Supermarkets & Dairy in Zambia

1. INTRODUCTION

The dairy sector in Zambia has witnessed significant changes over the last few decades, driven by policy reforms, privatization, and the influx of foreign and local investment. The government's liberalization policies in the 1990s, including the deregulation and privatization of the Dairy Produce Board (DPB), marked a pivotal shift in Zambia's dairy landscape. This set the stage for the entry of major dairy players such as Finta Farms Ltd, Parmalat Zambia, and Zambeef’s ZamMilk, which have since revolutionized dairy production and processing in the country.

Finta Farms Ltd, established in Livingstone, Zambia, in the 1990s, was one of the first dairy processing plants in Zambia to focus on Ultra-High-Temperature (UHT) milk. Over time, Finta's product range has expanded to include yogurt, flavored milk, and other dairy products, serving both urban and rural markets.

Parmalat Zambia, owned by Lactalis, a global dairy giant, entered the Zambian market by acquiring Bonnita Dairy in 1998. Parmalat is known for its production of UHT milk, cheese, butter, yogurt, and cream. As one of the leading dairy companies in Zambia, Parmalat maintains a strong presence in supermarkets and retail outlets across the country, with a diversified product portfolio catering to different segments of the population.

Another key player in Zambia's dairy sector is Zambeef, one of Zambia's largest agri-business firms, which launched ZamMilk in the early 2000s. ZamMilk operates large-scale dairy farms and processes thousands of liters of fresh milk daily. This local brand has been instrumental in reducing Zambia’s reliance on imported dairy products, contributing significantly to the growth of the local dairy industry.

Despite these advancements, Zambia's per capita milk consumption remains low compared to global standards, highlighting a vast growth opportunity for both producers and retailers. The sector has also seen competition from smaller dairy processors, such as Wonder Dairy and Sunglow Dairy, which are competing in niche markets with artisanal and organic products.

As Zambia's dairy sector continues to evolve, supermarkets, particularly Shoprite, Pick n Pay, and Spar, have played a crucial role in increasing access to dairy products. These retail giants have expanded their footprint across the country, making dairy products such as UHT milk, fresh milk, yogurt, and sour milk readily available to the average consumer. Shoprite, in particular, has significantly contributed to dairy retail by opening numerous outlets across urban and semi-urban areas since the late 1990s, further fostering the formalization of Zambia's dairy market.

The increase in dairy product availability through formal retail channels has also been accompanied by a rise in product standards, with an emphasis on quality control, safety, and packaging. Small-scale dairy producers, who were once predominant in informal markets, have increasingly been integrated into formal supply chains, benefiting from capacity-building programs and investment in cold-chain infrastructure.

This report aims to provide an updated analysis of Zambia's dairy sector, focusing on key aspects such as the role of supermarkets in retailing dairy products, the procurement systems of dairy processors, and the evolving relationship between dairy producers and processors. The findings are based on interviews with key stakeholders in Zambia’s dairy and retail sectors, including representatives from supermarkets, dairy processing firms, and farmers in various regions. Additionally, the report examines trends in product quality and market dynamics, offering insights into the future trajectory of the dairy industry in Zambia.

2. THE RISE OF SUPERMARKETS IN ZAMBIA AND THE ROLE OF SUPERMARKETS IN DAIRY PRODUCTS RETAIL

2.1 The Supermarket Sector in Zambia

2.1.1 Trends

The supermarket sector in Zambia plays a vital role in the country's retail landscape, contributing approximately 1.3% to Zambia's $3.4 billion GDP. The sector generates an annual turnover of about $60 million, with Shoprite, the largest supermarket chain, controlling 50% of this market. Supermarkets have increasingly gained market share from traditional food retailers, including independent small grocery chains that dominated before the market liberalization reforms of the mid-1990s. The food category accounts for around 90% of sales across supermarkets, with an estimated $54 million in annual food sales. However, the dairy product category represents only 18% of total supermarket sales.

