BUSINESS PLAN:

ESTABLISHMENT AND OPERATION

OF A

MINI-DAIRY PROCESSING PLANT

FOR PROCESSING & PACKAGING

OF YOGHURT

& VARIOUS OTHER DAIRY PRODUCTS

BY

CAREMARK INVESTMENTS LIMITED

CAREMARK INVESTMENTS LIMITED

P.O. BOX ---------------,
KAMPALA,
UGANDA.
Cell Phone: +256-772-406 002/751-117 141
E‐Mail: [email protected]

FEBRUARY 2019
 i
CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
A. TABLE OF CONTENTS

S/NO. DESCRIPTION PAGE

1.0 EXECUTIVE SUMMARY 1

1.1 Introduction 1
1.2 Opportunity Rationale 1
1.3 Product Profile 2
1.4 Target Markets & Product Distribution 3
1.5 Marketing Strategy 3
1.6 Project Capacity & Production Plan 3
1.7 Equipment & Materials 4
1.8 Personnel Compensation Policy 4
1.9 Investment Cost & Financial Performance 4
1.10 Keys to Success 7
1.11 Objectives 7
1.12 Mission 8

2.0 PURPOSE OF THE DOCUMENT 9

3.0 INTRODUCTION 10
3.1 Importance of the Livestock Sector in Uganda 10
3.2 Dairy Sector 10
3.3 Objectives and Scope of the Study 14
3.4 Methodology 14

4.0 PROJECT PROFILE 15

4.1 Project Activities 15
4.2 Current Activities 15
4.3 Farm Performance History 16
4.4 Objectives 17
4.5 Mission 17
4.6 Business Legal Aspects 18
4.7 Project Location 18
4.8 Opportunity Rationale 18
4.9 Proposed Capacity 19
4.10 Total Project Cost 19

5.0 PRODUCTS & SERVICES 21

5.1 Dairy Products 21
 ii
CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
5.2 Quality Control 21

6.0 THE DAIRY INDUSTRY IN UGANDA 23

6.1 Macro-Economic Developments 23
6.2 Overview of the Dairy Sector 26
6.3 Developments in the Dairy Industry in Uganda 28
6.4 Dairy Sector Policies, Regulations and Standards 29
6.5 Development of Co-operative Societies 31

7.0 TRENDS AND PERFORMANCE OF THE DAIRY INDUSTRY 33

7.1 Overview of Milk Production 33
7.2 Organization of Milk Production 35
7.3 The Structure of Uganda’s Dairy Industry 37
7.4 Raw Milk Output, Distribution and Milk Prices 41
7.5 Milk Storage and Transportation 47
7.6 Milk Processing and Capacity Utilization 50
7.7 Milk Products Consumption and Net Exports 58

8.0 MARKETING 63
8.1 Market Orientation 63
8.2 SWOT Analysis 63
8.3 Marketing Mix 64

9.0 RAW MATERIALS 71

9.1 Dairy Section Raw Material Requirements and Handling Procedures 71
9.2 Availability of other Processing Raw Material Inputs 74

10.0 TECHNICAL ASPECTS 75

10.1 Dairy Processing Overview 75
10.2 In-House Quality Assurance 75
10.3 Rationale for Setting up a Dairy Processing Plant 75
10.4 Pasteurized Milk Processing 76
10.5 Cheese Processing 79
10.6 Yogurt Processing 82
10.7 Plant Machinery and Equipment 85
10.8 Irrigation Equipment 87
10.9 Office Equipment 87
10.10 Vehicles 87
 iii
CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
11.0 THE BUSINESS CASE FOR A DAIRY HUB 88
11.1 Overview 88
11.2 Risk Assessment 88
11.3 Conclusion 90

12.0 CIVIL WORKS & BUILDING INFRASTRUCTURE 92

12.1 Site Development 92
12.2 Layout and Buildings 92
12.3 Utilities and other Infrastructure Services 94

13.0 OPERATIONS PLAN 95

13.1 Overview of Operating Procedures 95
13.2 Quality Control 96
13.3 Raw Product Acceptability 99
13.4 Employee Training 101
13.5 Recall Programme 102

14.0 HUMAN RESOURCE & MANAGEMENT STRUCTURE 103

14.1 Governance Structure 103
14.2 Management Structure 104
14.3 Roles and Responsibilities 105
14.4 Proposed Organization Structure 108
14.5 Manpower Requirements 109

15.0 PROJECT ECONOMICS 110

15.1 Outline of Project Economics 110
15.2 Jobs Creation 110
15.3 Socio-economic Development Impacts 111

16.0 KEY SUCCESS FACTORS 112

17.0 ENVIRONMENTAL ASPECTS AND POLLUTION CONTROL 113

17.1 Emissions 113
17.2 Prevention and Waste Production 116

18.0 SCHEDULE OF IMPLEMENTATION 121

19.0 FINANCIAL ANALYSIS 123

19.1 Capital Cost of Project 123
19.2 Financial Plan 126
 iv
CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
19.3 Profit & Loss Account 126
19.4 Rates of Return 127
19.5 Payback Period 127
19.6 Capital: Output Ratio 128
19.7 Cash Flow 128
19.8 Balance Sheet 129
19.9 Break-even Analysis 130
19.10 Value Added/Contribution to GDP 131

20.0 CONCLUSION 133

 v
CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
B. LIST OF TABLES

T/NO. DESCRIPTION PAGE

1 Key Project Performance Parameters 6

2 The Company Shareholders 18

3 Total Initial Project Investment Cost 20

4 Contribution of the Milk Sheds to the National Milk Production 33

5 Key Characteristics of Milk Chain in Uganda 36

6 Indicative Analysis Margins for Pasteurized Milk 2019 44

7 Indicative Analysis Margins for Yoghurt 2019 44

8 Regional Distribution of Milk Surpluses 47

9 Milk Processing Plants and Mini-Dairies in Uganda 52

10 Regional Distribution of Milk Consumption per Capita (litres) 2009-2017 59

11 Uganda Dairy Imports by Quantity and Value, 2011-2017 60

12 Mineral Salts Content of Milk 68

13 Vitamin Content of Milk 68

14 Product Pricing 69

15 Dairy Farm Machinery and Equipment 86

16 Office Equipment and Furniture 87

16-1: Office Equipment 87
16-2: Furniture, Fixtures and Fittings 87

17 Business Risks and Mitigation Strategies for a Dairy Hub 89

18 Building Area and Cost 93

 vi
CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
19 Manpower Requirements 109

20 Project Economics Tables 110

20-1: Total Project Cost 110
20-2: Project Returns 110
20-1: Financing Planning 110

21 Waste Production Data 114

22 Effect of Waste Products 115

23 Air emissions 116

An example of the relationship between management practices and waste

24 production 118

25 Cost of Project 123

26 Financial Plan 126

27 Summary of Profit & Loss Account 127

28 Rates of Return 127

29 Calculation of Payback Period for Equity and Total Investment 128

30 Capital: Output Ratios 128

31 Projected Cash Flows 129

32 Projected Balance Sheet 130

33 Calculation of Break-Even Analysis in Project Year 5 131

34 Value Added Contribution to GDP 132

35 Key Financial Modeling Assumptions 134

35-1: Machinery Assumptions 134
35-2: Operating Assumptions 134
35-3: Economy-Related Assumptions 134
 vii
CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
35-4: Cash Flow Assumptions 134
35-5: Revenue Assumptions 135
35-6: Expense Assumptions 135
35-7: Financial Assumptions 135
35-8: Depreciation Rate Assumptions 135
 viii
CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
C. LIST OF FIGURES

F/NO. DESCRIPTION PAGE

1 Financial Performance Highlights 6

2 The National Milk Sheds 34

3 Cattle Density in Uganda 36

4 Processing and Marketing Channels for Milk and Dairy Products in Uganda 39

5 Evolution of milk production in Uganda: 2011 – 2018 42

6 Distribution of cattle population versus milk production 43

7 Average Annual Milk Output per Farm in Each Region 43

8 Per capita annual consumption of fluid milk, 1997-2018 59

9 Uganda Dairy Exports by Quantity [Kgs], 2011-2017 62

10 Uganda Dairy Exports by Value [US$], 2011-2017 62

11 Advertising and Promotion Strategies 70

12 Pasteurized Milk Process Flow 78

13 Cheddar Cheese Making Process 80

14 Yogurt Process Flow 85

15 Proposed Governance Structure 104

16 Proposed Management Structure 108

17 Project Implementation Milestones 122

 ix
CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
D. LIST OF BOXES

B/NO. DESCRIPTION PAGE

1. Response to policy changes at farm level 46

2. Milk marketing channels and institutions in dairy industry 48

3. Processor responses to a changed business and policy environment 53

4. The underutilized processing capacity paradox 56

 x
CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
E. LIST OF FINANCIAL ANALYTICAL SCHEDULES

S/NO. DESCRIPTION PAGE

01: Key Financial Modeling Assumptions 134

02/1: Estimated Value of Existing Raw Material Reserves 136

02/2: Source and Structure of Project Financing 137

03: Loan and Interest Service Schedule 138

04/1: Calculation of Working Capital: I Minimum Requirements of Current Assets and Liabilities 139

04/2: Calculation of Working Capital: II Consolidated Annual Income Estimates 140

04/3: Calculation of Working Capital: III Annual Production Cost – Estimates 141

04/4: Calculation of Working Capital: IV Working Capital Requirements 142

05: Fixed Assets and Depreciation Allowances 143

06: Change in Total Investment Costs 144

07: Change in Total Assets 144

08: Projected Cash Flow Table 145

09: Projected Cash flow Table and Calculation of Present Value 146

10: Projected Income Statement 147

11: Projected Balance Sheet 148

12: Projected Payback Period 149

13: Business Ratios/Ratio Analysis 150

14: Sensitivity Analysis 152

 xi
CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
F. LIST OF APPENDICES

S/NO. DESCRIPTION PAGE

I: Suppliers and/or Producers of Dairy/Dairy Packaging Equipment and other Material 153
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
1.0 EXECUTIVE SUMMARY

1.1 Introduction

This Business Plan by the Caremark Investments Limited envisages the establishment
of a mini-dairy processing enterprise at the Company‟s 40-Acre farm at Nyamuhuti
Village in Hakibale Sub-County of Kabarole District – 12 kms from Fort Portal on the
Fort Portal – Kijura road. The dairy farm belonging to Caremark Investments Limited
has an organic cattle herd comprising of mostly Holstein-Friesian breed of cattle that is
now producing 100 litres per day of fresh raw milk which is mostly sold to domestic-
level consumers and commercial dairy wholesalers/retailers operating in the Rwenzori
region of western Uganda. Caremark Investments Limited now wants to scale up its
dairy operations by establishing a yogurt and pasteurized milk processing facility as a
dairy hub capable of processing its own raw milk output and that of dairy out growers
within its neighbourhood catchment area through the installment of a mini dairy
processing that will not only add value in terms of product quality and volumes but
also enable the Company to process and sell a variety of other dairy products including
fresh pasteurized milk (30% of output), cheese (20% of output) and butter (1% of
output) on the domestic dairy products market. To be able to break-even and ensure
that the enterprise becomes commercially viable, proposes to commence production at a
daily rated input capacity of 2,000 litres per day (LPD) that will yield approximately
568,800 units of assorted dairy products per year.

1.2 Opportunity Rationale

Value-added processing of milk increases the shelf-life of milk by destroying certain

pathogens found in milk. The process involves heating of milk at to a specific high
temperature for a time period and then cooling it immediately. After completion of the
ultra-heat treatment process milk will be packaged into Tetra Brick aseptic packs of 1-
litre, ½-litre, and ¼-litre standard size for distribution through the established market
distribution network in Uganda, South Sudan, and eastern DR Congo. The unit will be
using modern automated machinery for all the processes, ensuring quality checks
throughout the production process.

The rationale for setting up the multi-line mini-dairy processing plant is:

 The estimated current market size for processed milk products is more than 30
million liters per annum; in addition, the market is growing at around 20% per
annum and is expected to maintain this growth rate for the next 5 years.

1
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
 The consumers have developed a taste for value-added milk products and also
for its variants like “flavoured milk”, etc.

 The Government of Uganda has launched a program to increase milk yield per
animal from the current 6 litres per day to 15 by 2020, in addition the GoU is
launching a mass consumer awareness program aimed at highlighting the
dangers of consuming raw unprocessed milk.

 The technology and the skills required for setting up a modern multi-line dairy
processing plant exists in Uganda. The first multi-line dairy processing plant
which was set up in 1977 (at the then government parastatal – Dairy
Corporation) is now operating as Brookside Dairy Uganda Ltd and has seen
continuous capacity increase over the years.

 The aseptic packaging which increases the shelf life of the composite dairy
products is ideally suited for the local climate in Uganda which is characterized
by high dry season temperatures.

1.3 Product Profile

The main products of the Caremark Investments Limited mini dairy plant [dairy
hub] will include:

 Fresh pasteurized milk packaged in 1000ml litre, 500ml and 250ml sachets. The
milk will be available as whole milk (3.4% fat), full cream (fat-rich) and slim-milk
(99.5% fat-free).
 Salted and unsalted butter that will packaged in 500g and 250g hygienic foil as
well as in 5kg cartons.
 Yoghurt, in cups of 500ml, 250 ml, 150ml and 100ml as well as in sachets of 400ml
in plain, vanilla, mango, butterscotch, banana and strawberry flavours.
 Soft (cottage cheese), semi-soft (munster cheese), and hard (cheddar cheese)
cheesesthat will be available in 500g and 1,000g packs.

Yogurt will represent the major business for Caremark Investments Limited, with 50
percent of the milk that will be processed daily being used to produce set and stirred
yogurt. 30 percent of the daily processed milk will go into production of fresh
pasteurized milk; while 20 percent of the daily raw milk input will be used to
manufacture cheddar cheese.

2
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
1.4 Target Markets & Product Distribution

The target markets are institutions, wholesalers (e.g. supermarkets and hypermarkets),
local urban markets, large contractual consumers, households, hotels, hospitals, offices,
schools, etc. The Company will cultivate its own niche dairy product markets in
Kampala that should provide it with a secure and reliable captive market of repeat
customers (end-market consumers) which it will capitalize on for future business
growth. Caremark Investments Limited shall ensure that the composite dairy products
it produces are of high quality and that standard specifications are met. The packaging
materials shall be attractive enough with a unique brand name for product
identification.

Well-known bulk purchasers shall be appointed as distributors with attractive rebates.

They will act as sales outlets for the product. Henceforth, there will be a need to
network with the various decision-makers/order-makers to ensure we receive orders
for our products.

