a lack of finance. HDF also complained to
us about how they also had American NGOs visiting them before and promising them that
they would fund them, however never ended up hearing from them in the future. A technical
insight that we gained about the industry from Mr. Harun is how it is always better to use
human hands to milk cows over machines, as the machines damage the cows.

Helena Dairy Farm:

Helena Dairy Farm is a family farm controlled mainly by the males of the household.
Helena farms has been operating in the business using this patriarchal culture for 30 years
across 4 generations now. Their capital is sourced mainly through their own family, however
when we asked Mr. Joshim, he told us that they did once receive a financial subsidy from the
government in order to help them produce on a larger scale. Helena farms has a total of 10
cows and 10 calves, producing 57 liters of milk for them in the morning and 25 liters at night.

They sell this milk for a price of 50-80 taka per liter, with the price depending on their
customers, i.e. the village people and sweet vendors who require milk as a raw material for
their production. Mr. Joshim told us more about how milk produced by farms are considered
homogenous, not allowing for price differentials in between competitors, at least most of the
time. Besides, there is barely any competition in between these separate SME dairy farms as
there is a large amount of demand, resulting in all of these farms being able to sell all of their
output. Helena farms also utilizes technological advantages that allow them to convert wastes
like urea into bio gas to fuel their homes. They have also learnt of new important techniques
such as artificial insemination of cows in order to produce hybrid breeds that are more
beneficial to them.

Selim Dairy Farm:

Mr. Selim told us about how he also financed his entire farm himself and has never received
any help from the government. When he asked whether he took loans to help with financing,
he told us about how he never believed in loans because they charge too high interest rates
and also complained about how government financing was inaccessible to him as only those
with political affiliations ever get help.

Mr. Selim worked on his farm with his wife and son, who is also a student. Like Helena
farms, SDF also told us that they have no trouble with competition and all of their output is
always sold. SDF could produce 20 liters off season with up to 60 on season, from their 4
cows. JICA and Chinese NGOs were said to have visited this farm, however they still never
received any help, a common complaint from farm owners in Dhamrai. Most of SDFs output
was sold to the Dhamrai bazaar.

3.3.1.2 Small Enterprises:

Farms having a capital of Tk 1-5 cr. can be categorized as small dairy farms. These often start
off with loans, or periodically take loans when planning for growth. These generally rear 50-
100 cows, with less than 20 employees.

FDF Dairy Ltd:

FDF Dairy Ltd was established 3 years ago by a group of bankers based in Dhaka, primarily
for personal consumption, but good management practices have enabled them to
commercially market their product. Being bankers, they received huge initial loans and that
worked as a driving factor behind their success. As of now, they have 5 milking cows, 3 bulls
and 14 calves. They produce about 70 litters of milk per day and the rate stands at 80Tk/Liter.

FDF Dairy Ltd sells packaged products and has their own salesmen. Their products are all
sold in Dhaka and transported through a company vehicle. The company uses the e-
commerce platform to reach the consumers, the primary consumers being households. They
also have a good corporate network, which provides them chances of collaboration and an
opportunity to easily implement their business model. Organic products tend to have good
demand in urban markets and the company regularly has their products sold out.

FDF Dairy Ltd. follows good management practices and ensures hygiene. The company uses
grass cutter machines and processors to prepare the feed that usually contains wheat, lentils,
grass etc. They have individual feeding cubicles for all the animals, which obstructs
spreading of contagious diseases. The company has also used the insemination method to rear
hybrid cows.
3.3.1.3 Medium Enterprises
There is usually a capital of more than Tk 5 cr. Often owned by larger corporations or not
planning to grow, these farms generally run without loans. A major portion of this goes into
buying and rearing mainly cows (100 or more), very few sheep and goats, land, food
supplies, and other equipment.

Dhamrai Dairy Ltd:

Established in 1991, Dhamrai Dairy Ltd has grown to be the largest functioning enterprise in
the local dairy industry. It started off with a total of around 15 livestock and now possesses
51 milking cows, 39 bulls and 51 calves. The enterprise vows to preserve the quality of their
product through the use of proper storage methods and packaging. According to Md Rakib
Hossain, the General Manager of the enterprise, they produce about 370 litres of milk per
day. Along with providing a quality product to the locals, the company sells 115 litres of milk
to ACME Laboratories Ltd. everyday. Although other local SMEs engage in biogas
production, Dhamrai Dairy Ltd have not ventured into that field as it entails low profit.

The company was initiated by the Assistant Deputy Managing Director of ACME
Laboratories. Thus, they follow a very structured management method, with both office
employees and field workers. The company has a fixed rate of 70 taka per litre, w hich is the
same for local markets and their corporate collaborators. Even though the rate happens to be a
little more than the Dhamrai Bazar rate, the high quality of their product ensures local
demand.