Shoprite has had a profound influence on dairy product marketing in Zambia. It introduced a broader selection of dairy products, improved quality standards, and competitive pricing. Despite its significant impact, Shoprite has no immediate plans for further expansion in Zambia. In contrast, Spar, another supermarket chain, is actively expanding, with plans to open two additional stores in Lusaka and Livingstone.

The informal sector remains a substantial distribution channel for dairy products, especially for fresh milk, raw unprocessed milk, butter, sour milk, and long-life milk. Approximately 50% of dairy product sales occur through informal markets, which primarily offer basic dairy commodities.

2.1.2 Determinants of Growth

The rapid expansion of supermarkets in Zambia can be traced back to several key factors, most notably the market liberalization reforms of the mid-1990s. These reforms spurred a wave of foreign direct investment (FDI), with South Africa's Shoprite leading the charge. The government provided foreign investors with numerous incentives, such as corporate tax exemptions and waived import duties, which helped large retailers like Shoprite gain an advantage. Although these incentives have since expired, they played a pivotal role in Shoprite's early success and rapid growth.

The arrival of large foreign-owned supermarkets led to significant improvements in the quality and variety of food products available to Zambian consumers. Dairy product offerings, in particular, grew substantially. Shoprite, for example, leveraged economies of scale and offered lower-priced products despite Zambia's challenges with packaging costs, transportation expenses, and inefficient production capacity.

Urbanization has further fueled the growth of supermarkets, creating more opportunities for food retailing. As of 2003, around 36% of Zambia's population lived in urban areas, with urbanization rates increasing, especially in Lusaka, where growth is estimated at 3.5% per year. The World Bank projected Zambia’s urban population would reach 40% by 2005. This urbanization trend, combined with rising incomes and lifestyle changes, has expanded the market for formal retail channels, particularly for dairy products.

A national consumption survey revealed that urban households consume nearly four times more milk per capita than their rural counterparts. These urban consumers are also more likely to purchase milk from modern retailers who source from formal sector dairy processors. However, milk consumption in Zambia remains low, largely due to high urban retail prices for dairy products. Between 2000 and 2005, the price of pasteurized milk rose from $0.60 to $0.92 per liter, making it costlier than U.S. milk prices.

Two additional factors that have positively impacted Zambia's retail and dairy sectors include the growth of the copper industry—driven by high demand from China—and the influx of Zimbabwean commercial farmers, who have invested heavily in Zambia's agricultural sector.

2.2 An Anatomy of the Supermarket Sector in Zambia

Zambia’s supermarket sector can be categorized into three levels: (1) large supermarket chains, (2) medium-sized chains, and (3) small chains. Large chains control approximately 55% of the market, with Shoprite as the largest player. Medium chains account for 30% of the market, while small chains—typically independently owned stores—control the remaining 15%.

2.2.1 Large Supermarket Chains

Shoprite dominates the large chain category, holding the largest share of Zambia's supermarket market. Shoprite's expansion began in 1997 when it acquired and refurbished several state-owned retail outlets and opened new stores in key urban centers. By 1999, Shoprite had invested in several large stores, including the Manda Hill store, which caters to middle- and high-income consumers. Another major store is strategically located on Cairo Road near Lusaka's main bus terminal, targeting lower-income consumers and urban commuters.

As of today, Shoprite operates 18 stores, with 72% located in peri-urban and rural towns, making its presence felt in smaller towns like Mazabuka, Chingola, Chipata, and Livingstone. These stores typically have floor spaces of around 2,000 square meters and 9-34 cash registers. Shoprite’s wide product variety includes around 28,000 stock-keeping units (SKUs), with about 2,000 allocated to dairy products.

Shoprite’s rapid expansion was driven by a surge in consumer demand for a wide variety of affordable food products. In many instances, Shoprite's prices, especially for dairy products like butter, were lower than those in informal markets such as Soweto Market. However, fresh milk is often cheaper in traditional markets.

Despite its growth, Shoprite has indicated that it does not plan to open additional stores in Zambia, instead shifting its focus toward the untapped market in the Democratic Republic of Congo (DRC). Though it faces competition from new entrants like Spar, Shoprite remains well-positioned to maintain its dominance in Zambia, particularly due to its extensive presence in rural areas where there is limited space for new supermarkets.