1.5 Marketing Strategy

Our marketing strategy will be based mainly on ensuring that customers know about
our existence and the products we produce. Hence our intention is to make the right
information available to the right target customers. This will be done through
implementing a market penetration strategy that will ensure that we are well known
and respected in the market. We will ensure that our products' prices are favorable
relative to imported product prices, and that our potential customers appreciate the
quality of our products. However, the prices we charge will also take into consideration
the cost of production and distribution so as to ensure that we remain viable and
operational. In order to be competitive and have that cutting-edge market penetration
there will be need for us to not only aggressively market the high quality of our
composite dairy products, but also to go out of our way in serving our customers and
clients so as to establish a good long-term relationship.

1.6 Project Capacity & Production Plan

The proposed processing capacity of the multi-line dairy processing plant is 2,000 litres
per day in Project Year 2; 3,000 litres per day in Project Year 3; 4,000 litres per day in
Project Year 4; and 5,000 per day in Project Years 5 – 10. The plant will work in a single
8-hour shift and will commence operations at 40% of rated capacity in the second year
of the project. The mini dairy processing plant will also be closed for 8-hours a day for

3
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Cleaning-In-Place (CIP) operations to take place at the plant‟s premises since hygiene
standards in a dairy processing plant need to be at a premium and can never be
compromised.

1.7 Equipment & Materials

Since this project is a livestock-based industry, the essential raw materials needed in the
dairy farm production section including feeds, drugs and vaccines will be sourced and
procured locally form a wide variety of supply sources. Caremark Investments Limited
will be able to easily source and procure other vital composite dairy production inputs
such as packing materials, cleaning chemicals & detergents, disinfectants and other
dairy industry consumables from local suppliers in Uganda – who produce, stock, and
supply them in abundance in major towns including Kampala.

The mini-dairy processing plant and other essential dairy farm section equipment will
be sourced and procured from reputable suppliers or their Ugandan local agents for
easy follow-up after-sales servicing and support.

1.8 Personnel Compensation Policy

The Caremark Investments Limited intends to compensate its personnel well, so as to

retain their invaluable expertise and to ensure job satisfaction and enrichment through
delegation of authority. The company intends to achieve optimal productivity whilst
realizing the full potential of each of its employees through provision of health care,
generous profit sharing, plus a minimum of three weeks‟ vacation. Awards will be
given out to outstanding individuals for hard work and productions so as to not only
show our appreciation, but to instill a sense of fun into the work and promote the
maintenance of high standards.

1.9 Investment Cost & Financial Performance

The total project cost for setting up the Caremark Investments Limited mini-dairy
processing plant/dairy hub is estimated at UShs 2.057 billion. The project is to be
financed through 49.36% debt and 50.64% equity. The project NPV is around UShs
6.340 billion at a discount factor of 17%, with an IRR of 66.06%, payback period of 3.20
years and Break-even capacity utilization of 18.62%. The legal status of this business is
proposed as „Limited Liability Company‟.

4
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
The total capital investment cost in existing and planned land assets, existing livestock,
dairy processing plant, plant buildings, other equipment, vehicles, and office furniture
and equipment is UShs 1.655 billion approximately, while the margin money for
working capital and physical contingencies is approximately UShs 402 million.

We project a dairy product sales turnover to increase from more than UShs 2,383
million in the first year (Project Year 2) to slightly more than UShs 7,075 million in the
fourth year (Project Year 5), and UShs 9,486 million in the ninth year (Project Year 10).
Out of these amounts, pre-tax profits (operating profits) increase from UShs 702.89
million in Project Year 2 to UShs 5,373 million in Project Year 10.

Relevant ratios such as the percentage of net profit to total sales, return on equity and
return on total investment show promising returns (Refer to Schedule 13 on pages 150 –
151).

Investment cost and income statement projection are used in estimating the project
payback period. The projects will payback fully the initial investment in 3.20 years
(Refer to Schedule 12 on page 149).

Ultimately the attractiveness of our venture lies with the fact that customers will choose
our products above those of competitors because of the competitive prices as well as
their high quality. Hence, the Caremark Investments Limited's ongoing initiatives will
be to drive sales, market share and productivity so as to provide additional impetus
towards attainment of the corporate goals and objectives. Investment in this project is a
step in the right direction.

NOTE: All currency figures in this plan are in Ug Shillings („000s).

5
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Table 1: Key Project Performance Parameters (UGX „000s)
KPI/Year Year 2 Year 3 Year 4 Year 5
Sales 2,383,200 3,784,320 5,343,192 7,075,013
Operating Profit 702,894 1,474,663 2,445,888 3,588,870
Tax 531,672 1,239,463 2,225,088 3,382,470
Net Profit / [Loss] 372,170 867,624 1,557,561 2,367,729
Gross Margin 77.57% 78.20% 79.41% 80.56%
Operating Margin 29.49% 38.97% 45.78% 50.73%
Net Margin 15.62% 22.93% 29.15% 33.47%
Return on Investment 18% 42% 75.73% 115%
Fixed Assets Turnover 1.43 2.18 3.07 4.21
Debt Coverage Ratio 3.56 4.67 8.04 12.46
Times Interest Earned Ratio 5.80 12.80 24.26 41.54

Break-even Point (BEP): UGX 1,317,166,000 at a capacity utilization of 18.62%

Payback Period (Loan): 3.20 Years
NPV at 17%: UGX 6,340,336,000
IRR: 66.06%

Figure 1: Performance Highlights (PY2 – PY6)

Sales Gross Margin Net Profit

8,000,000
7,000,000
6,000,000
5,000,000
UShs '000s

4,000,000
3,000,000
2,000,000
1,000,000
0
PY 2 PY 3 PY 4 PY 5 PY 6

6
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
1.10 Keys to Success

 High level quality control.

 Another important aspect is the quality check at different stages of the composite
dairy products production and sales chain. This is very important because there
is a need to check and ensure that the company composite dairy product
distributors do not supply poor quality to compromise the standards and quality
of our products.
 Individualized customer service - providing our customers with what they want,
when and how they want it.
 Fully integrated distribution channels to help customers increased access to
Caremark Investments Limited dairy products.
 Smart composite dairy product distribution networks will also play an important
role in the success of this business.
 Integrating the changing market fundamentals into the business.
 Long-term partnership with both farmers and our customers so as to acquire
guaranteed market.
 The commercial viability of this project depends upon the availability of regular
dairy production raw material supply.
 To establish a brand name, aggressive marketing efforts are recommended.

1.11 Objectives

 Build our own high quality brand of composite dairy products for both the local
and international market within the next 2 years to average daily sales volume of
3,000 liters of composite dairy products.
 To provide high quality and reliable supply of composite dairy products for both
retail/wholesale and value-added milk product consumers in Uganda.
 Achieve first year (Project Year 2) EBIT (Earnings before Interest and Tax) of at
least UShs 700 million.
 To fulfill all the customer orders and quality standards within the first year of
business operation.
 To provide innovative support.
 To improve the quality of raw milk produced at the farm-cum-industry by
applying advanced zero-grazing techniques.
 To reduce cost of raw material inputs.
 Boost productivity.

7
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
1.12 Mission

 Caremark Investments Limited plans to develop strong relationships with key

dairy products customers so such that the Company can be viewed as an
indispensable partner, rather than just another milk procurement and processing
enterprise.
 Caremark Investments Limited will work closely with each customer to
recommend product requirements unique for their retail and wholesale base,
appropriate stocking levels and pricing in order to increase sales.
 Caremark Investments Limited will seek out and work with the other dairy
farmers and other milk suppliers as the Company will represent to introduce the
highest quality product and offer timely payments and seek most improved
methods to increase production. The Company will not only be selling a
processed and value-added milk product, it will also be selling service and
improving the livelihood of the dairy farmers and milk consumers who have had
limited options.

8
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
2.0 PURPOSE OF THE DOCUMENT

The objective of this Business Plan is primarily to facilitate the project promoter
(Caremark Investments Limited) and project financiers with the investment
information and provide an overview of a "Small-scale Dairy Products Industrial
Enterprise". The project Business Plan may form the basis of an important investment
decision and in order to serve this objective, the document/study covers various
aspects of project concept development, start-up, and marketing, finance and business
management. The document also provides sectoral information which has some bearing
on the project itself.

The purpose of this document is to facilitate potential investors of the Caremark

Investments Limited by providing them a macro and micro view of the business with
the hope that the information provided herein will aid the project promoter in crucial
investment decisions.

The Business Plan report is based on the information obtained by the Project
Consultant (PC) from industry sources as well as the PC‟s discussions with
businessmen in the Ugandan dairy sub-sector. For the financial models, since the
forecast/projections relate to the future periods, actual results are likely to differ
because of the events and circumstances that don‟t occur as frequently as expected.

9
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
3.0 INTRODUCTION

3.1 Importance of the Livestock Sector in Uganda

Agriculture is the mainstay of the Ugandan economy, providing 14% of Gross Domestic
Product, 85% of total export earnings, 73% of total employment, and the bulk of the raw
materials used by the mainly agricultural-based industrial sector1. The livestock sub
sector contributes 18% of agriculture gross domestic product (GDP) and between 7%-
9% of the national gross domestic product (GDP). Of the GDP attributed to the livestock
sub sector the dairy sector is estimated to contribute up to 45% and plays an important
role as a source of food, income and employment. Livestock is the main supplier of
basic raw material to the Ugandan food processing industry, with milk being the most
important sub-sector; the value of milk produced is higher than the value of two major
crops, i.e. maize and cotton.

3.2 Dairy Sector

A fast growing sector: The dairy sector is growing at an annual rate of 8-10 percent per
annum. This growth is even faster within the processed milk category, estimated at
about 11percent per annum. Growth is driven by a robust and unfulfilled level of
demand for milk products in the country and the region. The per capita consumption of
milk products is a mere 58 litres/person/year, far lower than the 100
litres/person/year in neighbouring Kenya or the 200 litres/person/year recommended
by FAO. The market has the potential to consume more milk.

The formal and informal segments are both important in the subsector: 80 percent of
all milk produced is offered for sale to the market, and this amounts to 2.0 billion litres
projected for 2018. This milk is retailed to the consumer through two different and
distinct segments: (i) the formal and (ii) the informal segments. The formal segment
deals with the processed milk, and includes various products such as: pasteurized milk,
UHT, yoghurt, Ice creams, powder milk and cheeses. The informal sector on the other
hand deals primarily with the sale of raw milk.

Important developments in the informal segment: The informal segment has

traditionally been characterized by minimal processing, but increasingly informal
segment actors are regularizing their businesses through registration of limited liability
companies, licensing and adopting the use of appropriate technologies. The informal
segment is massive- and is where up to 90 percent of all the milk is traded. It is of such

1Data 2010, World Bank.

10
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
significance and size because it provides a need that the formal segment cannot-
ensuring that milk is readily available and cheap, thereby meeting the needs of most
low income households.

There are hundreds of homestead and backyard processors of various products

including ghee, cheese, and chilled raw milk. There is however a growing number of
cottage industry actors that have formalized their status and an estimated 35 are now
registered with the Dairy Development Authority (DDA). These actors who are
increasingly adopting appropriate technology present extremely attractive
opportunities for trade.

Export potential: The export market for milk exists, but is constrained by low level of
supply. About 66 million litres of UHT- the primary milk export product - were
exported in 2018, amounting to only 10 percent of all processed milk. The main regional
export markets are Kenya, Democratic Republic of Congo, Southern Sudan, and
Tanzania. The biggest milk processor, Brookside Dairy Limited, claims to have existing
markets in 17 countries, but is constrained by low supply in servicing these countries.
Informal export trade goes on across all borders of Uganda.

The main milk production areas: For the purposes of measuring milk supply, the
country has been divided into a number of “milk sheds” including: (i) the South West
(ii) the Midwest (iii) Central (iv) Eastern (v) Northern and (vi) Karamoja (Northeast).
The southwest and central regions together produce almost 50 percent of the 1.8 billion
litres of milk produced (as at 2012) - and together with the Midwest are considered milk
surplus regions. The Eastern and Northern regions do not produce enough milk relative
to their level of consumption and are considered milk deficit regions. Karamoja
produces the least amount of milk, which is all consumed within the region.

Improved dairy breeds and MCC‟s required drivers of growth: The high supply
performance of the Southwest and Central regions is largely attributed to the higher
presence of improved local and exotic dairy breeds, and particularly in the case of the
South west, the extensive cold chain infrastructure of milk collection centres (MCC‟s)
that have been set up (MCC‟s in Southwest: 69%, Central: 12%, Midwest 12%, North 3%
and East 3%). The low level of MCC infrastructure is one of the biggest constraints to
the increased competitiveness of the dairy value chain.

Key actors in the dairy value chain: Key Actors in the dairy value chain include the (i)
large scale processors, (ii) the small processors/cottage industry (iii) transport chain
actors (iv) farmers, and (v) regulators among others. Currently, Uganda has 100

11
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
operational milk processing companies (large scale, medium scale, small scale
and cottages) with a total installed capacity of 2.7 million litres per day. Six of these are
large scale operators and the rest are mini dairies. Most factories operate significantly
below capacity- although there is an increasing trend in capacity utilization –now at
about 68 percent.

Brookside Dairy Uganda Ltd significantly influences the industry: Brookside Dairy
Uganda Ltd [Fresh Dairy] is the biggest and most influential processor, with installed
capacity of 560,000 litres, with the biggest fleet of transportation tankers and MCC‟s.
Brookside Dairy Uganda Ltd as a result influences all the activity in the market
particularly the retail price and the farm gate price.

JESA demonstrates that the integrated model works: Jesa the other processor worth to
mention as it has a 100,000 litre a day processing facility, which is supplied over 50
percent from an own dairy farm. With many years of successful operation, Jesa
demonstrates that an integrated dairy farm/Processing model can be successful. Jesa
commands a sizeable portion of the Kampala processed milk market, and is able to offer
premium prices to its growing out grower dairy farmers.

Types of dairy products, upcoming new products and consumer markets: 80 percent
of all processing activity is applied towards the manufacture of pasteurized milk,
followed by yoghurt production. Only 5 processors have the capacity to produce UHT
milk, and only Brookside Dairy Uganda Limited [Fresh Dairy] has a milk powder plant
currently- although a new milk powder plant has been established by Pearl Dairy
Farms Limited in the Southwest.

