Starting a business in the dairy industry can seem daunting, but it offers immense opportunities for entrepreneurs willing to dive in. Dairy products like milk, yoghurt, and cheese are daily essentials for millions of people, and the demand for these nutrient-packed foods continues to rise across various markets.
However, building a successful dairy product business requires more than just understanding the products. In this article, we’ll explore essential tips and strategies to help you carve a profitable niche in the dairy industry, while setting your business up for long-term success.
Key Insights
- The dairy product business is lucrative due to the high demand for essential nutrients in dairy products.
- Understanding your niche and conducting thorough market research are critical first steps.
- Proper branding and a strong online presence are vital for business success and scalability.
- Expanding from a local to a national market requires increased production capacity, upgraded branding, and compliance with regulations.
Unique Dairy Product Brand
- Fan Milk Nigeria: Since 1963, Fan Milk Nigeria has been serving nutritious frozen and non-frozen dairy products to Nigerians and West Africans from flavoured milk, ice cream and yoghurt.
- CHI Limited: Chi Limited is the company behind the popular Hollandia yoghurt and Hollandia evaporated milk. With its different flavours, Hollandia yoghurt is everybody’s go-to for a quick snack at home, at a picnic or a casual outing.
- Promasidor: Promasidor is one of Nigeria’s leading producers of milk. Promasidor is the genius behind the household milk brands Cowbell Milk, Cowbell Chocolate, Loya Milk, Milksi and Mixwell.
- Arla Foods: Arla Foods is the fifth biggest dairy company in the world and the UK’s largest dairy product producer. Their products cut across all spheres: from early life nutrition, medicine and sports and they are also affordable.
- Amul: Amul is a popular dairy brand in India, known for a wide range of products including butter, milk, bread spreads, cheese, and chocolates.
Step-by-Step Procedure for Starting a Dairy Product Business
A dairy product business requires various procedures to bring into actualisation. Below are simple steps to guide you in starting your dairy product business.
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Define Your Business Niche
What type of dairy product will you be selling? Will you be selling a specific product or will you go for all the well-known types like milk, cheese, yoghurt and butter? Also, will you source materials from the dark or produce the products yourself?
These questions will help you pick out a niche. You do not want to start your business without having a focus point.
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Market Research
After successfully carving out a business niche, the next step is to go on market research. Market research involves identifying your target audience, finding out the demand rate of dairy products in your location and identifying who your competitors are.
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Business Plan
This involves creating a framework for your business. It includes your long-term or short-term goals, objectives, strategies that will be implemented as the business kicks off, how you will measure growth, and marketing plan for the first 3 months, six months or a year.
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Funding
The next stage is calculating the cost of running your business and sources of fund generation. You could get funds through bank loans, friends, family members, investors and your savings. Having enough funds is important at the start of your business because it will help you settle the start-up costs such as buying farmland, getting equipment and livestock.
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Licenses and Permits
Get your business registered and obtain the necessary permits to run a food production business. This is to ensure that you follow food safety regulations to avoid issues in the future.
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Set Up a Production Facility
If you intend to produce the milk yourself, you will need to set up a dairy farm and a facility that contains production equipment such as pasteurisers and automatic milkers. If you won’t be producing yourself, source for reliable farmers who produce high-quality milk.
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Pricing
To fix a price for your dairy products, analyse and calculate the cost of acquiring materials, and the entire cost of production including transportation, look at your competitors and set a competitive price while making sure your products can be afforded by your target audience.
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Branding
This is where you create an identity for your business. This includes giving your business a name, creating a logo, creating eco-friendly and visually appealing packaging, coining an unforgettable tagline, and picking out your brand colour and the shape and sizes your dairy product will come in.
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Online Presence
This entails building an online presence on social media. You can do this through creating educational and helpful content like recipes and sharing health tips.
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Distribution Channel
This brings up the question; How will your product get to the final consumers whether you will be selling offline or online? Will you make use of middlemen or will your products go directly to the final consumer?