2.2.2 Medium-Size and Small Supermarket Chains

Among medium-sized chains, Melissa Supermarket is the most prominent. Established 12 years ago, Melissa operates three stores in Lusaka. Its flagship store in Kabulonga caters primarily to high-income and expatriate consumers, while the other two locations serve a predominantly low-income clientele. Food sales dominate Melissa's turnover, with dairy products accounting for about 15% of total sales.

Konkola Hyperama, located in Mazabuka, is another notable medium-sized supermarket. Catering to a diverse customer base, 60% of Konkola's clientele are low-income consumers, with middle- and high-income shoppers making up the remainder. Dairy products are considered an important category at Konkola, with approximately 10% of floor space allocated to dairy items.

Smaller supermarket chains generally allocate less space and fewer resources to dairy products, as they tend to focus on limited product ranges and target specific customer segments.

To remain competitive against larger chains like Shoprite, medium and small supermarkets have adopted strategies such as improving store cleanliness, enhancing product displays, and offering unique product lines. For instance, Konkola Hyperama specializes in offering halaal meats, while Melissa provides fresh baked goods, which are popular among high-income customers. Supersaver, another small supermarket, targets high-income consumers with niche products like organic honey and freshly baked bread.

3.Dairy Sub-sector, Product Retailing, and Procurement in Zambia

3.1. Structure of the Dairy Sub-sector

The Zambian dairy sector is comprised of three main types of producers:

• Traditional smallholder producers (99% of farms) primarily raise local breeds (zebu) for beef, contributing about 45% of milk production and 25% of marketed raw milk. Most of their milk is consumed locally or sold in informal markets. Some producers sell to milk collection centers, which supply processors or consumers.
• Large commercial dairy farms (70 farms) are capital-intensive, focusing on dairy breeds, and are responsible for 80% of the milk supplied to formal markets. These farms manage to optimize production during the dry season when prices are highest.
• Emerging smallholder dairy farms (260 farms) are a result of agricultural support programs. These farms use mixed breeds and have intermediate technology, and they mostly sell their milk to processors through milk collection centers.

The informal market represents about 50% of the total milk marketed in Zambia. The milk is sold as raw milk in rural areas through short supply chains. In contrast, the formal market is dominated by processors supplied primarily by commercial farms, along with some milk powder imports. The main channels in this market include supermarkets and traditional retail outlets (Figure 1 illustrates Zambia’s dairy supply chain).

Table 1: Dairy Production by Producer Type

Characteristic	Traditional Smallholder Farms	Emerging Smallholder Farms	Commercial Dairy Farms
Number of farms	30,000	260	50-70
Average herd size (heads)	30	50	550
Most common breed	Traditional breed (Zebu)	Mixed breed	Pure dairy breed
Yield (liters/cow, day)	2-5	8-15	25-30

Source: Valeta (2004), Emongor (2004), and key informant interviews

3.2. Dairy Products in Supermarkets and Other Channels

3.2.1. UHT Milk

Domestic UHT milk production has increased significantly since the late 1990s, reducing imports substantially. Finta and Parmalat are the main UHT milk producers, with Shoprite and Spar being major distributors. UHT milk’s long shelf life allows for its sale in areas lacking refrigeration, enhancing accessibility. Finta offers various packaging sizes, with the smallest 250 ml pack being particularly popular among low-income consumers.

3.2.2. Sour Milk

Sour milk has transitioned from being a rural staple to a popular product in urban areas, thanks to packaging innovations. Supermarkets like Shoprite report that sour milk constitutes around 18% of their total dairy sales. Parmalat and Zam Milk offer affordable sour milk products, with prices varying slightly across regions.

3.2.3. Cheese and Butter

Both local and imported cheese are available, with local brands like Kaposhi having a strong presence. However, imported cheeses, particularly from South Africa, remain important, especially in specialty cheese categories targeting higher-income consumers. Butter is dominated by imports, with Shoprite’s in-house brands like Ritebrand being more affordable than other imported options. Local butter brands face challenges in competing on quality with imports.