Increasing growth in milk production, the role of small farmers: Dairy farmers are
largely small holder farmers. Many produce for home consumption and only offer the
available surplus to the market. Most rely on the traditional indigenous herd, known to
have very low productivity. Increasingly however cross breeding of local breeds with
especially the Friesian, has led to increasing productivity particularly in the Southwest,
Midwest and Central regions. This explains to a great extent the high growth in milk
production (8-10%) relative to growth in cattle population (3%). Another promising
feature of the farmer landscape is the increasing involvement of women. Increasingly
women are being supported through NGO and government efforts to own pure diary
breeds managed on zero grazing units. This is appropriate especially for such farmers
who often have small landholdings.

12
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Farmers becoming more organized: Farmer organisation under associations and
cooperatives is a significant feature in the highly successful milk sheds. Farmers in the
South-west milk shed are organized into a very well structured cooperative union
registered at the national level. The impact and benefits of this are clear. Not only are
they ably accessing good markets, they have grown strong enough to develop plans to
set up their own dairy processing plant. It is also easier for such farmers to receive
appropriate support from national and international development actors. The success of
UCCCU, the successful cooperative union in the South-west, is yet to be properly
replicated in other regions.

There is an existing and effective regulatory process, with the DDA set up as a semi-
autonomous body responsible for the regulation, coordination and harmonization of
the dairy sector.

Main constraints in the dairy sector performance: A summary of the constraints to

increased dairy value chain performance and competitiveness are:
1. Low animal productivity due to low genetic potential, poor feeding and
animal health
2. Low adoption of improved management practices and technologies
3. Infrastructure for collection, storage and chilling of milk is extremely limited
across the entire country.
4. Limited incentives for small holders and loose milk traders to participated in
the formal segment.
5. Unavailability and inaccessibility of essential services including: extension
services, financial services, input supply, and business development services.
6. Young associations and cooperative movement.
7. Lack of specialized animal breeders while national body NAGRIC is severely
incapacitated.

Where are the investment opportunities in the diary sector?

The Windows of Opportunity sighted for the diary Sector include the following:
1.0 Investment in Milk Collection Centres
2.0 Investment in Supply Milk Tankers
3.0 Investment in unpackaged pasteurized milk distribution system
4.0 Upgrade of Informal Actors into Mini Dairies
5.0 Upgrade of existing dairy plants
6.0 Investment in Integrated farming/processing dairy business
7.0 Investment in transportation tanker cleaning facility.

13
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
3.3 Objective and Scope of the Study

The purpose of this Business Plan is to establish the need for setting up of a small-scale
dairy products industrial enterprise to avail more than 20 percent growth per annum in
the dairy sector. The purpose of the project is to establish and operate a dairy products
processing enterprise capable of processing of more than 720,000 litres (in Project Year
2) of fresh milk into a variety of marketable dairy products including pasteurized milk,
cheese, butter and yogurt products for sale on the fast-growing Ugandan dairy
products market. All the proposed dairy primary and secondary products will be
processed on site (i.e. at Caremark Investments Limited‟s 40-acre farm at Nyamuhuti –
Hakibale in Kabarole District).

The scope of the study is thus to undertake, inter alia, need assessment, technical
evaluation, assessment of governance and management structure and financial
evaluation of the project, on the basis of which recommendations are to be developed
for setting up the said project.

3.4 Methodology

The methodology employed for this study consists of review of published data as well
as exhaustive interviews of the stakeholders including farmers, dairy experts, dairy
marketing companies, dairy processors, multilateral agencies and Government of
Uganda officials as well as those belonging to the Ministry of Agriculture Animal
Industry and Fisheries (MAAIF). Lastly, we would like to bring on record the
cooperation extended by those individuals and companies who though no longer
associated with the Industry, were willing to share their opinions and experiences to
facilitate new entrants coming into the industry.

The data collected has been analyzed using quantitative and qualitative techniques,
where required necessary assumptions have been made which have been mentioned in
the report.

14
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
4.0 PROJECT PROFILE

4.1 Project Technical Brief

This project is about the setting up and operation of a mini-sized composite dairy
products processing plant at Nyamuhuti–Hakibale in Kabarole District and markets
the products under a brand name of Caremark Investments Limited.

Milk is the first food man takes on birth, is a „treasure-trove‟ of more than 200
ingredients, many with unique functional and nutritional properties which modern
processing is capable of isolating and refining for a multiplicity of uses in the food and
related industries.

Pasteurization is used to kill micro-organisms by heating the milk for a short time and
then cooling it for storage and transportation. Pasteurized milk is still perishable and
must be stored cold by both suppliers and consumers. Dairies print expiration dates on
each container, after which stores will remove any unsold milk from their shelves.

The highest quality milk shall be used for yogurt production as poor bacteriological
quality inhibits the growth of the yogurt culture during incubation. Residues of
penicillin and cleaning and sterilizing solutions also impede culture growth. For low-fat
or fat-free yogurt production the milk fat content of the milk is standardized by
separating off some, or all of the fat. A normal (full-fat) yogurt has butterfat content
greater than 3%. The fat content of a low-fat yogurt is greater than 1.5%, and for a fat-
free yogurt about 0.1%.

Yogurt/Ice Cream and Pasteurized milk processing in particular use similar equipment
and have in general terms less technological demands and provide faster cash turn
around with significantly less working capital requirements than cheese. For this
reason, these products have been grouped together.

4.2 Current Activities

The current activities at the farm comprise of dairy farming using a mixed herd of
Holstein-Friesian hybrid and cross-breed varieties. With a current herd stock of 40
animals, Caremark Investments Limited currently produces about 100 litres of fresh
raw milk daily with a potential to increase it three-fold with better pasture irrigation
and dairy farm management techniques.

15
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Caremark Investments Limited presently has a number of equipment and physical
infrastructure on the farm including: a cow milking parlour, a solar powered electricity
system, livestock water troughs and feeding troughs, a cattle feeding barn, a calf-
rearing pen, and several other livestock farm structures that have been progressively
put up on the farm since 2015 when it was first established.

4.3 Farm Performance History

Caremark Investments Limited is a 40-Acre sized farm that started off as a modest
livestock farm way back in 2015 with a dairying herd of only about 20 heads of cattle of
the cross-breed local/Holstein-Friesian type. Over time, as a result of the rapidly-
changing dynamics of the livestock market in Uganda and the dictates of the domestic
market economy, the composition of cattle on the farm gradually evolved to mostly the
higher milk-yielding cross-breed local/Holstein-Friesian breeds by 2017 and this same
herd composition structure has been maintained up to this very day.

Driven by her strong interest and passion in dairy farming, the project promoter of
Ceremark Investments Limited, Ms Irene Birungi took a further step to expand the
grazing area for her dairy herd in 2017 by leasing an additional 40 acres within the
neighborhood of the nucleus dairy farm at Nyamuhuti – Hakibale. Besides providing
additional rangeland space upon which to make future expansion for the proposed
dairy hub activities such as acquisition of additional dairy cattle stock and production
of cattle fodder crops like maize, such a space will make it possible for Ms Irene
Birungi to have sufficient space upon which to install dairy hub plant building
infrastructure and the associated mini-dairy plant equipment and machinery as
proposed in this Business Plan. It is also worth noting that Ms Irene Birungi has so far
not received any form of input support from NAADS towards the sustained
development of the Ceremark Investments Limited dairy farm at Nyamuhuti –
Hakibale with all the developments that have taken place at the dairy farm since 2015
being solely through her own efforts as well as personal inputs and savings – which is a
telling indication of the amount of passion and zeal she puts into dairy farming as a
commercially viable agri-business enterprise.

However, over the 2015 – 2018 period, Caremark Investments Limited has been able to
put up a variety of other useful on-farm structures such as a milking parlour, a cattle
feeding barn, a calf-rearing pen, and hay/cattle fodder silos that have substantially
lifted the quality and quantity of milk produced at the farm from the previous 60 litres
per day in 2015 to the present 100 litres per day to date.

16
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
4.4 Objectives

 Build our own high quality brand of composite dairy products for both the local
and international market within the next 2 years to average daily sales volume of
3,000 liters of composite dairy products.
 To leverage the existing dairy farm infrastructure and management expertise of
Caremark Investments Limited as a nucleus for establishment and sustained
growth of a dairy hub in the Rwenzori region that is able to bulk and make
value-added primary processing of other dairy producers‟ milk output in the
budding Rwenzori milk shed area.
 To provide high quality and reliable supply of composite dairy products for both
retail/wholesale and value-added milk product consumers in Uganda.
 Achieve first year (Project Year 2) EBIT (Earnings before Interest and Tax) of at
least UShs 700 million.
 To fulfill all the customer orders and quality standards within the first year of
business operation.
 To provide innovative support.
 To improve the quality of raw milk produced at the farm-cum-industry by
applying advanced zero-grazing techniques.
 To reduce cost of raw material inputs.
 Boost productivity.

4.5 Mission

 Caremark Investments Limited plans to develop strong relationships with key

dairy products customers so such that the Company can be viewed as an
indispensable partner, rather than just another milk procurement and processing
enterprise.
 Caremark Investments Limited will work closely with each customer to
recommend product requirements unique for their retail and wholesale base,
appropriate stocking levels and pricing in order to increase sales.
 Caremark Investments Limited will seek out and work with the other dairy
farmers and other milk suppliers as the Company will represent to introduce the
highest quality product and offer timely payments and seek most improved
methods to increase production. The Company will not only be selling a
processed and value-added milk product, it will also be selling service and
improving the livelihood of the dairy farmers and milk consumers who have had
limited options.

17
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
4.6 Business Legal Aspects

Caremark Investments Limited is a limited liability company that was incorporated in

the Republic of Uganda on the ------ (Date) of -------------- (Month), 2015. The company
Registration Number of is ----------. The company‟s authorized share capital is UG Shs.
10,000,000/= made up of 100 Ordinary Shares of UG Shs. 100,000/= each. The company
has 4 shareholders and 2 directors.

Caremark Investments Limited comes into this composite dairy processing project
with an equity capital base of UGX 1,041.60 million. The Company has 4 principal
shareholders with share ownership as follows:

Table 2: The Company Shareholders

Shareholder Shares held (%age)
1. Ms. Irene Birungi 60 60%
2. ------------------------ 20 20%
3. ------------------------ 10 10%
4. ------------------------ 10 10%
Total 100 100%

4.7 Project Location

Caremark Investments Limited dairy farm is the proposed site for the dairy processing
plant. It is located at Nyamuhuti Village in Hakibale Sub-County of Kabarole District.
The farm is located approximately only 12 kms from Fort Portal on the Fort Portal –
Kijura road and is therefore in an ideal location for inward delivery of dairy processing
raw material inputs and outward movement of manufactured industrial products to
both the domestic and export markets. The land is also within easy proximity access of
the electricity mains grid that runs along the Kampala – Fort Portal highway and also
has access to clean and potable water supply.

4.8 Opportunity Rationale

In Uganda only 3-4% of the total milk is processed and marketed through formal
channels whereas the remaining 97% of the milk reaches end users for immediate
consumption through an extensive, multi-layered distribution system of middlemen.
However the processed milk consumption is growing at the rate of 20% per year.
Pasteurized milk and Extended Shelf Life (ESL) milk products like yogurt, butter and
cheese are becoming very popular products. The demand is increasing with the
increasing awareness among the consumers. Also the mass sale of unhygienic,
18
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
adulterated milk by milk traders is letting the urban low-income segment to gradually
shift from home delivered adulterated milk to self-purchased pasteurized milk and
Extended Shelf Life (ESL) milk products like yogurt, butter and cheese from branded
milk shops.

4.9 Proposed Capacity

The proposed Caremark Investments Limited will have a maximum capacity to chill
and process 5,000 litres of raw milk per day or 1,800,000 litres of milk per annum into
various value-added dairy products including: pasteurized milk (30 percent of output),
cheese (20 percent of output), butter(1 percent of output), and yogurt (50 percent of
output). At full capacity utilization, this translates to 513,000 litres of pasteurized milk
per annum, 36,000 kgs of cheese per annum, 18,000 kgs of butter per annum, and
855,000 litres of yogurt per annum.

4.10 Total Project Cost

The total capital investment of the proposed Caremark Investments Limited is UShs
2.057 billion and is comprised of the project promoter‟s equity input, land and site
development building & civil infrastructure development, purchase and installation of
plant equipment and machinery, construction of a yogurt cold-room, purchase of an
industrial electric generator, transportation vehicles, office furniture & equipment and
working capital and contingency expenditure budget. A sum of UShs 401,765,000 is
required as contingency expenses and working capital, which will be used to finance a
range of the proposed dairy hub‟s start-up costs including: acquisition of dairy
processing licenses and permits; initial marketing promotion expenses; dairy hub
insurance cover; payments for business consulting services; 3 months advance rental
payments for the dairy hub‟s market retail outlet in Kampala; cover for operational
costs for the first 3 months of business; financing of start-up inventory; acquisition of
storage equipment and hardware; acquisition of customer counters and POS [Point-of-
Sale] systems; and other start-up miscellaneous expenses.

19
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Table 3: Total Initial Project Investment Cost (UShs „000s)
S. No. Project Investment Component Share Equity Loan Finance Total
Capital Finance
1 Existing Land (40 Acres) 9.72% 200,000 0 200,000
2 Cattle (40 heads) 3.89% 80,000 0 80,000
3 Land and Site Development 3.94% 80,975 0 80,975
4 Buildings & Civil Works 15.75% 323,900 0 323,900
5 Yoghurt Cold Room (US$ 100,000) 17.99% 0 370,000 370,000
6 Machinery & Equipment 22.86% 0 470,220 470,220
7 Industrial Generator 20 kVA 3.65% 0 75,000 75,000
8 Vehicles 1.70% 35,000 0 35,000
9 Office Furniture & Equipment 0.97% 20,000 0 20,000
10 Sub-Total 80.47% 739,875 915,220 1,655,095
11 Physical Contingency (5%) 4.01% 82,505 0 82,505
12 Working Capital 15.52% 219,260 100,000 319,260
13 TOTAL PROJECT FUNDING 100.00% 1,041,640 1,015,220 2,056,860
14 %age of Total Project Funding 50.77% 49.23% 100.00%

20
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
5.0 PRODUCTS & SERVICES

5.1 Dairy Products

The main products of the dairy section of the proposed Caremark Investments
Limited will include:

 Fresh pasteurized milk packaged in 1000ml litre, 500ml and 250ml sachets. The
milk will be available as whole milk (3.4% fat), full cream (fat-rich) and slim-milk
(99.5% fat-free).
 Salted and unsalted butter that will packaged in 500g and 250g hygienic foil as
well as in 5kg cartons.
 Yoghurt, in cups of 500ml, 250 ml, 150ml and 100ml as well as in sachets of 400ml
in plain, vanilla, mango, butterscotch, banana and strawberry flavours.
 Soft (cottage cheese), semi-soft (munster cheese), and hard (cheddar cheese)
cheeses that will be available in 500g and 1,000g packs.