Scaling your Diary Product Business: From Local to National Markets
This means expanding your business, its operation base, and its customer base. It involves making more people aware of your products to increase brand awareness and make more sales. Below are tips to help you scale your business from local to national markets;
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Identify National Market
This involves identifying the market you want to expand to. Which region is in high demand of dairy products, the proximity of the production facility to the national market and competitors in the market.
2. Increase Production Capacity
After identifying the market you want to expand to, the next step is to increase your production capacity. Your reach is now wide hence your production rate has to increase to accommodate both the local and national market. This entails building a larger production facility, more equipment and more hands on deck to ensure smooth operation.
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Upgrade Your Branding
In the beginning, you have set up a brand identity for yourself, now you need to upgrade your branding. This means tweaking your style to appeal to a large audience. You could add storytelling when you create content, content like the reason you started your business and how you source materials.
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Ensure Compliance With National Regulations
Since you are moving beyond the local market you are familiar with, you should familiarise yourself with the regulations of the new market. This includes food safety and health regulations, labelling standards and environmental regulations.
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Create a Distribution Channel
Since you aim to reach a wider audience, you will need a long distribution route that is more than your local middlemen. An easier route is to create an e-commerce shop to sell to consumers across the county. Ensure the e-commerce shop is easy to navigate and your customer service is top-notch in case of questions and enquiries from customers.
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Financing
A business expansion requires a lot of financial capabilities. Finance will be needed to build a bigger production facility, establish a brand presence online, hire more hands, purchase more livestock or purchase more milk from local farmers. Business owners can collect loans from banks, apply for government grants and also get investors.
Challenges and Opportunities in the Dairy Product Business
Challenges
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Market Volatility
The dairy product business is subject to price fluctuations, this can be attributed to different factors such as a sudden increase in production cost which can drive up the prices of dairy products, an outbreak of a disease affecting cows producing milk, production will decrease, supply will increase and prices will skyrocket. The lack of a fixed price makes it difficult for the business owner to make long-term plans.
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High Cost of Products
Running a dairy business especially if you intend to run a farm will include feed costs, labour costs, energy costs, regular veterinary services and transportation costs and in a situation where the economic condition of the country isn’t promising, the cost of running the farm will go up and if it doesn’t balance the profit coming in, you might have to shut down.
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Environmental Concerns
If you intend to establish a dairy farm and source from farmers there are a lot of environmental issues that can affect nature. One of them is greenhouse gas emissions. After food digestion, cows tend to release a powerful greenhouse gas called methane gas, a gas that traps heat in the atmosphere. It is recorded that 20% of the planet’s warming can be attributed to methane and a warmer earth can cause strong hurricanes, heavy rains and droughts.
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Change in Customer Preference
Currently, there is an increase in the demand for plant-based diets such as fruits, vegetables, nuts and whole grains. This has resulted in a decrease in the demand for dairy products. If consumer preferences continue to evolve, it will pose a problem for business owners in the dairy industry.
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Shelf Life of Dairy Products
Dairy products such as milk, butter, yoghurt and cheese have a limited shelf life. Milk can stay for 12-14 days, yoghurt for 4-6 weeks, cheese can stay for a week or two while butter has a shelf life of about 4 weeks. What this means is that products must be stored in good condition and transported under favourable conditions to avoid spoilage.
Opportunities
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Diversification
Diversification is a great opportunity in the dairy product business. It means moving past traditional dairy products such as milk, yoghurt, cheese and butter and creating new products that will also serve the same purpose—for example, combining plant-based products and dairy products such as coconut yoghurt.
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Sustainable Practices
Since environmental concern is a huge challenge in running a dairy farm, farm owners can adopt sustainable farming practices that are less harmful to the environment.
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Global Market Expansion
With product diversification already in motion, a dairy product business offers you grounds for expansion. Without a dairy product, a breakfast table isn’t complete, this alone shows how important they are and why it’s a great business to go into. As demand continues to increase, an opportunity to expand is presented leading to huge growth for your business.
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Conclusion
If hacked successfully, the dairy product business is a lucrative business that an entrepreneur can venture into and make profits. While the cost of a startup is expensive, the benefits that will flow in at the end of the day are quite bountiful. Take the above steps as a guide to start up your dairy product business and with the right production facility and marketing plan, your dairy product business is destined to flourish.
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