3.2.4. Fresh Milk

Fresh milk constitutes the highest share of dairy product sales in supermarkets. The most common package size is the 500 ml pack, which is widely available in supermarkets and smaller retail stores. Prices for fresh milk vary based on the store location and packaging, with supermarkets in high-income areas generally charging more.

3.2.5. Yogurt and Flavored Drinks

Yogurt demand is increasing in Zambia, with local brands like Parmalat and Zam Milk competing with imported options. Yogurt and flavored milk drinks are popular in urban areas, with new products and flavors being introduced regularly.

3.2.6. Milk Powder

Imported milk powder, mainly from Nestle, is used for direct consumption and by processors like Parmalat and Finta, particularly during periods of milk shortages.

Sources:

• Valeta (2004)
• Emongor (2004)
• Ministry of Trade (Zambia)

4. PROCUREMENT SYSTEMS OF SUPERMARKETS FOR DAIRY PRODUCTS IN THE STUDY COUNTRIES

4.1. Direct Delivery to the Stores

Suppliers to most supermarkets deliver dairy products directly to the stores. While large supermarkets like Shoprite use a centralized distribution system for fresh fruits and vegetable procurement, the procurement for dairy products is highly decentralized. All large and medium supermarkets interviewed require dairy suppliers to deliver products directly to the store.

45% of the 11 stores interviewed in Lusaka district require dairy processors to deliver products to the stores at the processors’ own cost; all of these retailers were large and medium-size supermarkets. The remaining 55% were all small independent retailers, who make their own arrangements for product delivery, including picking up the products from processors. In Kabwe and Kapiri Mposhi, 72% of retailers made arrangements at their own cost for dairy product delivery, while 28% had dairy companies deliver products directly to the store. In Livingstone and Mazabuka, with the exception of a few small stores, more than 90% of small retailers arranged for product delivery, while medium and large supermarkets had suppliers deliver products directly to the stores.

4.1.1. Suppliers

Shoprite buys its dairy products directly from processors. It does not purchase any dairy products from wholesalers or other traders. 100% of fresh milk, sour milk, and yogurt are procured locally, while 75% of butter, 5% of UHT milk, and about 50% of cheeses are imported (mainly specialty cheeses). Also, 100% of fresh milk and sour milk sold in Spar are procured locally; 80% of butter is imported, 50% of UHT milk is imported from South Africa, and 50% is supplied by Parmalat. Over 55% of cheese products in Spar are imported.

Medium and small independent retailers buy directly from processors and wholesalers. Most retailers do not indicate a preference for buying from a select few processors and welcome all types of processors, provided the product is of good quality and meets store labeling requirements.

4.1.2. Contractual Arrangements

The majority of large and medium-size stores have written contracts with suppliers, but in some cases, contracts are only for particular dairy products. For example, Shoprite has no written contracts for fresh milk and UHT milk, but it has written contracts with Zam Milk and Parmalat for sour milk and with Parmalat for yogurts. Halawi, a cheese processor, indicated that they only have a written contract with Shoprite specifying volumes and general requirements, including product labeling. For the rest of the products, Shoprite only has general agreements with suppliers.

The majority of small and medium-size retailers have no contracts with suppliers. In Kabwe, Livingstone, and Kapiri Mposhi, 72% of small retailers indicate that they do not have contracts with suppliers, and 64% of small independent retailers in Lusaka have no contracts with suppliers. They mainly have open and general agreements with dairy product suppliers, and some have established long-term historical relations, continuing to procure from suppliers to maintain and foster trust. For example, a medium-sized market in Livingstone sells locally produced fresh milk (Surprise Milk) processed by a small processor, and they indicate that they have conducted business with the processor for a long time and do not need a contract. Trust is a significant element in contractual relations for many small and medium-size processors.

5. DAIRY PROCESSING SECTOR: CHARACTERISTICS AND RELATION OF FIRMS WITH SUPERMARKETS

5.1. General Characteristics of the Dairy Processing Sector

The dairy processing sector in Zambia is characterized by high concentration, with 16 firms operating in total. The two largest firms dominate the market, holding an estimated combined market share of 80%. Product differentiation is significant, particularly among yogurt, cheese, and dairy fruit drinks. Parmalat leads the market overall, but other processors excel in specific product categories, such as Kaposhi cheese and Finta's long-life milk.