Yogurt will represent the major business for Caremark Investments Limited, with 50
percent of the milk that will be processed daily being used to produce set and stirred
yogurt. 30 percent of the daily processed milk will go into production of fresh
pasteurized milk; while 20 percent of the daily raw milk input will be used to
manufacture cheddar cheese.

5.2 Quality Control

The proposed Caremark Investments Limited will put up a fully-equipped laboratory

facility with all the desired quality checks parameters at its farm/plant site at
Nyamuhuti – Hakibale. Guided by the Uganda National Bureau of Standards
(UNBS), the proposed Caremark Investments Limited will set minimum quality
standards which must be met. In order to be able to achieve full economies of scale, the
proposed Caremark Investments Limited will have to apply the highest standards so
that it can serve all its customers with good quality processed dairy products. Quality
parameters set by its customers will be given to its staffs as a bench mark working
document. The proposed Caremark Investments Limited will therefore implement a
system of carrying out lab tests after every thirty minutes so as to assess the quality
status of the raw milk inputs and the processed dairy product outputs. Quality control
literature will be distributed to all the staffs engaged in the production, handling and
transporting of the dairy products. Current and potential customers will be included in
the circulation and updated on the additional products and services being added.

21
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
The proposed Caremark Investments Limited will ensure that it meets all the quality
standards as regulated by Uganda National Bureau of Standards and its ultimate goal
is to achieve ISO certification by the 3rd year of operation.

22
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
6.0 THE DAIRY INDUSTRY IN UGANDA

6.1 Macro-Economic Developments

Macroeconomic performance

Real GDP growth was an estimated 5.3% in 2018, up from 5.0% in 2017. On the supply
side, industry (9.7% growth) and services (8.2%) contributed considerably, while
agriculture showed slower growth (4.5%). On the demand side, greater investment in
public infrastructure was the main contributor to growth, while the current account
registered a deficit due to growing imports of capital goods, thereby stymieing growth.

The fiscal deficit widened to an estimated 4.7% in 2018, driven largely by ongoing
public infrastructure investments supported by borrowing from both external and
domestic sources. The country‟s debt-to-GDP ratio was estimated at 40.0% in 2018, with
external debt at 28.1% of GDP. The 2017 debt sustainability assessment indicated that
Uganda is at a low risk of debt distress. Inflation fell to an estimated 3.2% in 2018, due
mainly to lower food inflation and prudent monetary policy.

Tailwinds and headwinds

Real GDP growth is projected to improve to 5.5% in 2019 and 5.7% in 2020. Increased
infrastructure investment, foreign direct investment in the oil and mining subsectors,
and reforms to improve the business environment will drive stronger growth over the
short and medium term. The current account deficit is projected to stabilize at 4.9% in
2019 and further weaken to 5.4% in 2020, and the fiscal deficit is projected to further
narrow to 4.4% in 2019 and 4.3% in 2020. Headline inflation is projected to increase to
4.3% in 2019 and 4.8% in 2020.

Downside risks include adverse weather shocks, given agriculture‟s high reliance on
rain, and the slow implementation of infrastructure projects. Despite the government‟s
recent large public infrastructure investments, the quantity and quality of transport,
water and sanitation, energy, and agriculture infrastructure remain inadequate to meet
the country‟s economic transformation and development objectives. The country
continues to face shortages of skilled labor, especially in services and manufacturing,
and several business climate challenges that undermine competitiveness: heavy
burdens of regulations for registering and obtaining trading licenses and a high
administrative burden of taxes.

23
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Agriculture remains a strategic opportunity for spearheading the government‟s
development objectives. Uganda is abundantly endowed with natural resources,
including oil, gas, and mineral resources and a natural habitat for diverse wildlife that
could support the tourist industry. The country continues to post high economic growth
and price stability driven by prudent macroeconomic policies. And its strategic location
allows it to be accessible to Central and East African markets, including Common
Market for Eastern and Southern Africa members, making it a possible transportation,
logistics, and transit hub for regional trade.

The strategy of the Ugandan government is to build on the positive trends by;

 Investing more in infrastructure (energy and roads)

 Human resources (education and health).
 Agriculture productivity and value addition.

Government Intervention in the Agricultural Sector

Increasing Agricultural Production and Productivity:

Agricultural production and productivity remains unacceptably low, yet the sector
employs 85% of Ugandans. During the medium term additional resources will be
allocated to interventions that increase production and productivity for both farm and
non-farm activities so as to increase employment and consequently incomes of rural
households.

The medium term funding priorities in the agricultural sector will focus on the
expansion of National Agricultural Advisory Services (NAADS) to reach all sub-
counties, provision to farmers of necessary inputs, and investing in agro-processing and
marketing. Supply of improved varieties and inputs to farmers within NAADS will be
linked to Savings and Credit Cooperative Organizations (SACCOs) and marketing co-
operatives.

The agricultural sector will focus on the following emerging priorities for the medium
term: Institutional Reform and Strengthening, especially MAAIF; Water for Agricultural
Production; Strengthening of the capacity for Strategic Agricultural Planning,
Strengthen Agricultural Advisory Services; Primary and Middle-level Agricultural
Processing and Marketing; Provision of Physical Agricultural Infrastructure; Epidemic
Diseases, Parasites and Pest Control; Quality Assurance and Regulatory Services; and
Provision of Improved seeds, Planting and Stocking Materials.

24
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Strengthening and Expanding Rural Financial Services: With the appropriate
institutional framework now in place, Government plans to focus its efforts in FY
2008/09 on consolidating the creation of a nationwide network of rural financial
institutions. This will be done by:

a. Strengthening Uganda Cooperative Savings and Credit Union (UCSCU) to

deliver on its mandate including the establishment of 15 regional branches,
following the attention accorded to its headquarters during FY2007/08. These
branches will subsequently be transformed into regional networks of UCSCU.
b. Supporting MSCL to strengthen its regional offices and to increase them from the
current number of 12 to15. Each of these offices will be given a credit loan of
UShs 500 million, and will have authority to approve and disburse loans of up to
UShs. 50 million to qualifying SACCOs at any one time.
c. The Rural Financial Services Programme (RFSP) will also focus on the
operationalization of the SACCO Specific Act 2008 and the SACCO Regulations
2008. The key area of attention will be the establishment and operationalization
of the SACCO Regulatory Agency (SRA). A study will be carried out to
determine the financial and human resource implications of the Agency.
Thereafter, attempts will be made to operationalize it. Furthermore, efforts will
be made to ensure that SACCOs begin to comply with the new law once it takes
effect.
d. The RFSP will also focus on the regulation of the remaining institutions under
Tier 4, which include the Non-deposit taking MFIs, the micro finance NGOs, and
the privately owned wholesale lending institutions. A framework will also be
provided for the operations of the Rotating Village Savings and Credit
Associations(ROSCAs) and the Village Savings and Loan Associations (VSLAs)
e. The RFSP will develop a monitoring and evaluation system that will help in
reporting the progress of the programme. Specifically, a survey of all micro
finance institutions will be carried out to determine its size and its impact on
household income.

Expanding Market Access: As parts of its efforts to draw in more farmers into
commercial agriculture,

Government plans to:

a. Refurbish a total of 173 commodity stores;
b. Construct 10 warehouses at Sub-county/LC III level;
c. Extend support to the operations of the Uganda Commodity Exchange (UCE).

25
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Loan Guarantee Scheme: Government plans to support a Loan Guarantee Scheme for
commercial banks that provide credit to agricultural and agro-processing projects. This
will be available for projects appraised and vetted by commercial banks for which the
scheme will guarantee 50% of the lending.

6.2 Overview of the Dairy Sector

The dairy sector is one of the critical sectors in Uganda, COMESA and East African
Community (EAC), with high potential for improving food security and welfare. Recent
analysis provides clear evidence of increasing demand for dairy products (and other
foods of animal origin) in Sub Saharan Africa (SSA) and other developing regions of the
world as a result of rapid population growth, urbanization and increasing purchasing
power.

In Uganda, dairy production takes place under any of the following four categories of
farming systems;

Zero grazing (i.e. the cow is fed exclusively on concentrates; no grazing). Refers to the
confinement of a few animals in a small enclosure where feeds or fodder and water are
brought to the animals. According to study done by Mbabazi Pamela (2005), at least
20% of low income households in Ankole have received a zero-grazing cow not only
from government but also from such organizations as Send A Cow (UK) and Heifer
International Project. The advantage of this grazing system is that people without much
land for grazing are able to raise cattle to produce milk for home consumption and to
earn an income. This system is widely practiced in Uganda especially is the Eastern,
Western and Southern Western regions.

Fenced/paddock grazing (i.e. grazing cattle in paddocks or/and feeding them with
concentrates) is a common farming practice in areas where the land holdings are fairly
small. This type of grazing requires land clearing and improved pasture. It‟s largely
practiced by farmers of hybrid and cross-breed cattle and has expanded rapidly with
the liberalization of the economy which has resulted in the need to make farms
economically viable. In order to increase production, dairy farmers have planted
legumes, elephant grass and alfalfa for their cattle.

Free range grazing (i.e. grazing cattle by moving them all over the farm). Traditional
practice especially in the extensive grasslands in the Southern part of Uganda. The
farmland is often not paddocked, but the boundaries are fenced with a local plant. The
daily routine of open grazing is morning milking, grazing, watering evening milking

26
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
and late evening grazing. This system is being phased out because of the sensitive
nature of land encroachment.

Communal grazing (i.e. pastoral grazing on communal land owned by clan).Still

practiced in North- Eastern part of Uganda (Karamoja, Kotido, Moroto, Amuria, and
Soroti). The government is discouraged this system of cattle grazing, but culture still
overrides government initiative.

Uganda produces a variety of milk products; these include pasteurized milk, UHT milk
(long life milk), cheese, yoghurt, cultured milk, butter, ghee, creams and ice cream. A
substantial amount of milk and milk products is also imported indicating that the
domestic production is not sufficient to meet market demands. Uganda also exports
dairy products mainly to the regional market. The annual growth rate of milk
production between 2001 and 2017 has been 9 percent leading to total national milk
output growing from 900 million litres in 2001 to 1,800 million litres in 2012 and up to
2,200 million litres in October 2018. Dairy farming is concentrated in the cattle corridor
districts of Uganda which stretch from the south western region through central to
north eastern. On average, 60 percent of the households in the cattle corridor.

The cattle population in Uganda in 2016 was 14.368 million with the indigenous lot
accounting for 93 percent while the exotic and crosses accounting the balance. Because
of the high productivity associated with intensive dairy farming methods such as zero
grazing of improved breeds. Most farmers have adopted modern farming techniques at
various levels of production.

The population of goats has also increased from 5.8 million in 1997 to over 15.725
million in 2016 according to the Uganda Bureau of Statistics [UBOS] Statistical Abstract
2017. The number of the exotic dairy goats has proportionately increased with Kasese
continuing to lead in this area. Most of the milk produced by the goats is, however,
consumed at household level with minimal processing.

Within the livestock industry, dairy development continues to receive the greatest
attention in the development of the animal industry in Uganda. Consequently, as of
2017, per capita milk consumption in Uganda stood at 62 liters, up from 25 liters in
1986. 80 percent of the milk produced is marketed while 20 percent is consumed by the
farming households. 33 percent of the marketed milk is processed, while 67 percent is
sold as raw milk.

27
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
The productivity of smallholder dairy farms is generally low. Small-scale producers are
facing many challenges/constraints, which are partly responsible for the poor
production performance. Despite various initiatives to enhance quality at various stages
of the dairy chain, many weaknesses still exist. The hygiene and handling practices at
farm level are generally poor. The collection and transportation of warm milk as well as
sale of loose unprocessed milk are still a big challenge as far as improving quality in the
dairy chain is concerned.

One of the key challenges to milk procurement and marketing may not be the generally
poor milk collection, transportation and marketing infrastructure but lack of harmony
between the formal and informal marketing channels. There is a need for policies to
streamline the procurement and marketing of milk in the country. There is also a need
for Policies that will promote processing and enhance the flow of milk from the surplus
to deficit areas within the country. There is a need for policies that will facilitate a
sustainable increase in the productivity of dairy farms, promote the collection,
transportation, processing and marketing of milk and enhance the participation of
stakeholders in the formulation and implementation of policies, standards and
regulations.

6.3 Developments in the Dairy Industry in Uganda

Uganda has probably been the most successful African example of economic
liberalization in the 1990s. Uganda probably has the most liberal trade regimes of any
African country today. Liberalization began way back in 1987 and included initiatives
aimed at redressing imbalances in the system of allocation of foreign exchange,
restoration of credibility of the monetary and fiscal policy, abolition of marketing
monopolies, the reduction of administrative red – tape, and gradual introduction of a
more rational tax and tariff structure. All these efforts were geared to increase
competition, which would in turn improve the quality of manufactured goods,
encourage the emergence of new products and promote adoption of new production
techniques.

The emergence of dairy as a vibrant export sector is therefore the outcome of a

deliberate government effort; first by liberalizing the sector and then by promoting
foreign investment.

The privatization of the Uganda Dairy Corporation in 2004 brought initially little
change as the government monopoly in processing was replaced by dominance by one
processor, Brookside Dairy Uganda Ltd. As recently as 2010, the Brookside Dairy

28
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Uganda Ltd factory with a processing capacity of 400,000 ltr/day still represented 90%
of the processed milk market in the country.

However, that has drastically changed in recent years. Two large processing factories
have opened for business in southwest Uganda. Amos Dairies can process up to
300,000 litres of milk per day to make casein for the export market (mainly America),
while Pearl Dairies has a capacity of 400,000 litre per day, exporting 90% of its produce
in the form of milk powder, ghee and UHT to Kenya, the Gulf and the Asian market.
This explains the sudden surge in dairy exports.

Uganda has always been a net importer of dairy, with high end products (butter,
cheese) in the supermarkets in Kampala imported from Kenya and Europe. With the
two processors in southwest Uganda entering the market, as well as some local dairy
processors also expanding, Uganda has become one of the few African countries that
are net exporters of dairy products.

