The Economics and Marketing of Dairy Products in Modern Sector in Khartoum State: A Case Study of Khartoum Dairy Products Company

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Nadia Mohamed Ali, EL Aggab
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The study was conducted on modern dairy sector in Khartoum State, a case study of Khartoum Dairy Products Company (KDPC). The overall objective was to study the economics and marketing of milk and milk products. The study was intended specially to identify and analyze the main cost items and compare profitability of different dairy products. The study also focused on marketing efficiency in different channels of distribution. The analysis was based on secondary as well as primary data. Descriptive statistics and product budget were used as analytical techniques. Study results showed the following: Costs of raw materials represented the biggest share, (67.58% and 75.73%) of total costs of recombined milk and yoghurt, respectively. Feed costs represented the highest share ranged between (62-68%) of total costs of fresh milk production. Fresh milk was most profitable in terms of (N/K) (0.6) product followed by recombined milk (0.23) and yoghurt (0.20), while comparison of stability of profitability in term of net benefit per unit investment indicated that yoghurt was more stable (39.5%) followed by fresh milk (48.4%) and recombined milk (106.07%). The main channel of distribution was refrigerated trucks. Most of the retailers sold their products directly to consumers. About 75% of the customers dealt regularly with KDPC because of the consumer preference of KDPC. The result showed that there was a gap between the actual supply and demand for KDPC products. It was clear that customers prefer direct cash payment rather than advance payment during the purchase of products from the company. A significant relationship was found to exist between the quantity of dairy products supplied in different working days per week and location of retailer shops. Wholesale distribution at factory gate had the highest marketing cost (LS 5.15, 16.7 and 15.03/ liter) of recombined milk, yoghurt and fresh milk, respectively. These costs resulted from tax, storage, handling and losses during transportation. This is due to absence of well developed organized marketing system to reduce marketing intermediaries. The factory had the highest marketing costs (LS 1.86/liter) as compared to retailer (LS 0.35/liter) when distribution was at retailer shops gate. The most important costs were taxes, storage and handling. The net margin of retailer was high (LS 19.15/liter) compared to the net margin of factory (LS 13.95/liter). Yoghurt distribution at retailers shop had the highest marketing costs (LS 6.05/liter) compared to factory (LS 3.7/liter). Wholesaler fresh milk which was only distributed at farm gate had the highest marketing cost and net margins. At factory gate, factory's share of consumer price was 77.5%, 74% and 68.75% of recombined milk, yoghurt and fresh milk, respectively, while marketing costs and margins comprised 22.5%, 26% and 31.25% of the consumer price. At retail level, the factory’s share of the consumer price for recombined milk and yoghurt was 82.67% and 77.8%, respectively, while marketing cost and margin comprised 17.23% and 22.23% of the consumer’s price. The study recommended a continuous improved supply of raw materials and other important production inputs to operate the factory at maximum capacity. It also recommended the establishment of a milk marketing board to ensure good quality and hygiene of milk and milk products. The future impact of foreign technical aid to develop the dairy industry should be investigated.
Khartoum, Dairy, Products Company