Alongside mutton and horsemeat, milk is a defining element of traditional Kazakh cuisine. Traditional drinks include kymis (fermented mare’s milk), shubat (camel’s milk), and airan (cow’s milk). Various dairy products such as kaymak (sour cream), katyk (buttermilk), and kurt (dried cheese) are also widely consumed. “The milk and dairy products market is one of the most important segments of the country’s food industry and constitutes 16% of the food basket,” Aida Sapargazinova, General Manager of Foodmaster, told TBY.
Despite its deeply rooted dairy culture, the dissolution of the Soviet Union also brought along the dissolution of the country’s organized dairy sector. In the 1990s, milk production declined sharply; by 1997 it met only 42% of the 1990 level. Since 1997, the volume of milk production has been increasing at an annual average rate of 4.5%. In 2011, the market produced 5.2 million tons of cow milk.
Local milk production still lags behind demand, creating import dependency. The UN’s Food and Agriculture Organization (FAO) notes that between 2003 and 2008, dairy imports to the country increased by 516%. The unmet demand for fresh products was compensated by the extensive use of milk powder and ultra-high temperature (UHT) processed milk.
The availability of milk products on the market is determined by three sources: household dairy farmers using communal pastures, small- and medium-scale farmers, and agricultural enterprises. While household farms produce 90% of the domestic milk supply, small- and medium-sized farmers and enterprises produce 6% and 4%, respectively.
In terms of overall industrial production, dairy infrastructure operates below its full capacity due to the scarce supply of raw milk and high fluctuations in availability. Home processing and local sales account for the majority of dairy production, while about 30% of the milk produced in Kazakhstan is processed in factories.
Initiated in 2009, the National Dairy Development Plan seeks to increase the weight of large-scale operations in the domestic market. The plan foresees an issuance of subsidy instruments to support the construction and operation of modern dairy farms (MDFs), each with 500 to 2,000 head of dairy cattle, also subsidized if imported. Among other incentives provided to foster MDFs are better loan interest rates, milk prices, and artificial insemination services. The purpose of the plan is to create a competitive edge for MDFs and enable them to survive vis-à-vis dominant suppliers, which can produce milk at much more affordable prices. Asylzhan Mamytbekov, the Minister of Agriculture, explained to TBY that “in order to stimulate the economic development of the industry and enhance its investment attractiveness, we will continue to subsidize agriculture. Those who will apply modern technology… will receive subsidies.”
Although Kazakhstan is presently a dairy-importing country, in the long run it has the potential to position itself as an exporter of high value-added dairy products. Fortunately, it has a loyal consumer base within Kazakhstan to rely on. “The Kazakhstani people prefer domestic dairy products over those imported from Russia,” explained Sapargazinova.
David Manzini, General Director of Danone, is one executive leading the drive to convert Kazakhstan into a production base. “We are definitely pushing our export business as well, and Danone’s ambitious strategy is to increase exports to Kyrgyzstan, Uzbekistan, and Turkmenistan, as well as China,” he said in an interview with TBY. Companies such as Danone are expected to bring the country into focus as potential source of quality dairy products, with the capacity to meet both domestic and regional demand.
© The Business Year