The export growth has been exponential, from a zero base as recently as 2007 to US$ 25
million in 2014 and then US$ 50 million worth of dairy products in 2015. While there are
no reliable figures yet, the 2016 export can be estimated at US$ 80 million, and US$130
million for 2017 out of approximately 300 million litres in annual dairy exports, which is
more than 10% of the total milk produced in Uganda; currently estimated at 2.5 billion
litres per annum.

With the world dairy market still poised for further growth, and local conditions
favouring production at relatively low prices, exports are likely to further increase in
the future. Based on current market predictions, dairy exports from Uganda are likely
to reach US$ 150 million in 2018.

With this kind of phenomenal growth trend in dairy exports, the government would
also do quite well to also support the dairy sector in addition to the other six priority
commodities (coffee, fish, tobacco, sugar, flowers and tea) that have been lined up for
strategic government support by the Ministry of Trade, Industry and Cooperatives if it
is serious in attaining middle income status by 2020.

6.4 Dairy Sector Policies, Regulations and Standards

Over the last decade, the dairy sector has undergone a number of reforms. The Dairy
Master Plan (1993) has provided the key guidelines for transformation of the sector
particularly liberalisation of the dairy industry, establishment of a regulatory body as

29
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
well as restructuring and privatisation of the state owned dairy processing company,
which is now at an advanced stage. The Dairy Industry Act, 1998 is the main law under
which the new institutional and policy reforms in the sector are being implemented.
This has been supported by the general livestock sector policies such as the Policy on
marketing of livestock and livestock products, Animal Health Policies, the Animal Breeding
Policy, as well as the Public Health Act and the broad national policies and strategies
such as Liberalisation, Privatisation, Decentralisation Policy (Local Government Act);
the Poverty Eradication Action Plan (PEAP), Plan for Modernisation of Agriculture
(PMA) and the National Agricultural Advisory Services (NAADS).

At the milk-shed level, the liberalisation policy has resulted in an upsurge in the
number of traders and processors vying to purchase the milk and an increase in
competition, better milk prices and a more reliable market. Under the decentralisation
policy, local governments levy taxes on dairy and dairy related businesses. Milk traders
who set up milk vending outlets in urban centres are required to pay for annual trading
licences up to as much as US$ 100. Hawkers and vendors who sell milk in urban areas
are obliged to pay a small fee ranging between 200/= (US$ 0.1) and 500/= (US$ 0.25)
per day to the local authorities.

In some areas dairy farmers who deliver milk to bulking facilities within town councils
are required to pay for an annual licence ranging between U Shs 10,000/= and 20,000/=
(US$ 5 and 10) per year depending on the amount of milk delivered per day.

The Dairy Development Authority is responsible for promoting and monitoring quality
in the dairy industry through enforcement of standards and regulations.

The Authority develops new and updates existing standards in liaison with the Uganda
National Bureau of Standards (UNBS). The government has released new regulations,
“The Dairy (Marketing and Processing of Milk and Milk Products) Regulations, 2003", which
provide the framework for enforcement of quality standards and good hygiene and
handling practices. DDA in liaison with UNBS has developed the Code of Hygienic
Practice for Milk and Milk Products. The document provides guidelines for hygienic
production and handling of milk and milk products at different stages of the dairy
chain There are several other legal documents (Policies, Acts of Parliament, Ordinances
of Local Authorities, etc.) being implemented by different government
institutions/departments but which also address dairy related issues. The Public Health
(sale of Milk and Milk Products) Rules, the Kampala City (Sale of Milk and Milk Products)
Ordinance and the UNBS Standards for milk and milk products are all concerned with the
standards for marketable milk and milk products, as well as the requirements for

30
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
handlers and handling facilities. The need for harmonization of the content of different
statutory instruments/ legal documents in respect of the quality and handling of milk
and milk products cannot be over-emphasized.

In order to enhance quality in the dairy chain, DDA, on behalf of government outlawed
the use of plastic receptacles/equipment for handling transporting milk.

The Authority also registers and inspects all facilities for handling and processing milk
and milk products. Facilities that meet the minimum requirements are issued with a
registration certificate after paying an annual registration fee. The Authority also
promotes the training of dairy stakeholders on quality, and good hygiene and handling
practices for milk and milk products. There is a formidable challenge to improve the
quality and handling of milk at farm level. This study revealed that milk-handling
practices are generally poor.

6.5 Development of Co-operative Societies

Successive governments since the 1960s partly saw the cooperative movement as an
instrument of control and an informal mechanism through which rural surplus could be
extracted for the benefit of the urban dwellers while at the same time improving the
incomes and quality of life of rural communities. However, the cooperative system was
abused and cooperatives lost the purpose for which they were created. Cronyism
become rampant and often the hard earned savings of society members were
misappropriated.

With the adoption of Structural Adjustment Programmes (SAPs) by the government of

Uganda in the 1990s, the financial support to cooperatives through the marketing
boards dried up. Since cooperatives had never learnt how to be financially self-reliant,
they started collapsing one by one especially with private sector competition becoming
severer. The challenges as well as the opportunity for the cooperatives to succeed in
today‟s competitive environment exist.

Recently, co -operatives societies have developed and many of them are involved in
milk collection and marketing. Some have gone into milk processing. The Uganda Dairy
Industry Stakeholders Association (UDISA), an organization of all stakeholders in the
dairy Industry was recently formed. UDISA together with Uganda National Bureau of
Standards have completed the formulation of the code of practice for Raw Milk
Handing and Marketing.

31
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
In 2005, Uganda Crane Creameries Cooperative Union was born out of the Western
Uganda Dairies Association. It has a membership of 7 district cooperative unions, 76
primary society/milk collection centres (MCC) and total of 10,500 dairy farmers. The
East African Dairy Development Project will help small scale farmers to come out of
poverty.

Currently, there are 219 Primary Dairy Farmers‟ Cooperative Societies and 11 Dairy
Farmers Cooperative Unions across the country.

32
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
7.0 TRENDS AND PERFORMANCE OF THE DAIRY INDUSTRY

7.1 Overview of Milk Production

In terms of milk production, Uganda is divided into six milk sheds based on the
differences in geographical agro-ecological characteristics, market dynamics and cattle
population.

Table 4: Contribution of the Milk Sheds to the National Milk Production

Milk Sheds Contribution to National Milk Production (%)

South-western 25

Mid-western 12

Central 24

Eastern 21

Northern 11

Karamoja 7

TOTAL 100%

Central and South western milk sheds together contribute 50% of the total national
production. The other milk sheds or regions particularly Eastern and Northern
experience a deficit of marketable milk almost throughout the year and are referred to
as milk deficit areas while South-Western and Central regions continue to experience a
surplus of marketable milk particularly in the wet season.

Milk surplus and deficit milk sheds present differences in market opportunities for poor
dairy farmers and aid in the focusing of knowledge dissemination, market
infrastructural investments, and service delivery to dairy farmers.

Uganda has about 2.5 million livestock farmers, 90% of whom are smallholders.

Milk production in Uganda went up to 1.8b liters in 2011 from 1.5b liters in 2010
following the improvement in the skills of dairy farmers and management and care of
dairy animals. Out of this annual milk product, only 40% is processed, 45% is sold
unprocessed and 15% is dumped.

33
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Milk transport tankers have also increased from 99 in 2010 to 126 in 2012. The number
of processing plants has increased from 22 to 30. The plants process pasteurized milk,
UHT, yogurt and milk powder. Importation of milk products has declined because of
the increase in supply and processing. The milk collecting centers have increased from
476 to 628 this year.

Figure 2: The National Milk Sheds

34
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
7.2 Organization of Milk Production

There are groups and associations that have organized themselves to influence the
supply and demand of the dairy industry sector and these are: the Uganda National
Dairy farmers Association/groups, transporters, vendors and processors. These groups
influence standards as well as market conditions in terms of supply and demand for the
products. However the milk and dairy products market in Uganda has been liberalized
since early 1990s whereby the price of both raw milk and its products are determined
by market forces to a larger extent. This has led to free participation of the private sector
and also increased informal marketing standards and regulations for dairy products.
Unlike other regions, the South Western part of Uganda has revived the cooperative
movement; this has led to the formation of the Uganda Crane Creameries Cooperative
Union with a membership of twelve (12) district unions, 110 primary societies/MCCs,
and 18,000+ dairy farmers. Its mandate is to represent the views of the farmers as a
single voice.

Currently the milk market is mainly in two categories namely: the formal and informal
sector. There are categories of milk buyers and vendors. The first categories are the
bicycle vendors who buy milk from farmers and sell it from house to house. Secondly,
there are the licensed traders who own coolers and sell milk on wholesale or retail basis.

Then there are established and licensed processors who process pack and sale milk and
milk products to consumers where the demand for milk is high. The milk marketing
chains are therefore two fold; the processed milk chain and unprocessed milk chain.
The boundaries between the two chains are at times porous and continuous shifting.
Since the vendors and some licensed traders have no regular suppliers, they receive
milk of variable quality. However, the informal/unprocessed milk chain is flexible
enough to undercut the prices offered by the processors more regular and upfront
through payments. Given their lower overhead costs, vendors and licensed traders have
managed to out-compete the formal/processed milk chain and this has constrained the
growth of the milk industry.

Approximately 85% of the marketed milk goes through the informal sector (raw milk
market) leaving only 15% to be processed and packaged before marketing. The formal
sector markets pasteurized milk and other dairy products. The informal sector mainly
markets unpasteurized milk because the Public Health Act that prohibits its sale is not
enforced. However, the enforcement of the Act began in 2003 and has prohibited the
sale of unpasteurized milk, thus boosting sale of pasteurized milk.

35
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Table 5: Key characteristics of milk chain in Uganda
Processed Milk Chain Unprocessed Milk Chain
Test the raw milk at the farm level to ensure Do not usually test the milk and quality is not
quality. an issue.
Largely use modern methods to preserve the Use traditional methods like boiling to
milk and quality is an important issue. preserve milk.
Obtain fresh milk from key established Obtain milk from any source.
suppliers.
Maintain contact and collaborate with Often have no attachment to suppliers.
suppliers.
Deal in processed milk with a longer shelf life. Deal in raw milk with a very short shelf life.

This formal sector distributes and markets dairy products through vendors or direct
delivery to groceries, supermarkets, hotels, restaurants, schools and hospitals. Some
dairy co-operative societies and agents also involved in marketing mainly un-
pasteurized milk.

Figure 3: Cattle Density in Uganda

(Number per km ) 2

36
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
7.3 The Structure of Uganda‟s Dairy Industry

7.3.1 Dairy Value Chain

The structure of Uganda’s dairy industry can be described using Figure 4. A key
characteristic of the industry is the large informal sector that serves as the conduit for
approximately 85 percent of the milk marketed in Uganda. The formal sector, which
includes conventional milk processing, handles only about 15 percent of the milk
marketed in the country. Approximately 20 percent of the milk produced in Uganda is
consumed on the farm and enters neither formal nor informal marketing channels.

Milk and dairy products consumed on farms make important contributions to nutrition
in Uganda. Households with one or more dairy cows tend to be healthier than
households without dairy cattle. This is partly because milk is a whole food that
supplements other facets of the diet.

7.3.2 Farmers

The dairy industry in Uganda is based largely on smallholder farmers – producing for
home consumption and only offering available surplus to the market – estimated
nationally at about 2.5 billion litres in 2018. In an effort to increase production and
productivity, there has been an increase in cross breeding the indigenous stock with
pure dairy breeds particularly the Friesian through use of Artificial Insemination (AI)
and exotic bulls. Consequently milk production has increased by 8-9 percent annually
over the past two decades mainly from a rapid build-up of the dairy herd2. Sale of milk
is the major and often the only source of regular income for the vast majority of these
smallholders. A very small but growing number of farmers have started manipulating
breeding so that animals calve down in the dry season taking advantage of higher milk
prices in the dry seasons. Supplementary feeding is emerging as a practice among these
particular farmers.

Some smallholder farmers particularly women who have benefitted from NGO‟s
involved in livestock sector now own pure dairy breeds sourced from the existing stock.
Partly due to this, a significantly increasing proportion of milk is being produced from
zero-grazing units that have been established by farmers with only small land holdings,
mostly living close to a market. Typically, these farmers, who are mainly women, keep
between one and three dairy cows in a stall on a zero-grazing regime. As land is usually

2 Through increasing proportion of improved breeds within total national herd.

37
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
insufficient to keep a bull, these farmers make regular use of AI services although in
some cases these services are not readily available.

The demand for good dairy breeding stock outweighs supply hence the skyrocketing
prices for pure dairy breeds and crossbreeds. The current market price for an exotic
breed dairy in-calf heifer ranges from 4.15 – 5.18 million shillings (US$ 1,120 – 1,400).
However, upgrading of the cattle has only minimally been accompanied by the
corresponding change in the cattle farmers‟ management skills and practices, especially
improved feeding of the dairy cow. In addition limited change has occurred in the
availability of extension and research services to the farmer. Important to mention is
that the number of commercial farmers with large herds of exotic dairy cows (Holstein-
Friesian, in particular) is very limited.

Small scale dairy farmers have over the past two decades started re-organizing
themselves into associations or cooperatives in order to better participate in the market.
Farmers in the south-western milk shed have evolved into an extremely well organized
cooperative Union, (UCCCU) operating at the national level. Members through this
union supply over 36 million litres of milk a year mainly to Brookside Dairy Uganda
Limited. The union is in the process of establishing a milk processing plant 3 to further
integrate farmers into the market4.

Farmers in the central region are following closely behind and formed the Central
Uganda Dairy Cooperative Union in 2010. The union is currently looking for financing
to start a small animal feeds processing unit as a means to serve its membership with
quality feeds and earn an income for the union. Also in this region, with assistance from
various projects and funders5, a total of 39 dairy farmer cooperatives have been revived
and new ones established. Of these, 11 (28%) have acquired new chilling plants through
loan financing guaranteed by EADD, 7 (18%) are running processor owned chilling
plants and 21 (54%) are participating in the informal milk segment. The expected long
term objective is for the development of dairy hubs fully capable of providing all the
required by the dairy farmers including veterinary services,, artificial insemination (AI)
services, financing services (through SACCO) and others.

3 A building to house the processing plant has been constructed and roofed. Farmers are now in the process of raising funds to
complete the building and purchase processing equipment.
4 Supported by Danish mixed credit finance instruments.