Despite the concentration, Parmalat has been losing market share, indicating stiff competition among firms. New entrants like Zam Milk pose a significant threat, rapidly catching up in quality and market presence. Zam Milk, operational for just five years, has successfully invested in value-added products and expanded its cattle herd by 28%.

Competition among dairy companies centers on price and quality, with increased product variety and quality pushing consumers to demand more. Larger dairies, benefiting from robust financial resources, have invested in upgrading their processing plants. Smaller processors face challenges but are joining initiatives under multinational cooperatives to enhance quality and practices.

The competitive landscape also involves strategic imitation. Finta has successfully differentiated its product offerings, notably by innovating with new packaging sizes in collaboration with Tetra Pak. Furthermore, the emergence of sour milk products in supermarkets showcases local innovation. However, dairy processors face challenges from imported products, particularly as the Zambian Kwacha strengthens, making imports cheaper. Regional trade agreements raise concerns about potential product influxes from countries like Kenya, which threaten local dairy firms.

5.2. Dairy Companies’ Procurement Systems and Relations with Suppliers and Buyers

5.2.1. General Description:

Parmalat: As the largest dairy processor in Zambia, Parmalat has a monthly production capacity of 3,840,000 liters, though it currently operates at only 52% capacity. Its extensive product range includes fresh and long-life/UHT milk, sour milk, yogurts, cheese, and butter. A substantial portion of its milk is sourced locally, with about 50% from the Mazabuka area. Local dairy farmers hold a 27% stake in Parmalat-Zambia, though the majority is owned by Parmalat (South Africa).

Finta: Finta focuses exclusively on long-life/UHT milk, having opted not to pursue cold chain operations due to high costs. It has a processing capacity of 120,000 liters per day but only utilizes 50% of that capacity. Over the years, Finta has significantly reduced its reliance on reconstituted milk powder, from 90% to around 40-50%. Partnering with Clover has helped maintain product quality and has positioned Finta as a significant player in the UHT milk market, largely displacing imports from Zimbabwe.

Zam Milk: A subsidiary of the integrated Zam Beef company, Zam Milk has quickly established itself as a profitable unit, accounting for about 12% of the company's profits. It primarily sources milk from its own herd, which has proven beneficial for maintaining product quality.

Kaposhi Dairy Products Limited: As the leading cheese producer in Zambia, Kaposhi processes 4,500 liters of milk per day and is currently testing its products in the South African market. Despite increasing competition from imports, it continues to thrive by focusing on both specialty cheeses and affordable options for the local market.

Halawi: A small processor in Lusaka, Halawi produces cheese and yogurts, processing about 750 liters of milk daily. It is working on improving its facilities and product range while maintaining partnerships with multinational cooperatives to enhance quality.

5.3. Relations of Dairy Companies with Supermarkets

5.3.1. Product Range and Sales to Supermarkets vs. Other Channels

Parmalat has expanded its product line significantly since its inception in Zambia, offering around 80 different SKUs. However, it primarily utilizes its own distribution channels, with only 15% of sales occurring through supermarkets. The majority of sales go through wholesalers, highlighting a more fragmented distribution strategy.

Finta has carved out a niche in the UHT milk market, with innovative packaging options that cater to a wider audience. About 20% of its sales are made directly to Shoprite, underscoring its strategic relationship with this major supermarket chain.

Zam Milk has a strong presence, with 30% of its sales going directly to supermarkets, while its own retail outlets account for 70% of sales. This unique structure allows Zam Milk to maintain close ties with consumers.

Kaposhi has developed a diverse product range, with 40-50% of its cheese sold directly to supermarkets. Despite facing stiff competition from imports, its focus on local cheeses allows it to capture significant shelf space in larger retail chains.

Halawi maintains a robust presence in supermarkets, with a significant portion of its yogurts and cheeses sold directly to these retailers.

