Azerbaijan 2012 | AGRICULTURE | FOCUS: DAIRY

With international companies geared to increase local production and factory operations underway, the dairy industry is poised to expand.

The rapidly growing consumer demand for dairy products is now beginning to be met by increased local production and international distribution throughout the country, combatting the shortages of the past. In 2012, a number of global dairy corporations and the government have announced their intentions to expand livestock numbers, dairy processing facilities, and build stronger distribution networks throughout the country.

According to the State Statistical Committee of the Republic of Azerbaijan (Azstat), the number of cattle and buffalo in the country grew by approximately 24,500 head in 2012 to 2.67 million. Sheep and goat numbers increased from 8.4 million to approximately 8.51 million. Milk production rose to 1.62 million tons over 2011, registering 5.6% growth over the same period in 2010. Meanwhile, milk prices fell by 0.7% over the year. The cheese market in Azerbaijan also registered average growth of 20% in sale terms over 2011.

Over the year, the state budget set aside monies for the construction of large-scale dairy facilities in regional areas. Among these projects was a milk and dairy facility in Naftalan city. This factory will add to the local production base, which includes milk processing plants and dairy factories throughout the country.

One such processing plant is the newly inaugurated Atropatena factory in Agjabadi in May 2011. Atropatena is currently producing 25 tons of milk per day, which is 10% of the factory's capacity. “Our target is to have the factory fully operating at its maximum capacity by 2015, when we expect to be producing 250 tons per day. At the moment we are producing around 28 different products and we will increase that figure up to 54 by the end of 2012," Elshad Rasulov, Chairman of the Board at Atropatena, told TBY. The project is especially significant, as it will provide the population with natural, high-quality, local products in a country with increasingly sophisticated tastes. Furthermore, the production of dairy products will contribute to Azerbaijan's need for food security. Financial analysis of the business plan determined that the quality of products to be manufactured and the year-on-year increasing demand for the product will generate considerable income.

In addition, multinational Danone will begin producing locally through one of Atropatena's processing facilities in 2012. Murat Künt, Country Manager for Danone in the Caucasus, told TBY, “local production will strengthen our distribution process, improve our inventory management, give better freshness to our products, and above all we will be able to meet Azerbaijani consumer demands and apply all of our research to the local market in a more efficient way." Danone's presence in the country is now being driven by local expansion as well as extended product shelf life, as the company gears up for the competition.

One such competitor is French firm Lactalis, which has noted Azerbaijan as a promising market for dairy products. A commercial branch of the company, Lactalis Caspi, opened in 2011. The January 2012 edition of Echanges Internationaux, a French-based magazine, wrote that Azerbaijan enjoys a very favorable environment for milk production, and Lactalis plans to increase the number of its sales points as well as open more offices in regional areas in the coming years.

Azerbaijan will also host the 18th Annual International Food Industry Exhibition in May 2012, an event that attracts food industry businessmen, distribution managers, diplomats, and media as well as a variety of international and local dairy companies.

Historically, Azerbaijan has imported the majority of its dairy and meat products from CIS member states, especially Belarus, as cattle production and dairy processing were heavily impaired by Soviet-era regulation. However, the government has taken timely action to reverse the situation, ensuring that the dependence on imports for food security will become a thing of the past.