From One Success to Another, or How to Make Money from Milk in Azerbaijan

From One Success to Another, or How to Make Money from Milk

By Gulnara Mammadova
This article originally appeared on www.mesopartner.com.
The most popular questions which are asked during the implementation of any program or project in any country are: is the project/program sustainable? Will it impact lives after the completion? Does the project do long-term changes? And when I think of CDA program, I am proudly answering: yes, yes, and yes. USAID’s Community Development Activity program was implemented during 2005-2008 in Azerbaijan by CHF International, and most of its projects were successful. I want to highlight one of the most successful economic development projects of CDA program, which is Rehabilitation of Milk Collection Point in Chakhirly community in Masalli.
Chakhirly is a village in Masalli, which is located in the South of Azerbaijan. CHF applied Participatory Appraisal of Competitive Advantages methodology developed by Mesopartner in identification of its all economic projects, which basically were initial assessment and collection of hypotheses on local economic development, analysis and identification of local economic development opportunities by community and local stakeholders, presentation of the results and selection of projects. The main outcome of the local economic development activity was Local Economic Development Plans (LEDP) developed by each community/cluster.
Two projects were selected from Chakhirly’s LEDP by CHF International for funding: rehabilitation of the milk collection point and new dripping irrigation system for cucumbers. Both projects have proven to be very successful, but for now we will focus on milk collection point rehabilitation project, which brought positive changes to the village livelihood. As a CDA lead of LED activities in Azerbaijani communities I believed in this project from the very beginning, I thought that community residents should use existing sustainable resources and opportunities and create a sustainable source of income by themselves, and this was the great example of it.
Hours and hours of hard work were put behind this project, CHF team members and project owners worked together and partnered with the local PalSud Milk processing plant in Lenkaran, which agreed to give milk storage tanker to the facility; engineers from community, CHF and milk plant worked together to ensure that the building is rehabilitated up to all hygienic standards. Today, when we look at the impact the project brought to the life of Chakhrli village and other people, it’s obvious that those efforts have not been wasted! This project impacted not only life of Chakhirly and eight surrounding villages, where the milk is being collected from; it also directly impacted life of Tofig Rzayev, the CDA Economic Officer from Lenkaran Office, and later POC Manager of Lenkaran Office, who has benefited from the valuable experience and lessons learned and built his own milk collection business in his village. Now Tofig working hard on trying make other people benefit from that experience and expand to other areas.
After the completion of the project in Chakhirly, and even after the close-out of CDA program Tofig hasn’t lost touch with the main project owner, Gadir Gadirov and was continuing monitoring its activities. Being an experienced milk farmer, Mr. Gadirov was sure about the success of the project, however, few days before the opening ceremony he told us half-seriously: “I am taking certain risks in investing in this building and project overall; if it works, I will be happy, if it doesn’t… well, I have to use building anyways, so I will make a public bathhouse out of it.” Well, he didn’t have to do it, because looking at the milk collection point two years later everyone realizes that the project was a success and number of beneficiaries grows every year!
What did Tofig do to come to his success? While learning details of the milk collection business and drafting a business plan together with Mr. Gadirov, Tofig used to think about why such potentially good and profitable business doesn’t exist in his village? Tofig is from Fatalikend village, Saatli region, 70% of which (total population is 3800 people) consists of Akhiska Turks, Turkish refugees from Uzbekistan who flee after the conflict in Ferghana Valley in 1980s; they easily and quickly integrated into Azerbaijani population, and now it is hard to differentiate Akhiska Turks from the ethnic Azeries. So Tofig was trying to analyze why there is no milk collection facility in his village or nearby, when 80% of village residents keep livestock and 40% of them are constant milk producers? Besides, Fatalikend village is producing very good milk, with minimum of 3.5% of fat level. If there is plenty of great quality milk, something needs to be done about it!
In December 2008 Tofig met with director of Milk-Pro, one of the two largest milk processing plants located in Baku, proposed himself as a supplier and asked for a milk storage tanker. The Milk-Pro agreed to give him a milk storage tanker and all necessary support to start Tofig’s business. As Milk-Pro had shares of the Bilesuvar Agro Milk processing plant (it is brand new plant in Bilesuvar region), they agreed that Tofig will sell collected milk to that plant in Bilesuvar, since Bilesuvar plant is closer to Tofig’s village than Baku plant.