5.3.2. Commercial Relations and Requirements with Supermarkets vs. Other Channels

The commercial relationships between dairy processors and supermarkets vary widely. While larger supermarkets, such as Shoprite, enforce strict quality and packaging requirements, many smaller retailers operate on less formal agreements. Finta's approach is characterized by open agreements with wholesalers, which allows flexibility and responsiveness to market changes.

Zam Milk and Halawi maintain written contracts with larger buyers to ensure compliance with packaging and labeling standards. These contracts detail delivery conditions and payment terms, facilitating smoother commercial transactions.

5.3.3. Requirements of Supermarkets vs. Other Channels

Supermarkets, particularly larger ones, require processors to deliver products, unlike smaller retailers that often manage their own logistics. Most dairy processors provide transportation for deliveries, ensuring that their products reach supermarkets in optimal condition.

Quality standards are notably higher in supermarkets than in traditional channels. While processors generally exceed public standards, the lack of enforcement from supermarkets regarding HACCP certification leaves room for improvement in product safety assurance.

In conclusion, the dairy processing sector in Zambia exhibits a dynamic and competitive landscape. Companies like Finta have distinguished themselves through innovation, strategic partnerships, and a keen understanding of market demands, positioning them favorably within the industry. As the sector evolves, ongoing investments in quality and distribution will be essential for maintaining competitiveness, particularly in the face of rising imports and increasing consumer expectations.

6. EVOLUTION OF QUALITY AND STANDARDS OF DAIRY PRODUCTS

Public standards for dairy products in Zambia are established by the Zambia Bureau of Standards, aligned with specific CODEX standards. However, enforcement of these standards is notably weak. The Food and Drugs Act (FDA) in Zambia outlines legal sanitary requirements for milk and milk-based products, ensuring compliance with OIE (World Organisation for Animal Health) and CODEX standards (Valeta 2004). These mandatory requirements focus on critical aspects such as nutritional composition, microbiological content, chemical residues, and treatment history of milk.

Currently, the Zambia Bureau of Standards collaborates with the private and NGO sectors to develop broader and more detailed voluntary technical standards and codes of good practices for dairy products. These standards encompass specifications for pesticide residues, antibiotics, and packaging. The legal framework for dairy product trade implies the necessity for:

• Certification that milk is disease-free.
• Laboratory testing of samples.
• Use of official seals.

The National Livestock Epidemiology & Information Centre (NALEIC), part of the Ministry of Agriculture, is responsible for adhering to the OIE’s international animal health code during its risk assessments. In the domestic market, health inspectors from the Ministry of Health are tasked with overseeing the facilities, processes, and products of dairy processors and retailers under the FDA's guidelines. The Food and Drugs Control Laboratory, responsible for testing food samples, utilizes WHO and CODEX guidelines for its testing, yet it lacks accreditation.

Despite these regulations, effective implementation remains a significant challenge. While the sale of raw milk is illegal, it continues to be a common practice. Government veterinarians only inspect animals upon the introduction of new livestock into an area, and milk collection centers (MCCs) are not subject to regular inspections. Even major dairy processors are not frequently inspected by public health inspectors.

Private Sector Influence on Quality Standards

The most substantial changes in dairy product standards in Zambia are being driven by the private sector. Dairy processors are at the forefront of developing quality and sanitary standards. Key players, including multinational dairy cooperatives like Land O’ Lakes and various NGOs like ZATAC, play vital roles in fostering improvements in the industry. Dairy processing companies are competing on both price and quality, creating incentives to enhance sanitary standards. Many processors collaborate with NGOs and Land O’ Lakes to elevate their quality and standards.

For instance, large processors such as Parmalat, Finta, and Zam Milk have established standards that surpass public regulations. Zam Milk has made significant investments in its processing facilities and anticipates obtaining HACCP certification within the next year. Informants working within various dairy companies indicate that local firms like Finta and Zam Milk perform better in terms of quality and standard practices compared to competitors. Conversely, smaller processors face financial constraints in acquiring essential equipment but are often supported by Land O’ Lakes to enhance their hygienic processing practices.