They have routinely received support from government veterinary services, Upazila
Livestock Officers and NGOs for better treatment of livestock and to ensure better treatment.
They have also collaborated with a number of international organizations over the years.

3.3.2 Keraniganj Region

A review of the commercial dairy sector revealed that there were about 79847 dairy farms
operated by SMEs in FY 2009-2010, a great majority of which were small farms. A small
portion of the farms can be seen in the dairy cluster in Keraniganj. Commercial dairy farms
of varying sizes and capacity can be further clustered into medium, small and micro
categories.

3.3.2.1 Medium Enterprises:

There is usually a capital of more than Tk 5 cr. Often owned by larger corporations or not
planning to grow, these farms generally run without loans. A major portion of this goes into
buying and rearing mainly cows (100 or more), very few sheep and goats, land, food
supplies, and other equipment. Necessary steps to maintain hygienic food and living
environments are taken. Employee number for a farm (Sharif Agro-Vet) housing 200 cows
can range from 20 to 30, all of whom are recruited preferably already trained. A farm of this
size generally has contracted food suppliers and buyers (sweetmeat shops, other industries,
resellers etc.), although they sell in retail as well. The delivery is carried out by other
intermediaries when sold in bulk. The total production for the aforementioned farm per day
reaches up to 360 liters/day, selling at a common rate of Tk 80.

3.3.2.2 Small Enterprises:

Farms having a capital of Tk 1-5 cr. can be categorized as small dairy farms. These often start
off with loans, or periodically take loans when planning for growth. These generally rear 50-
100 cows, with less than 20 employees.

The food supplies are collected from wholesale markets mainly in Zinzira. Some grow their
own grass. Their (Ratan Ghosh Dairy Farm) production stands at 240 liters/day from 65
cows. Farms of this size supply locally, and outside Keraniganj to direct consumers, bakeries
or sweetmeat shops and other industries and resellers at Tk 80 per liter, or less depending on
quality.

3.3.2.3 Micro Enterprises:

Micro dairy farms are the most common in the Keraniganj area due to lower land and
employee requirements. These have a capital of less than Tk 1 cr. housing 5-30 cows, goats
or sheep depending on breed and capacity. Most of them run on loans. Their production
stands vary greatly due to variety of cow breed and capacity, but all seem to have sufficient
demand to be sold out regularly. Their customers are local people and sweetmeat shops.

Due to the national shortage of milk, farms of all sizes have sufficient demand and
opportunity to grow. However, there exists a lack of incentive for employees to train and
work in dairy farms due to the highly labor and time-intensive nature of the work, and a fear
of entrepreneurs to expand due to the continuously rising supply costs. Owners are open to
cooperation from the government in terms of more affordable financing and trained labor
provision.

3.3.3 Miscellaneous MSME Corporations

The following corporations could not be categorized into any criteria as the in-depth
interviews were conducted with upper management in mega-corporations. The following
Dairy Enterprise are merely subsidiary projects of these companies:

BeShuddho
As per the founders of BeShuddho, after the extraction of milk by the farmers, the value
chain is formed by bottling the milk in glass bottles purchased from a factory located in Puran
Dhaka, and then supplying them to customers in a particular region by the company’s own
delivery team. Subsequently, the glass bottles are recollected the next day and reused in an
attempt to uphold sustainability. The marketing efforts also fall within the value chain, which
involves social media marketing such as through Facebook as well as Word of Mouth. The
social media marketing process is handled by the founders themselves because they lack
sufficient returns to implement functional departmentalization as of now.
Triple Triangle Framework Analysis
• Firm Domain
o Capital
BeShuddho started with a capital of 16 lacs through crowdfunding, and have
used up 50% of it so far. The company plans to reserve 20% of its initial
capital for later expansion.
o Capabilities
BeShuddho currently caters to the customers nearby, but they plan to expand
their business to Baily road which would require further training of staff and
setting up another outlet near that area to ensure that the product is not
hampered during the delivery process. The company also plans to add organic
egg and ghee to their product portfolio.
o Culture
BeShuddho was founded by a group of acquaintances and hence, the
organizational culture is rather flexible, without the presence of a hierarchy.

• Industry Domain
o Competitor
The current close competitors of BeShuddho involve GhaashFood and Avro
Dairy, who both provide organic milk. However, the edge that BeShuddho has
over the aforementioned businesses been the fact that BeShuddho provides
milk in glass bottles which ensures good quality of the milk as well as
sustainability.
o Customers
The customers of BeShuddho currently involve the middle-income or upper-
middle income groups, and the relatively older generations who prefer raw
milk that is rich in fat, which also adds to the taste of desserts made from the
milk.
o Collaborators
The collaborators currently involve the farmers and the glass bottle suppliers
that add to the operations of the business.