5 The East Africa Dairy Development project (EADD) funded by the Bill & Melinda Gates Foundation and the United Nations

Food and Agriculture Organization (FAO)

38
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Figure 4: Processing and Marketing Channels for Milk and Dairy Products in Uganda

Formal Sector Informal Sector

15% of raw milk 85% of raw milk

Dairy Farmers

Country or Village Collection Points

Small Travelling Milk Traders
—Primary Collector (Coop or Private)
—Secondary Collector (Coop or Private)
Dairy Dairy
Development Development
Authority Authority
Processor–Distributors
Central Processing Plant
(Private Sector)

Exports Retailers

Distributors

Retailers

Consumers

39
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Farmers in the eastern and northern regions are not yet well organized. Efforts are
being made to stimulate increased milk production in these regions. Currently DDA is
rehabilitating three of its defunct MCCs with plans to hire them out to private
operators. In addition SNV has made efforts to organize dairy farmers in the Soroti and
surrounding districts linking them to local small-scale processor in the region. Farmers
in Gulu embarked on forming a cooperative union, which is still in its very early stage
and will need significant support in capacity building in the coming years.

7.3.3 Input and Service Providers

Businesses established along the dairy chain by farmers, transporters, processors and
traders require support services. Farmers and processors can easily access business
support through embedded services, if they have long-lasting relationships with their
input suppliers. Suppliers of inputs and services in the dairy sector include:
 Seed, animal feed and animal health products
 Processing ingredients
 Packing materials
 Equipment
 Service providers (Artificial Insemination (AI), veterinary, extension and
business development).

Animal nutrition has been noted as one of the constraints limiting productivity.
Optimum production especially improved dairy breeds require supplementation of the
conventional feed resources with compounded animal feeds. There are few large scale
animal feed processing companies in the country the largest being Engaano Millers Ltd
based in Jinja. However, there are numerous small-scale feed mixing units scattered
mainly in peri-urban areas. These enterprises mainly produce poultry feeds with dairy
feeds accounting for less than 20% of the output. Dairy feeds are supplied to farmers
with improved breeds mainly in the central region. Despite Uganda having a
favourable climate, availability of raw materials for animal feeds varies from season to
season leading to inconsistence in quality and quantity of feeds produced between
firms and within the same firm.

Low adoption or use of inputs was cited as a very big challenge to development of the
market for dairy inputs. The distribution networks for dairy inputs (except to a certain
extent veterinary drugs) are not well developed and in some areas are non-existent.
Absence of reliable agricultural data and statistics on the other hand has made it
difficult for suppliers to make forecasts for demand of inputs.

40
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Dairy stakeholders particularly farmers lack information on benefits of using inputs and
many would be users are not aware that the inputs exist. The relatively low farm gate
price for milk in some areas therefore, does not motivate farmers to incur any extra cost
on inputs to improve productivity. Lack of trust amongst the dairy industry
stakeholders was also cited as a challenge to use of inputs. In the absence of a
regulatory institution for inputs such as animal feeds, food additives amongst others,
dairy industry stakeholders may not believe that suppliers are telling them the truth
about the products they sell and how they could benefit from their use.

7.4 Raw Milk Output, Distribution and Milk Prices

7.4.1 Milk Production & Supply Analysis

Available statistics compiled from administrative and a number of other secondary

sources show that overtime, raw milk production in Uganda‟s dairy industry has
steadily grown from about 380 million litres in 1990 to 2.5 billion litres in 2018. The
period between 1990 and 2000 shows that growth in milk production followed a trend
similar to growth in cattle population. The sudden increase in milk production between
2001 and 2018 relates to the gradual and overtime change in proportion of grade
animals to local breeds. For example the proportion of exotic-cross breeds to local cattle
increased from 14 percent in 2005 to 21 percent in 2009. Therefore, the overtime growth
in cattle population from about 5 million in 1990 to 15.725 million heads in 2016 had
both attributes – qualitative and quantitative.

The different views are advanced in the literature on the relationship between milk
production and growth in cattle population, and the fact that milk productivity per cow
has not greatly improved with time in Ugandan dairy sector. A large proportion (over
80 percent) of the total milk produced comes from the local cattle breeds6 – the local
bread account for over 83 percent of the national herd. Yet, other studies such as assert
that annual milk production hit 2.2 billion litres in 2018 partly due to more farmers
adopting milk yielding cattle. That said, increased up-take of improved breeds was
observed during the field work.

Dairy farming is concentrated in the south-western and central regions which

contribute 553.6 million litres (25%) and 530.2 million litres (24.1%) of the national
production respectively as exhibited in Figure 6. These are followed by the eastern
region 468.9 million litres, the mid-western region at 254.8 million litres, the northern

6Milkproduction from local breeds averages 2 litres of milk per head per day with lactation period of 200 days – considerably
below the performance of improved breeds, which can produce as much as 990 litres per head per year {World Bank, 2009}.
41
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
region at 249.3 million litres and the north-eastern region (Karamoja) at 143.3 million
litres (Source DDA).

Figure 5: Evolution of milk production in Uganda: 2011 – 2018 [Million litres]

Million Litres
2,500

2,000

1,500

1,000

500

0
2011 2012 2013 2014 2015 2016 2017 2018

Source: Ministry of Agriculture, Animal Industry and Fisheries (MAAIF), and Uganda Bureau of Statistics

Figure 6 below illustrates the relationship between livestock population and dairy milk
production in the various regions.

The Western region is the milk hub of the country with the most productive dairying
farm units, with output per unit farm estimated at about 5,450 litres per annum in 2018.
It is worth noting that with the exception of the Northern region, dairy farms in other
regions improved in terms of average raw milk productivity per annum (Figure 7). This
is can be attributed to the growing number of dairying households adopting improved
breeds.

42
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Figure 6: Distribution of cattle population versus milk production
% of Livestock Population % of Milk Production

30.00%
25.89% 25.16%
24.10%
25.00% 21.32% 21.56%

20.00% 17.43%
14.79%
15.00% 11.33% 11.58%
10.27% 10.06%
10.00% 6.51%

5.00%

0.00%

Adopted from MAAIF & DDA Statistics (2018)

Figure 7: Average Annual Milk Output per Farm in Each Region

6,000 5,449

5,000

3,777
Average Litres

4,000

2,887
3,000 2,572 2009
2018
1,843
2,000 1,444
1,338 1,256

1,000 698 569

0
Central Eastern Northern Western Uganda

Source: Author’s computations from the 2009/10 UNPS and 2016/17 UNHS

43
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
7.4.2 Milk Pricing and Margins

Consumer milk prices are directly impacted by the price fluctuations of milk at the farm
gate. Prices will shoot up in the dry seasons, when milk supply levels drop, and fall in
the wet season when milk supply increases. Due to the modest level of competition
among processors – as Brookside Dairy Uganda Limited is the price setter, and the
others followers, the processors are able to load all their costs in the prices offered to the
customer, and to shift this upward as input costs go up.

Table 6: Indicative Analysis Margins for Pasteurized Milk 2019 [In UGX]
1000 ML % margin 500 ML % margin
Retail price 2,600 1,400
margin 300 12% 238 17%
Ex-Factory 2,300 1,162
margin 920 40% 460 40%
Trader 1,380 702
margin 480 35% 252 36%
Farm Gate 900 450
Source: Field Research, February 2019

The above analysis illustrates the frequently encountered theme from the several visits and interviews held
that there are good margins7 being made by milk processing companies. The margins for yoghurt are even
higher and explain the tremendous growth of yoghurt supply – that has translated into increased yoghurt
consumption in Uganda. At a cottage industry level most actors that are upgrading into processing are
specializing in the processing of yoghurt – with Ceremark Investments Limited being a clear-cut case in
point.

Table 7: Indicative Analysis Margins for Yoghurt 2019 [In UGX]

500 ML % margin 450 ML % margin 250 ML % margin
Retail price 3,500 3,000 1,800
margin 1,500 43% 690 23% 600 33%
Ex-Factory 2,300 2,310 1,200
margin 1,600 70% 1,770 77% 860 72%
Trader 700 540 340
margin 250 36% 178 33% 115 34%
Farm Gate 450 405 225
Source: Field Research, February 2019

7The margin cited does not account for production and overhead costs, as this information is not publically available, but most
upcoming processors indicate that margins are very competitive
44
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
It is important to note that the income elasticity of demand for milk is greater than one,
meaning that with the projected continued growth of the economy and the associated
increase in household incomes, the demand for milk can be expected to expand rapidly.

Implications for Investment: From a demand analysis, it appears certain that there is a
robust and growing demand to justify investment and trade both in the formal and
informal segments.
 Current high product pricing and margins offers entry and competitive
strategies, through low cost production and therefore competitive price
positioning.
 The narrow range of product offerings offers more opportunities for innovative
ideas.
 The informal segment is attractive from its sheer size, and opportunities in this
channel are perceived more in the area of trade – through selling, implementing
and servicing improved technologies for collection, quality checking, cooling,
transporting and distributing to larger and smaller end users.

45
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Box 1: Response to policy changes at farm level

South-western Region
 As a result of the liberalization of the dairy sector, farmers interviewed noted that there is
an increase in quantity and an improvement in quality of milk produced at the farm level.
 Farmer attitudes towards dairying have changed from subsistence to commercial and
there is a general shift from local to cross breeds. Access to market has improved as a
result of an improvement in the collection and bulking network with coolers now being
located closer to farmers. This has been possible due to the proliferation of co-operatives
and more players (vendors, and lager traders) joining the market.
 However, issues of low farm gate prices persist mainly in the formal marketing channel
due to monopoly tendencies by Brookside Dairy Uganda Ltd the biggest player in the
formal marketing channel. An interview with the management of Brookside Dairy
Uganda Ltd, intimated that the company pays for raw milk following market demand
and supply conditions. The excessive marketing behaviour in the dairy sector is
documented by the MoFPED (2012), where farmers report that - “sometimes Brookside
Dairy Uganda Ltd cuts prices without informing us. We get to know this at the time of
payment yet when we were supplying we knew it was the usual known price”.

Eastern Region
 As a result of the liberalization of the dairy sector, farmers interviewed noted that there is
an increase in quantity and an improvement in quality of milk produced at the farm level.
However, milk production in the area/region is still very low.
 Farmer attitudes towards dairying have changed from subsistence to commercial and
there is a general shift from local to cross breeds.
 Access to market has improved as a result of an increase in demand for milk due to
increased awareness of the nutrition value of milk.
 Collection and marketing have had minimal changes due to the low milk production.
Milk prices have generally improved since liberalization although still low compared to
increases in prices for farm inputs. Unlike Southwestern Uganda the Eastern region does
not experience severe milk price fluctuations between seasons.

Northern Region
 Farmers interviewed noted that there is an increase in quantity and an improvement in
quality of milk produced at the farm level as a result of liberalization. However, milk
production in the area/region is still very low partly due to impact the LRA war had on
dairy farming.
 Farmer attitudes towards dairying have changed from subsistence to commercial and
there is a general shift from local to cross breeds.
 Access to market has improved as a result of an increased in demand for milk.
 Collection and marketing have had minimal changes due to the low milk production.
 Milk prices have generally improved since liberalization although still low compared to
increases in prices for farm inputs.

46
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
7.5 Milk Storage and Transportation

There is a general increase in milk output and hence marketable surpluses in the post-
reform period across all regions in the country. About 80 percent of the total national
milk produced is marketed and 20 percent consumed by the farming households. This
is likely to increase even further after the rehabilitation of more milk collection centers.
Only 33 percent of the marketed milk is processed while 67 percent is marketed raw.
According to the Dairy Development Authority (DDA), an agency under the Ministry
of Agriculture, Government has invested in increasing milk production and
productivity, reducing post-harvest milk losses through rehabilitation of Milk
Collection Centers (MCC‟s), enhancing milk value addition and access to milk and milk
products‟ markets. Currently, the dairy subsector has a growth rate of 8 percent per
annum. Growth has been, and continues to be registered in milk production, milk
collection and transportation, milk processing according to the DDA. According to the
authority, the value of marketed milk had a 5 percent increase from USD 716 million in
2015 to USD 752 million (about Shs 2.7 trillion) in 2017/18.

Currently, Uganda has 100 operational milk processing companies (large scale, medium
scale, small scale and cottages) with a total installed capacity of 2.7 million litres per
day. Products currently processed include; milk powder, UHT Milk, Pasteurized Milk,
Yoghurt, Butter, Ice Cream, Cheese, Ghee and Casein.

Analysis of 2016/17 UNHS reveals that about 80 percent of the raw milk produced is
sold to either processors or direct consumers (Table 8).

Table 8: Regional Distribution of Milk Surpluses

2005/05 2016/17
Region Output Sales Home Use Output Sales Home Use
Million Litres % Million Litres %
Central 302 169 54 445 342 23
Eastern 159 62 61 393 287 27
Northern 69 32 54 329 224 32
Western 480 292 39 678 624 8
Uganda 1,010 555 48 1,845 1477 20
Source: Author’s calculations based on the 2009/10 UNHS, & 2016/17 UNHS

47
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Box 2: Milk marketing channels and institutions in dairy industry

South-western Region
 In South-western milk shed, milk from the farms is channelled through both formal and
informal channels.
 The formal marketing channel is organized in that; from farms milk is sent to collecting
centres operated by primary co-operatives. From primary collecting centres milk is
transported to larger bulking centres at the district level (operated by district co-operative
unions). From the district co-operative unions, milk is chilled and transported to the
processing plants.
 The formal network, farmers are organised into co-operatives based on networks that
were formed around the distribution networks of former DC that became SALL after
liberalisation. This channel largely feeds Brookside Dairy Uganda Ltd [Fresh Dairy] that
currently controls about 78 percent of the formal milk marketing channel.
 Some of the milk is drawn into the largely informal collection channels at the different
nodes of the bulking stage. Some milk at primary co-operatives is sold to traders and
vendors and some co-operatives have outlets that sell directly to individual consumers in
urban areas. This largely happens during peak seasons when there is excess milk.
Some farmers have opted not to join the co-operatives and therefore sell their milk
through the informal market channels. It was observed during the field work that farmers
closer to peri-urban centres (market) are reluctant to join co-operatives and market a
substantive volume of their milk through the informal market channel. This is because
proximity to market guarantees better prices with money earned immediately.
 It was revealed (from the FGD and in interviews with key informants in the industry)
that the market for milk is readily accessible. However, farm gate prices are rather low.
Farmers are free to sell milk to any buyer/agent of their choice irrespective of being
members of co-operatives. Co-operatives are the main buyers of milk from their members
(between 80 and 90 percent) and sell it to Fresh Dairy. Other buyers in the formal market
channel include GBK and Birunga, and an estimated 2 percent of the milk goes through
the informal marketing channels.
 Processors exercise price differentiation depending on the volume and quality of raw
milk purchased during peak and lean seasons. For example, GBK offers Shs. 600 and Shs.
1,000 per litre during the peak and lean season respectively. While Paramount dairy
processes a smaller volume and specialises in the production of niche products (cheese
and fresh creams) produced from high quality milk offers premium price – ranging
between UShs. 700 and UShs. 900 per litre.