Supermarket Standards and Consumer Complaints

Supermarkets primarily focus on packaging aspects—such as attractiveness, expiration dates, volume, and other labeling requirements—rather than stringent food safety measures. They typically limit their quality and safety control to maintaining appropriate cooler temperatures and conducting weekly employee sample tastings. Supermarkets tend to trust their suppliers to deliver safe dairy products and only react to quality issues when consumer complaints arise regarding spoilage.

When a sufficient number of complaints are received for a specific dairy product, supermarkets may cancel standing orders with the supplier.

A study conducted by Prof. Kasase of the University of Zambia in 2004 assessed the microbiological quality of three commercial brands of pasteurized milk sold in supermarkets around Lusaka. The study involved sampling 25 products from shelves in three supermarkets over a period of time. A total of 75 samples were tested for indicators including Aerobic Cell Count (ACP), E-coli, Salmonella, Listeria, and Clostridium, in accordance with Zambia Bureau of Standards guidelines. The findings revealed that overall, 61% of the brands conformed to ACP requirements; however, conformity varied significantly among brands. One brand had an impressive 80% conformity rate, while only 8% of the third brand met the standards. Notably, Salmonella, Listeria, and Clostridium were not detected in any of the brands tested, while E.coli conformity ranged from 16% to 68%.

7. Conclusion

The market liberalization in Zambia has led to a significant transformation of the dairy sector, largely propelled by foreign direct investment, joint ventures, and partnerships. This has resulted in the emergence of a new formal sector that plays a critical role in the processing and retailing of dairy products. As a result, consumers now have access to a wider variety of differentiated dairy products. Companies such as Finta have improved access to milk for average Zambians by prioritizing UHT milk and offering packaging sizes tailored for lower-income customers. Similarly, Zam Milk has successfully reduced prices by vertically integrating its production process.

In response to the rising demand from the formal sector, numerous donor-funded programs have been established to support smallholder dairy farmers, facilitating their access to dynamic formal channels by enabling them to supply milk to processors. However, the ability of small dairy farmers to access these markets is constrained by the technology they use. While larger and higher-capacity small producers are entering the formal dairy channel, many small-scale farmers still face barriers to entry.

Although the Zambian dairy sector presents great opportunities, challenges persist, particularly in the supply of raw milk. The private sector—comprising dairy processing companies, NGOs, and multinational corporations like Land O’ Lakes—has become instrumental in establishing private standards for dairy products that often exceed public regulations.

Development programs targeting small-scale producers must recognize that not all farmers will be able to integrate into modern supply chains effectively. Therefore, it is crucial for these programs to define their target farmers clearly from the outset. The integration of smallholder farmers into modern, dynamic markets necessitates a balanced approach that includes various complementary program elements implemented in synchrony. Achieving this requires careful coordination among all stakeholders involved, including private entities, public institutions, and NGOs.

Finally, the ongoing evolution of the Zambian dairy sector highlights the critical role of private initiatives and the need for coordinated development efforts to facilitate the successful integration of smallholder farmers into modern supply chains. With the right strategies and stakeholder collaboration, the potential for growth in the dairy industry can be fully realized, benefiting producers and consumers alike.

