MILKING PROFITS IN EAST JAVA © Duncan Graham 2005
The Westernisation of Indonesian lifestyles is helping lift incomes for thousands of East Java dairy farmers.
Working with the provincial government and the agriculture department of Western Australia they’ve boosted milk production. Now they are manufacturing their own brands to meet the demand as Indonesians turn to dairy foods.
“At last we’ve become price makers instead of being price takers,” said Fuad Ardiansyah, 30, manager of the new Sekar Tanjung milk processing plant at Purwosari.
“Being at the mercy of the buyers has always been a problem for Indonesian farmers, particularly those producing perishable foods.
“When yields are good, prices fall. When yields are poor prices go up. Farmers had to take what’s offered. They were seldom able to save money or upgrade facilities. That situation has now changed for members of our co-ops.’
Six dairy co-ops in the Malang and Pasuruan regions, each with about 7,000 members, have pooled their dividends to build their own Ultra High Temperature (UHT) milk-processing plant.
The factory, about 90 minutes drive south of Surabaya, has created new jobs for 100 local workers. It runs three shifts 24 hours a day.
The Rp 45 billion plant was set up with loans from the East Java and Indonesian governments using funds allocated to help cooperatives. No money was borrowed from banks.
Although it has been operating for less than four months the venture has been so successful that plans to install more packaging machines in 2010 have been brought forward to this year. This is despite having no advertising budget.
“Indonesian tastes are changing. There’s a shift from powdered milk to UHT milk,” Faud said. “Consumers are more concerned with their health. They recognise UHT milk is cheaper and easier to use. Like Westerners, people have less time and prefer fast foods.
“The shift is marginal, maybe two to three per cent a year. But with 250 million people that’s a lot of new customers.”
Faud’s father Mohammed Koesnan was one of the first farmers to seize opportunities presented by the East Java – Western Australia Sister-State agreement. This provides exchange visits for progressive professional and business people.
Visiting Australia he was surprised that dairy cows produced 25 litres of milk a day. Around Malang the yield was seven litres.
He imported Friesian cows from Australia when dairy farms in that country were being rationalised to make the industry more efficient. Small enterprises were closing and quality cattle were on the market.
Most East Java dairy farmers have three to five milking cows. Australian herds are numbered in the hundreds.
Milk production jumped once the new cows had settled in, but the only buyer was the Nestle factory in Pasuruan which makes dried milk powder.
Faud, who studied marketing at the University of Auckland in New Zealand puzzled how to sell the extra milk and improve returns. Every year production was increasing by around 15 tonnes.
Five years ago he recommended the cooperatives build their own plant. They agreed and set aside dividends for capital. All had a role in the planning.
The new factory has been designed for study tours by schools, community groups and government departments to promote milk consumption. To maintain hygiene visitors are not allowed in the milk processing rooms but can watch operations through big windows. The laboratories, which constantly monitor quality, can also be viewed.
Packaging machines imported from Sweden seal milk in sterile multi-layered paper and foil packs. These contain 150 or 180 millilitres of plain or flavoured UHT milk.
The packs, under the brand names Idola (with a logo like the Indonesian Idol TV program), Sekar (Flower) and Juara (Champion) are designed for the youth market. They are distributed through the Indonesian co-op network and schools.
Sekar Tanjung also packages for other manufacturers who can’t get enough milk.
“There’s a great need to build health awareness in the villages and kampung, and slowly this is happening,” said Faud.
“There are some free milk programs for poor schools supported by overseas aid agencies, and we are starting to retail UHT milk through kaki lima (food carts which patrol the streets of most Indonesian cities).”
During the past 14 years the Western Australian agriculture department has been sending veterinary surgeons and dairy farm experts to help the cooperatives raise standards. This service has been free.
“I’m very optimistic about the future,” said Faud. “Everyone supports Indonesian co-ops because they know profits go back to the members. The healthy food message is getting through and we’re in a great position to benefit.”
HOT AND COLD FACTS
It’s a fact well known by every sleep-starved parent who has fumbled late at night to prepare a bottle for a hungry baby; powdered milk has some awkward properties.
If it’s not stored properly, prepared in sterile bottles and mixed with clean well-boiled water the baby will keep howling – from stomach cramps.
And if you doze off at the stove the milk can suddenly boil, rapidly changing its taste and composition – and not for the better.
Fresh milk is nutrient-rich which makes it a lively breeding ground for bacteria so most Western consumers now prefer pasteurised milk. In the 19th century French chemist Louis Pasteur developed a system of raising and holding the temperature of milk at 68 degrees. While this killed many harmful pathogens food purists also claimed it destroyed some natural benefits.
Opponents of pasteurisation were vocal for many years early last century but the process is now well accepted. It’s also used for other natural products, including fruit juices, beer, wine and honey.
Pasteurisation doesn’t kill all micro-organisms, so the milk has a short shelf life. In tropical Indonesia the absence of an integrated refrigerated transport and retailing system means UHT milk (also known as long-life milk) has a ready market.
UHT milk lasts about six months at room temperature. It does not require refrigeration until the pack has been opened.
The manufacturing process is critical. The temperature has to be raised to 140 degrees and held for four seconds before rapid chilling. The system was developed in Sweden last century and eliminates the need for added preservatives. It destroys all bacteria.
Families with refrigerators tend to buy one litre cartons of UHT milk which Sekar Tanjung does not make. Instead it has concentrated on the individual one-pack, one-drink market. These retail for around Rp 1,500.
Small shops in Indonesia seldom have refrigerated cabinets to display perishable products so prefer to stock powdered milk. Prices vary depending on the product and additives, but 400 grams typically costs about Rp 20,000.
However widespread TV and print promotion of the benefits of UHT milk (which retails at around Rp 8,000 a litre) is turning busy families towards the liquid product.
A survey last year claimed more than 80 per cent of Indonesian milk consumption is powdered, compared with less than one per cent in the US. This indicates huge potential for UHT milk manufacturers and dairy farmers.
(Published in The Jakarta Post, Saturday 13 August 2005)