Northern Region
 Milk from the farms in Northern Uganda is generally sold unprocessed due to lack of
processing plants in the region. Milk from farms is collected from door to door by
collecting agents, traders or vendors or marketed by farmers themselves. Only some
yoghurt is processed by the Gulu Women Dairy cooperative society.
 Respondents revealed that the market for milk was readily available this being in a milk
deficit region. Marketing of milk from farm level is channelled through both “semi-
formal” and informal arrangements. Some farmers are organized in co-operative
through the guidelines ofthe co-operatives
unions/associations and sell theirwhile others sell
milk directly
48 their milk directly
to consumers and milktotraders.
consumers and
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Eastern Region
 Milk from the farms to processing plants is channelled through farmer groups, individual
farmers and vendors. Milk from farms is collected from door to door by collecting agents,
traders or vendors and transported to the processing plants.
 Respondents revealed that the market for milk was readily available this being in a milk
deficit region. Marketing of milk from farm level is channelled through both “semi-
formal” and informal arrangements. Some farmers are organised in co-operative
unions/associations and sell their milk through the guidelines of the co-operatives while
others have opted remain out of co-operatives.
 Processors in the Eastern region offered the same price during both peak and lean
seasons. However, they practice price discrimination based on supplier category. Soroti
Dairy limited for example offers UShs 700 per litre to farmer groups and UShs 800 to
individuals and vendors while Eastern Dairies offers Ush 800 to farmers and UShs. 1,000
to vendors or collecting agents.
 Formation of dairy farmers‟ co-operatives in Kamuli for example was mainly influenced
by the NAADS program where services could only be accessed by groups. Some farmers
opted not to join the co-operatives and therefore sell their milk independently. Unlike in
South-western Uganda where milk channelled through cooperatives largely ends up
being sold to processors (formal milk marketing channels), in the Eastern region, milk
collected through co-operative arrangements largely ends up being sold to consumers
through traders, cooperative outlets and retailers in raw unprocessed loose form.
 There were no direct involvement of co-operatives in collecting and transporting milk
from farmers. Milk is collected by collectors/traders or cooperative agents who then sell
it directly either to consumers, co-operative outlets or to milk retailers. This type of milk
collecting arrangement greatly exposes farmers to dubious middle men and frequent
incidences loss of income and expensive farmers‟ milk collecting equipment (aluminium
cans).
 Farmers are free to sell milk to any buyer/agent of their choice irrespective of being
members of a union/association.

The private sector has been assuming an increasing role in the collection, transportation,
processing and marketing of milk and milk products8. Numerous private sector
operators have set up dairy related enterprises all over the country with several bulking
and milk-processing facilities especially in the south-western milk-shed. However, the
capacity for milk bulking and transportation has not been equally developed in all the
milk sheds countrywide.

8Before the liberalization the dairy sector, milk collection and transportation had been under DC
government control. DC was inefficient and consequently milk marketing did not meet the farmers‟
expectations. The farm gate prices offered by DC were very low, something that acted as a disincentive to
the industry‟s growth. Following the liberalization of the dairy sector in 1993, and complete privatization
and the transfer of DC to Fresh Dairy, the network of collection centers expanded. This ultimately
reduced the informal and thereby expanded the formal sector milk collection network.
49
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
According to the Dairy Development Association (2018), there are now 471 milk
collection centres spread throughout South-western, Central, and Eastern regions and
with total installed capacity of 1,770,417 litres – with 120 owned by Brookside Dairy
Uganda Limited [Fresh Dairy]. Each centre comprised of 2,000 to 5,000 litres capacity
milk cooler and a generator. However, Dairy Development Association (2018) also
reveals that there were 100,000 itinerant traders using metal milk cans instead of plastic.
There were also less than 50 milk traders countrywide and about 60 insulated milk
tankers with total capacity of over 400,000 litres.

This milk distribution network was supported by a large number of mobile hawkers (on
foot, bikes, using buses and vehicles) especially within 20 Km radius of major towns
(World Bank, 2017). These largely informal traders are involved in the delivery of raw
milk to bulking centres, kiosks, and households. At the tail end of the milk value chain,
hundreds of milk kiosks and shops sell fresh or hot milk and processed products to
consumers. It is important to note that the liberalization of the dairy industry opened
wide opportunities for many ill-equipped private informal milk traders to participate in
the value chain. This rampant informal market run by itinerant raw and loose milk
traders has been growing and out-competing the formal milk marketers, and has
proved difficult for the DDA to regulate. This amounts to unfair competition due to
regulatory obligations imposed on formal traders that informal traders evade. The
phenomenon remains the main constraint to developing and expanding the formal milk
marketing channel. The advantage that informality confers can be seen through the
employment opportunities that have been created in milk transportation, retailing, and
at bulking centres across all regions of the country.

7.6 Milk Processing and Capacity Utilization

The liberalization of the dairy industry in the mid-90s broke the monopoly of DC and
opened up opportunities for private investment. The dairy sector is one of the sectors
where the concept of value addition has been successfully achieved. The processing of
milk and production of dairy products previously imported is one of the successes
recorded by the dairy industry. Before the industry was deregulated, informal milk
trading9 formed the biggest network for surplus milk in most rural Uganda. The formal
sector handled only 10 percent of marketed milk (MAAIF, 1993). The development of
the informal sector began in the earnest period of civil disturbances between 1977 and
1986, when DC was unable to service its suppliers, and had suffered from widespread

9The development of the informal sector began in the earnest period of civil disturbances between 1977
and 1986, when DC was unable to service its supplies and it suffered from widespread looting (Keyser,
2009).
50
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
looting. The informal market comprises both direct sales by producers to consumers in
the neighbourhood of their farms and sales to traders, vendors and associations that
transport milk to local urban markets. The associations are estimated to account for 60
percent of farm sales, though this proportion varies significantly across regions in the
country.

The level of private sector investment after the liberalization of the dairy industry is the
subject of this section. Focus is placed on the number of new dairy plants and mini
dairies that have been established, as well as the expansion in value addition i.e.
through the introduction of new milk products (UHT, powdered milk, yoghurt, cheese
etc.) on the market. Growth in milk processing signifies strides made to expand the
formal milk sector. This has improved the quality of milk, and created capacity for milk
exports to the regional market.

7.6.1 Private Sector Investment in the Dairy Industry

With policy and institutional changes in the milk sub sector that began in early 1990s, a
number of private enterprises, cooperatives, and associations began processing and
marketing raw milk and other dairy products, competing directly with DC. In 2001,
seven dairy companies were pasteurizing, packing, selling milk and other dairy
products mainly in urban areas in Central and South-western areas of the country
(World Bank, 2016). Between 2008 and 2016, the number of companies grew from 12 to
20 private milk processing enterprises (Table 9). It is worth mentioning that with the
exception of White Nile Uganda Limited that is located in the Eastern region (Jinja
Town), eighteen out of the twenty processing plants are located in Central and Western
Milk sheds (Table 9).

Most processing plants are located in the Central and Southwest milk sheds and are
operating at 76 percent capacity of the combined installed capacity output of 1,802,200
litres per day. More important to note is that Brookside Dairy Uganda Limited‟s market
share of the processing capacity stood at 80 percent in 2018, despite the increasing
participation of other private players in the market (see Table 9). The benefits of the
privatization process of the dairy industry have not yet spread out equitably at the
processing and marketing stages of the dairy industry commodity value chain. Milk
processing in the Eastern and Northern region is undertaken on small scale mini-
dairies. The mini-dairies are managed and organized by private individuals and
primary cooperative societies. The success story here is that value addition focusing on
products like cheese, yoghurts for the local markets that are scale neutral is produced
by mini-dairies in milk deficit Northern and Eastern regions.

51
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Table 9: Milk Processing Plants and Mini-Dairies in Uganda

No. Company Location Installed Year Products

capacity Established
(Litres)
1. Brookside Dairy Limited Central Kampala 560,000 1998 Pasteurized milk, UHT, ESL
[Fresh Dairy] milk, yogurt, ice cream,
butter, ghee, milk powder
2. JESA Farm Dairy “ Wakiso 100,000 1994 Fresh milk, ESL milk, and
yoghurt
3. Gouda Gold “ Kampala 15,000 2012 Cheese
4. MADDO Dairies Ltd “ Masaka 2,000 2003 Pasteurized milk, yogurt
5. NIRMA Dairy & Foods “ Entebbe 5,000 Pasteurized milk, yogurt, ice
Ltd cream
6. Napier Dairy “ Ntinda 10,000 Yogurt, ice cream
7. White Nile Dairies Eastern Jinja 6,000 1997 Pasteurized milk, yogurt,
ghee, ice cream
8. Kaisa Fresh Milk “ Kamuli ------ Pasteurized milk
9. Teso Fresh Dairy Ltd Northern Soroti 3,200 2007 Pasteurized milk
10. GBK Dairy Products (U) Western Mbarara 54,000 1996 UHT processed milk, ghee,
Ltd yogurt
11. DairiBoard (U) Ltd “ Mbarara 40,000 Plant yet to be operational
12. Birunga Dairy “ Kisoro 20,000 UHT milk
13. Paramount Dairies Ltd “ Mbarara 15,000 1992 Cheese and cream
14. Alpha Dairies “ Mbarara ------
15. Pearl Dairy Farms Western Mbarara 500,000 2012 Milk powder, butter oil, ghee,
Limited skimmed milk powder, full
cream milk powder
16. Amos Dairies (U) Western Kiruhura 400,000 2014 Anhydrous milk fat, ghee,
Limited casein and whey
17. Holland Dairy Limited Central Kampala 10,000 2012 Cheese
18. Vital Tomosi Dairy Western Kiruhura 50,000 2015 UHT processed milk and
Limited yoghurt
19. Toro Dairy Cooperative Western Fort 4,000
Pasteurized milk, yogurt
Society Portal
20. Maama Omulungi Central Wakiso 8,000 2008 Pasteurized milk, yogurt
Total 1,802,200
Source: DDA (2018) & BoU

52
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Box 3: Processor responses to a changed business and policy environment

South Western Region

 As a result of the reform of the dairy sector, processors interviewed noted that there is a
general increase in the quantity of milk processed. For example, GBK has increased the
volume of milk processed from 5,000 litres to 60,000 litres per day between 1996 and 2011.
 The increase in the quantity of milk processed is also partly driven by an
improvement/increase in the consumption of processed milk products resulting from a
growing middle class.
 There are observed changes in packaging technology from plastic porches to tetra-packs
due to increased competition among many processors (players) in the market.
 There is a general increase in farm gate milk prices due to an increase in the demand for
milk resulting from many players joining the industry. The quality of raw milk produced
by dairy farmers, and milk handling (hygiene) practices have improved.
 There has also been a shift from individual to group marketing.
 The processors interviewed in South-western Uganda revealed that there is noticeable
improvements when it comes to milk collection and transportation; due to improvements
in the milk collection network and infrastructure, the number of coolers and cooling
plants have increased, milk is no longer transported in plastic jelly cans but aluminium
cans as per the DDA regulations.

Eastern Region
 The processors interviewed in eastern Uganda also revealed that there are noticeable
improvements when it comes to milk collection and transportation although the region
still lags behind South-western Uganda.
 The system is predominantly door to door collection of milk by traders and some farmers
organized in groups have milk collection centres.
 There is a gradual shift from transporting milk using plastic jerry cans to aluminium cans
(DDA regulations). There is a gradual shift from using bicycle for transporting milk to
motor-cycles (Boda-Bodas) and pick-up trucks, this has ensured timely delivery milk and
has reduce wastages. But the total absence of refrigerated trucks was apparent in the
Eastern Region.
 The increase in farm level milk production is partly attributed to increased market for
milk, trainings from NGOs and government agencies, reduction in cattle rustling and
increased regional market for animal, and animal products especially in South-Sudan.

Northern Region
 There is minimum processing of milk done in Northern Uganda. The one processor
interviewed revealed that there is an increase in farm level milk production, partly
attributed to increased market for milk, trainings from NGOs and government agencies,
restocking programs following the end of LRA war and increased regional market for
animal, and animal products especially in South-Sudan.
Source: Consultant’s Field Work

53
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
7.6.2 Milk Processing and Distribution

Although Uganda‟s milk processing capacity has increased four-fold over the past
decade, most dairy processors operate below installed capacity, with the exception of
JESA Farm whose business model replies on trust-based relation with milk suppliers.
Industry-level capacity utilization oscillates between 40-60% between the lean and peak
production seasons, implying an upward push on the per-litre processing cost
especially in the dry season. Despite the end of state-controlled processing, the dairy
industry is still highly concentrated; the top three processors control 73% of the national
installed capacity, and there are about 20 processors for the whole country.

With an installed capacity to process of about 511 million litres annually, the processors
have a redundant capacity of 91 million litres annually. At the industry level, actual
capacity utilisation remains low, oscillating between 40 and 60 per cent at the industry
level between the lean and peak milk production seasons. This low utilization of
capacity is in most cases driven by the presence of raw milk, where farmers prefer to
make their own direct sales, without adding value. This problem, in part, arises from
what farmers considered low prices and what processors also consider as poor quality
milk. For instance, Fresh Dairy has the highest plant utilization of about 70 per cent
because of its extensive presence around the country. Its distribution and retail network
is the largest of any milk processor in the country, giving it that advantage.

Other players have set up factories closer to the source of milk. VTD [Vital Tomosi
Dairy], Pearl Dairy and Amos Dairies are all located in Mbarara, near the source of the
milk. According to DDA, South Western Uganda accounts for about 30 per cent of all
the market produced in Uganda, which explains why most processors set up shop
there. The central region is largely dominated by Fresh Dairy and Jesa Farm Dairy. For
the factories to set up shop in western Uganda, they take-out the middleman and offer a
“competitive price” to the farmer.

For Jesa, it is a whole different arrangement, much like the beer companies operate
when purchasing sorghum and barely from farmers. Under a long-term MoU, JESA
pays its milk suppliers a constant price throughout the year and provides training and
animal disease control to cooperative farmers. The fixed price allows Jesa to plan ahead
in terms of expenses to farmers. For the farmer, they are guaranteed income through the
year. The price fixed is, however, reviewed annually to incorporate the prevailing
market conditions.