Table 2: Dairy Companies in Zambia

Name	Installed Capacity (ltrs)	Milk Processed (liters/day)	Capacity Utilization (%)	Products	FDI/Country
Parmalat	120,000	64,000	53	Milk: UHT, Pasteurized, Sour; Butter, yogurt, fruit drinks, Cream	Yes/Italy
Finta	120,000	60,000	50	UHT Milk, Flavored drinks	No
Zam Milk	30,000	20,000-30,000	66-100	Milk: Pasteurized, sour, flavored; yogurt, cheese, Cream	No
Diamondale	15,000	8,000	53	Milk: Pasteurized, flavored, sour; yogurt, cheese, Ghee, Butter	No
Kaposhi	6,000	4,500	75	Cheese, Butter, Pasteurized Milk, Cream	No
Kalwa	2,500	1,000	40	Pasteurized Milk	No
Cedrics Farm	3,000	1,700	56	Pasteurized , Milk	No
Ndola Dairy Farm	5,000	3,500	70	Pasteurized Milk, flavored milk, Butter, Cream	No
Maplehurst	2,500	1,000	40	Cheese, Yogurt	No
Mosi O Tunya Dairy	8,000	1,000	12.5	Sour Milk, Pasteurized Milk, Butter	No
Eastern Dairies	16,000	1,000	6.25	Milk: Pasteurized, Sour, Flavored; Juice, yogurt, cheese, Butter	No
Greenveld Farm	6,000	4,000	66	Pasteurized Milk	No
Sayyah Enterprises	800	800	100	Sour Milk, Yogurt, Pasteurized Milk	No
Dairy King	1,800	1,000	55	Sour Milk, Yogurt, Flavored Milk	No
Manyana Farma	300	270	90	Pasteurized Milk	No
Halawi		750		Cheese, Yogurt	No

Source: Processor Interviews & Valeta, 2004

Table 3: Assistance Programs to Suppliers

Name	Credit	Input	Extension	Veterinary	Bank Loan Guarantees
Parmalat	Yes	Yes	Yes	Yes	Yes
Finta	No	No	Yes	Yes	No
Zam Milk	No	No	No	No	No
Halawi	No	No	No	No	No
Kaposhi	No	No	No	No	No

Source: Interviews

Table 4: Estimated Milk Market Share

Name	Pasteurized Fresh Milk (%)	UHT Milk (%)
Parmalat	50	40
Finta	n/a	55
Zam Milk	40	n/a
Other	10	n/a
Imports	n/a	5

Source: Interviews & Nyovu, 2005

Table 5: Retail Prices by Brand (Lusaka District) in Kwacha

	Pasteurized Fresh Milk (500 ml)	UHT Milk (1 Liter)	Sour Milk (500 ml)
Parmalat	2,400-1,900	4,800-3,550	2,300	2,250-2,350
Zam Milk	1,300-1,250	2,410-2,200	n/a	2,200-2,900
Finta	n/a	n/a	2,450-2,500	n/a
Diamondale	2,000	n/a	2,000-2,100
Traditional	1,000-1,200	4,200	1,900	2,400-2,500

Source: Supermarket observations; 1 USD = K3,320.

Table 6: Range of Milk Price by Location

	Pasteurized Fresh Milk (500 ml)	UHT Milk (1 Liter)	Sour Milk (500 ml)
Lusaka	1,000-2,400	2,200-4,800	1,900-2,500	2,250-2,350
Kabwe	1,350-2,400	2,200-5,100	1,950-2,200	2,100-2,550
Mazabuka	2,100	4,250	2,500-3,980	1,980-2,250
Livingstone	1,900	3,800	1,850-2,450	1,980
Kapirimposhi	1,750-1,900	3,800	2,100-2,150	2,400-3,800

Source: Supermarket observations; 1 USD = K3,320.

Table 7: Relative Prices of Selected Dairy Products: Shoprite vs. Traditional Market

	Shoprite	Soweto Market
UHT Milk (500 ml)	K2,300	K1,900
Fresh Pasteurized Milk (500 ml)	K2,100	K1,200
Sour Milk (500 ml)	K2,200	K2,500
Stock Margarine (500 g)	K4,700	K4,800

Source: Observations in markets. The prices at Soweto Market fluctuate almost daily. These were collected in December 2005 and January 2006. Exchange rate: 1 USD = K3,320.

Source

Supermarkets and Dairy Products: Policy and Program Implications – Case Study of Zambia, Authors: Hikuepi Katjiuongua, Tom Reardon, David Neven, Mukelabai Ndiyoi, A Report to the Food and Agriculture Organization (FAO), Acknowledgments: The authors acknowledge Mr. Mukubesa Mamili and Patrick Nyirongo of the Farming Systems Association of Zambia (FASAZ), along with key informants from various supermarkets, dairy processing companies, NGOs, Land O’Lakes, COMESA, Zambia National Farmers’ Union (ZNFU), and the University of Zambia.

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