• Macro-Domain
o Country Context
Because BeShuddho is not operating at a large scale right now, it is not subject
to much rules and regulations set by the government. However, by ensuring
sustainability as exhibited by their use of glass bottles, BeShuddho is actively
contributing to the positive impact on the country’s environment.
o Creativity and Technology
BeShuddho does not employ the use of advanced machineries to extract milk
from cows, and therefore, rely on the manual procedure.
o Cross-Border Trade
BeShuddho does not currently provide to or plan to provide to the
international market, and does not face competition from imported, packaged
milk. This is because BeShuddho targets a market that prefers freshly bottled
milk which is not provided by foreign firms.
SWOT Analysis

Strength:
These are the internal factors or resources that provides a business with a certain competitive
edge. For BeShuddho, their strength or unique selling proposition is the provision of evening
milk and glass bottled milk which is not provided by other businesses operating in the same
industry and same stage of production.

Weaknesses:
BeShuddho weaknesses involve its lack of trained delivery people, which is required to
expand the business to other regions. This also means a limited market to sell their products
to, and thus a lack of profit.

Opportunities:
There is a shortage of domestically produced milk because of which Bangladesh government
has to import more than 100,000 tons of powdered milk and dairy products spending Tk
2,000 crore a year as per Bangladesh Bureau of Statistics and Bangladesh Bank. This
indicates an opportunity for BeShuddho for they can fill this gap by producing to the market
and thus, get sufficient returns.
Threats: The threats facing BeShuddho currently may involve the advancement and
implementation of technology which is employed by a lot of dairy companies, improving
their efficiency as well as capacity. Failure to match this factor may take a toll on BeShuddho
competitiveness in the long-run.

Fortuna
As per Fortuna’s chairman, after the farmers supply milk, it is bottled in plastic bottles
purchased from a nearby factory and then providing it to customers that visit Fortuna’s own
restaurant named Fortuna Fried Chicken, as well as to local shops nearby. However, contrary
to BeShuddho, Fortuna does not undertake marketing activities to promote their milk
particularly, so the marketing process is not involved in the value chain.

Triple Triangle Framework

• Firm Domain
o Capital
Fortuna group made an initial investment of 50 lac taka to start its dairy firm.
o Capabilities
Fortuna has around 20 cows which produce around 6-8-liter milk per day. So,
Fortuna can produce around 140 bottles on milk per day on an average.
o Culture
The dairy firm is small is managed by only 5 management employees and two
delivery man. The culture here is very friendly and open. The management
employees of the farm can easily approach the top management of Fortuna too
• Industry Domain
o Competitors Since Fortuna only caters to its personalized customer base and
specific FFC outlets. They do not usually face competition since they are not
producing on a high scale. The milk they produce everyday gets distributed every
day.
o Customers The customers of this farm are acquaintances of Fortuna group
employees and consumers of FFC restaurant.
o Collaborators Fortuna does not collaborate with any other company to produce
its milk. The process is all covered within their company.

• Macro Domain
o Country Context Fortuna was fined for not dating its products properly after a
government inspection recently. After that Fortuna is abiding by all the
regulations put in place by the government.
o Creativity & Technology Fortuna uses ancient manual techniques of dairy
farming to produce milk. They do not use any modern technology.
o Cross-Border Trade: Fortuna does not produce its products for international
markets and Fortuna does not plan on expanding its operations as well.

SWOT Analysis

Strengths:
The value chain is controlled by the company
itself which helps them to control everything and
produce maximum output for the input. They
have their own farm as a result they can easily
ensure quality.

Weaknesses:
Fortuna does not have a scope to expand its
business due to lack of resources allocated
towards this farm. There are not enough
employees as a result it hampers productivity.
The cows produce only 6-8 liters of milk which
is very less than that of cows from Aarong dairy
farm & Akij dairy farm where cows usually
produce 20-22 liters of milk every day. There is
no usage of modern technology because this farm
is manual technique based.

Opportunities:
Due to the lack of resources and the no clear
intention of expansion, this farm has no new
scope in the market.

Threats:
Fortuna might lose their customized customer
base if other big dairy farms target those areas.
FFC is shutting down many of its outlets as a
result Fortuna might fail to sell their milk there in
the future as well.
This research has used the TTF model to identify the challenges and opportunities that the
dairy MSME sector is currently facing. Major findings of the research are the knowledge gap
in terms of strategic management, supply-chain management, modern technologies and
financing.

While the milk production in Bangladesh is increasing, it’s barely enough to keep up with the
rising demands and consumption of the growing Bangladeshi middle class. The dairy
industry of Bangladesh has a huge potential to contribute to not only the local market but also
the global market with the aid of cooperative policy-making and appropriate government
intervention.

This research will help the current investors, entrepreneurs, industry professionals and
researchers find out about the lapse and discrepancies in Bangladesh's MSME dairy farms. It
will also help to define the differences in value added to Bangladesh's total dairy industry.
The insights and experiences captured in this research work are expected to help dairy
industry grow not only in Bangladesh but also in other emerging economies with similar
background and growth trajectories
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