Tofig and his team disseminated information about milk collection terms and new collection facility couple of days before the milk storage tanker was brought to the village. Tofig built a small facility in his yard for collection and storage of milk. He started with six cars collecting milk in three villages, and increased to eight cars afterwards. The table below shows the progress in milk collection of Tofig’s team in December versus Mr. Gadirov’s team in March. We should take into consideration that in winter season cows produce less milk than during any other season (see table).
The farmers were gladly selling milk to Tofig and his team because the milk was collected from the house and for fair price; besides, Tofig is from well-respected family, which was important factor in trust as well. After collecting 3,000 to 3,500 liters of milk per day with eight vehicles Tofig quickly realized that one tanker is not enough and he needs to expand. But delivery of milk to only one village can bring to waste of time on transportation, high transportation costs and spoiling of milk. And he decided that decentralization is the best way to meet increased milk supply with minimal or no damage. He established 2 more small collection points in different villages. The milk gathered at collection facilities is being collected by the milk processing plant. The milk plant is paying fair price to Tofig, and he is distributing money to farmers once every five days. In addition, Tofig is getting 0.002 to 0.005 AZN per liter of milk with fat content above 3.5%. This was very good financial incentive for Tofig, and he decided to do the same with his employees, he announced that he will pay certain amount per liter of milk with fat content above 3.8%. This was great idea because his team members got inspired and started collecting milk of 3.9 to even 4.2% of fat level! The competitors who were in the same villages for years before Tofig were surprised how he could achieve such high level of milk fat in such short period of time. Tofig says: “Quality is the most important thing for me; I don’t understand why farmers should dissolve their milk with water and sell to the plants, when they can sell natural milk and gain trust and mutually benefit from partnership with milk processors!” He also makes sure that the collected milk is inspected in laboratory every day, and the payment is made every five days and is based on fat level of milk.
Another great idea for small business came to Tofig while he was thinking about proper utilization of slightly soured milk, which is often a problem in summer times. He made research and found out that milk with sour level up to 20% can be used in production of Georgian smoked cheese called suluguni. He found a good suluguni cheese expert in Georgia and brought him to his village. Georgian expert set up a small cheese production workshop in Fatalikend. At first cheese came out with weird bitter taste, and they couldn’t sell the first party of the product. Later it came out that Tofig neglected Georgian specialist’s instruction to smoke the cheese with smoke from walnut shells only, and that was the reason for bitter taste! Tofig started transporting walnut shells from Sheki every month for smoking the cheese, and cheese came out of great taste and quality! Georgian specialist moved to Tofig’s village with his two sons and plans to continue smoked suluguni production together with Tofig.
Today Tofig Rzayev has 2500 constant milk suppliers in 23 villages. He owns 1 big and 9 small milk collection facilities in those villages. The milk supply volume vary during seasons, for example, Tofig’s facilities gather from 8 to 10 thousands of liters of milk daily. He earned full trust of Bilesuvar Agro LLC plant, and they are planning for long and productive cooperation and expansion. Recently Tofig brought milk laboratory equipment consultants from ADRA to the Bilesuvar Agro plant, and they inspected all equipment and provided training for staff and recommendation for improvement of the milk testing procedure. Tofig constantly thinks how the business can be better, that’s why he efficiently motivates his employees and also encourages his friends and former CDA community members to open similar milk collection businesses in other regions as well. He thinks that raw milk supply to the processing facilities is very low, and demand for milk in Baku is very high, as majority of processing facilities are located there. According to Dairy Sector Action Plan prepared by Chemonics in 2009 under the USAID’s Private Sector Competitiveness Enhancement Program, “processing operations (two large and several small processors) face shortages in raw milk collection and utilize a disjointed network of collection facilities…Although donor programs have made contributions in this area, human resources in the dairy sector are particularly low and there is a limited base of associative structures or cooperation among stakeholders. These factors combine to create a diminished ability across the sector to adopt best practices resulting in decreased product quantity and quality and concomitant decreases in sales, jobs, and investment.”
Tofig Rzayev is a great example of successful solution to the improvement of the milk value chain in his region. Although the report states that the weakest link in milk value chain is malnutrition of cows and therefore lack of milk on the market, Tofig is confident that Azerbaijani farmers produce enough milk but they fail to deliver it to the market, and that is the weakest link in the value chain.
Tofig also helped Umid HSDM with preparation of the project proposal of supporting milk farmers funded by USAID, and Umid is implementing that project right now.
Tofig often says: “I am so glad I was involved in CHF’s CDA program activities, and in milk collection point rehabilitation in Chakhirly in particular, because this project gave me initial knowledge on milk collection business and encouraged me for my success in milk business, I would never dare to start it without that knowledge and experience!”