54
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
There are currently three distribution systems for processed dairy products:

1. Distribution systems owned and operated by the dairy processor, using trucks
to distribute products to distribution outlets,
2. Distribution systems owned by the dairy company but outsourced to
independent entrepreneurs; and
3. Grocery retailers and modern supermarkets.

Supermarket retailers consider dairy a key product line and market a range of dairy
products manufactured by local and regional dairy processors: pasteurised milk, UHT
milk, powdered milk, yogurt, and cheese. Despite the challenges in Uganda‟s dairy
industry, the country has been identified as one of the 20 „Markets of the Future‟ that
will offer the most opportunities for consumer goods companies (Euromonitor, 2015).
The modern retail outlets are expected to increase their sale of dairy processed products
at 11% compound annual growth rate (CAGR) during 2013-18.

55
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Box 4: The underutilized processing capacity paradox

The problem of underutilized processing capacity is still a paradox among the actors
along the milk value chain:
 Dairy farmers do not understand why processors operate below installed capacity yet
they are frequently faced with un-purchased volumes of surplus milk during peak
seasons especially in the South Western Milk Shed;
 SALL the major player in the formal value chain imposes quotas during the peak
season when there is surplus milk and this is accompanied by a drop in raw milk
purchase prices;
 The processors link the underutilized processing capacity phenomenon to the limited
market for pasteurized milk due to stiff competition from the informal sector that
deal in relatively cheap loose unprocessed milk;
 In Uganda about 80% of marketed milk is sold as loose unprocessed milk at relatively
lower prices thereby outcompeting processed pasteurized milk in the market.
 Processors recognize that the informal market is strong and vibrant, (John Anglin,
October 2011). Pasteurized milk (the main processed milk product on the market) has
a limited shelf life therefore processors set their production targets depending on
what the market can absorb.
 Another facet of the paradox is that whereas the industry is struggling with the
problem of underutilized processing capacity, more processing plants are being set
up. For example, two more plants (UCCCU and Pearl) are currently being set up in
South-western Uganda.

Proposal to remedy situation:

 Possible solutions to solving this paradox include; expansion of capacity to produce
and market processed dairy products with a long-shelf life (like UHT) for both the
domestic and export market;
 Gradually reducing the share of loose milk marketed unprocessed. This implies that
the sector must build capacity to produce dairy products that meet international
standards.
 The prevailing raw milk marketing environment (system) does not provide
incentives to farmers for producing better quality milk - in this largely “low input- low
cost milk industry”. Any effort to improve the quality of milk offsets the margin. The
value of milk should be measured in kilograms instead of litres to compensate for the
fat content in the milk as a yard-sick for the quality of milk. Therefore better quality
milk should be bought at a premium price” (John Anglin, October 2011).
 Reducing the size of the informal sector will require mechanisms that ensure
reasonable and stable farm gate prices to sustain milk production, and consumer
prices that ensure affordable consumption of quality milk across households of
various income brackets.

56
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
7.6.3 Processed Milk Products on Ugandan Market

Pasteurized Milk
Production of pasteurized milk is the largest processing activity in the dairy industry.
About 80% of processed milk goes into the production of pasteurized milk currently as
nine firms are involved in the production of pasteurized milk.

UHT Milk
Until 1995, all the UHT milk in Uganda was imported mainly from Kenya. As of 2018,
five (5) firms in the country produce UHT milk with a combined annual installed
capacity of 112,120 tons. The two companies Brookside Dairy Limited and GBK
currently handled about 60% of their installed Capacity and 80% of this is exported to
Kenya, Sudan, Rwanda, Tanzania, Egypt, Syria and Ethiopia.

Cheese
Although cheese is produced locally, Uganda still continues to import this product. The
Brookside Dairy Limited produces 3.0 metric tons/year, which is mainly is Cheddar,
Gouda, Maribou cheeses. Other private firm like Paramount Dairies Ltd in Mbarara
have exploited the increasing cheese market and started production of cheese mainly
Cheddar and Gouda types.

Cream and Ice Cream

Five out of the twelve firms produce cream but this is mainly an input product. The
Brookside Dairy Limited produces substantial amount of creams, which it uses in the
production of Ice cream. Apart from Brookside Dairy Uganda Limited [Fresh Dairy]
other private diary processors like NIRMA food and Dairy Industries, DairiBoard,
White Nile Dairy and Jesa Farm Dairy produce cream for sale on the market.

Yoghurt
The yoghurt produced in the country is mainly the set and drinking type. Led by
Brookside Dairy Limited, the production of yoghurt has continued to increase due the
growing market for this product since 1995, a number of small and medium scale dairy
processors have started producing and marketing yoghurt.

Cultured milk
Commercial cultured milk is newly developed from indigenous cultured milks. Several
small scale dairy processors do production and marketing of cultured milk.

57
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Butter and ghee
Brookside Dairy Uganda Limited [Fresh Dairy], Jesa Farm Dairy and DairiBoard are the
only firms producing salted and unsalted butter. The butter demand and production is
expected to increase. Farmers produce ghee mainly on small scale which is for domestic
consumption. A number of small scale processors have started production and sell of
ghee. Other firms producing ghee includes. GBK Diaries (U) Ltd based in Mbarara.

7.7 Milk Products Consumption and Net Exports

7.7.1 Milk Products Consumption

With the advent of the dairy sector reform, the national domestic consumption of milk
has been growing with time (Figure 8). The UNPS data provided insights into milk
consumption at household level. However, such survey data did not capture
information on other milk products. The results are presented in Table 10. The per
capita milk consumption, on average, stood at 62 litres per annum well below that of
neighbouring Kenya of 100 litres and the internationally (FAO/WHO) recommended
200 litres. While the World Bank (2017) indicates that Uganda has attained a level of
near national self-sufficiency in milk production, it is apparent that attaining the 200
litres per capita per person mark recommended by the World health Organization
(WHO) requires 8 billion litres per annum to be produced in the country (assuming a
population of 40 million Ugandans). Currently annual milk production in Uganda is
estimated to be 2.2 billion litres.

Significant regional differences in per capita milk consumption within the country are
notable, ranging from 92 litres per annum in Western region to 46 litres in Eastern
region in 2016/17 (Table 10). Per capita milk consumption remained rather static at 62
litres per capita at national level – and below this national average figure in the Eastern
(46 litres), Northern (51 litres). Milk consumption figures are low and constant in the
Eastern region are possibly due to increasing pressure on due to the high population
growth that negatively impact on investment in the stocking of dairy cows at household
level. While having expansive dairy activities and the tradition of milk consumptions
may explain the high per capita milk consumption in Western Uganda. The decline in
milk consumption recorded in the Northern region over the four year period could be
linked to the decline in the stocking of dairy cattle in this part of the country.

58
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Figure 8: Per capita annual consumption of fluid milk, 1997-2018 (litre/p.a.)

Per capita annual consumption of fluid milk

70

60
62
Litres per annum

50
50
40
40
38.1
30
28.5 29.5 30
20

10 16

0
1986 1997 1998 1999 2000 2001 2007 2018

Table 10: Regional Distribution of Milk Consumption per Capita (litres) 2009-2017
2005/06 2009/10
Per capita Per annum Per capita Per annum
Central 53 5,238,422 57 6,149,148
Eastern 43 2,393,511 46 4,018,487
Northern 62 916,835 51 1,337,132
Western 67 3,892,705 92 6,006,658
Uganda 58 12,441,473 62 17,511,425
Source: Author’s calculations based on the 2009/10 UNHS, & 2016/17 UNHS

Some studies have attributed the low level of milk consumption in Uganda to poverty–
low disposable income – and the poor cultural value of milk consumption in Uganda. A
number of initiatives are being implemented to increase consumption of milk and dairy
products and build a strong local market. The DDA is liaising with the Ministry of
Health (MoH), and Ministry of Education and Sports (MoES) to promote milk
consumption in schools. Similar initiatives are being supported by the private sector,
particularly NGOs such as Land O‟ Lakes (DDA, 2018).

59
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
7.7.2 Exports and Imports of Dairy Products

Demand for Imports:

The demand for imported milk products is not quantified from any available demand
statistics, but can alternately be analyzed from the current level of imports. Records
from UBOS and MAAIF indicate that a number of dairy products are imported into the
country, the most important of these being long life milk products, cheese, infant milk
products and yoghurts. The relative importance of these products is highlighted in
Table 11 below:

Table 11: Uganda Dairy Imports by Quantity and Value, 2011-2017

Item/Year 2014 2015 2016 2017
Qty (kgs) Value (US$) Qty (kgs) Value (US$) Qty (kgs) Value (US$) Qty Value (US$)
(kgs)
Buttermilk 139,102 301,712 90,486 175,423 10,322 11,652 8,520 7,837
UHT Milk 437,081 1,025,518 555,167 1,234,457 203,999 620,137 222,406 586,398
Milk Cream
>6% fat 2,729,076 1,996,572 1,190,497 839,154 237,767 235,959 36,685 29,492
Cheese 266,703 259,471 93,301 146,607 131,362 286,760 137,707 483,075
TOTAL 3,571,962 3,583,273 1,929,451 2,395,641 583,450 1,154,508 405,318 1,106,802
Source: UN Comtrade Database 2018

Quality is the main driver of demand for imports as these are perceived to be of higher
quality to local products. With the exception of infant milk products however, there are
a variety of local product substitutes for all milk product imports. Kenya is the biggest
milk exporter into Uganda, accounting for over 50% of all imports. It is also worth
considering that imports are demanded by the more affluent customers and are
accessed primarily through supermarket stores and a limited number of grocery shops.
This implies a relatively small level of demand10. Therefore, the degree to which
demand for imported dairy products should influence investment decisions is viewed
as relatively insignificant as imported products cater to only a small percentage of the
population who prefer or can afford such products.

10 80% of all processed milk is pasteurized – all locally produced.

60
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Dairy Exports:

Dairy exports stood at US$ 60 million in 2016 and increased to approximately US$ 130
million in 2017/18 while Dairy Imports dropped from US$ 5.4 million to US$ 5.2 million
over the same period.

The increase in the net exports has been as a result of increased compliance and meeting
standards of Uganda‟s milk and milk products on both regional and international
markets due to efforts by the DDA in regulation and quality assurance.

The Dairy exports mainly go to EAC, COMESA countries, SADC, UAE, Nigeria, Syria,
Egypt, Oman, USA, Nepal and Bangladesh. The exported dairy products include; UHT
milk, ghee, casein, whey proteins, and butter oil.

Going by the recent export commodity trends, Uganda is predicted to become Africa‟s
largest dairy exporter in the next five years.

According to a report published by the East African Business Week, the dairy sector is
slowly inching its way into Uganda‟s top exports, next to coffee and tea, where a pool of
exporters is largely responsible for this transformation.

The report shows that in the last 10 years, the value of milk and milk products exported
from Uganda has increased astronomically from $5 million US$ in 2008 to 130 million
USD in 2017.

Dairy exports in 2017 amounted to approximately 300 million litres, which is more than
10% of the total milk produced in Uganda; currently estimated at 2.5 billion litres per
annum.

The growth in the sector can be attributed to favourable natural conditions as well as
dairy development programmes instituted by government and development partners,
the same report indicates.

With the world dairy market still poised for further growth, and local conditions
favouring production at relatively low prices, exports are likely to further increase in
the future. Based on current market predictions, dairy exports from Uganda are likely
to reach 150 million US$ in 2019. Figure 9 and Figure 10 below depict the increasing
dairy exports performance trend for the period 2014-2017 by quantities and values of
dairy products exported from Uganda.

61
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Figure 9: Uganda Dairy Exports by Quantity [Kgs], 2011-2017
UHT Milk Milk Powders Buttermilk/Yoghurt Whey
Butter/Fats/Spreads Cheese & Curd Casein

80,000,000
70,000,000
60,000,000
50,000,000
Kgs

40,000,000
30,000,000
20,000,000
10,000,000
0
2014 2015 2016 2017

Source: UN Comtrade Database 2018

Figure 10: Uganda Dairy Exports by Value [US$], 2011-2017

UHT Milk Milk Powders Buttermilk/Yoghurt
Whey Butter/Fats/Spreads Cheese & Curd
Casein
100,000,000
90,000,000
80,000,000
70,000,000
60,000,000
US$

50,000,000
40,000,000
30,000,000
20,000,000
10,000,000
0
2014 2015 2016 2017

Source: UN Comtrade Database 2018

62
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
8.0 MARKETING

8.1 Market Orientation

Customer focus

The proposed Caremark Investments Limited will commit to strict quality standards in
all its operations – from the milking of its on-farm dairy herd of 300 cows to the
provision of hygienically processed nutritious products to its customers. The company
will follow the philosophy of "delighting the customers" by providing them quality
products at the right price on their door step.

 Caremark Investments Limited will therefore treat the customers as partners.

 Caremark Investments Limited will keep channels of communication open with
them because they are the only reliable source that can provide them the best
feedback about the product.

Competitor intelligence

Caremark Investments Limited will keep a bull eye on the activities of competitors and
try to offset all the possible threats, which they can encounter in the future.

Caremark Investments Limited will continuously measure and monitor the market
trends and competitor moves. This will be one of the channels that shall be used to get
feedback from its sales teams and dealers about what is happening in the market.

Inter functional coordination

The top management and employees at Caremark Investments Limited will commit in
their work as they will be aware about the importance of coordination and interaction
of different departments in order to achieve better results. Weekly meetings will be held
between different departments in order to solve problems as well as to make accurate
decision so that resources are not desecrated.

8.2 Dairy Market SWOT Analysis

Strengths:
 International packaging
 Affordable and reasonable prices
 Have our own packaging plant
63
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Weaknesses:
 Heavy capital will be required for promotion
 Consumers are brand loyal toward competitors‟ products so we have to convince
them.

Opportunities:
 Increased consumption of milk products
 Can introduce flavored milk
 People are switching from unhygienic to hygienic milk

Threats:
 Competitors can come up with plastic bottles

8.3 Dairy Marketing Mix

Product
 High quality and convenience product.
 Packaging.
 Aseptic packaging or bottle is reusable.

Price
 Price is less than competitor.
 Using market penetration.

Promotion
 To enhance awareness.
 To do promotion on TV channels, FM radios and newspapers.

Place
 We will give incentives to retailers.

8.3.1 Product Life Cycle

Type:
Brand promotion.

Objective
Establish market position and extend target market.

64
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Product strategy:
Identified weakness (Packaging, taste).

Advertising objectives:
Provide information on product benefits and features.

Distribution:
Build a strong distribution network with a good distribution strategy. Caremark
Investments Limited will use a conventional distribution strategy having strategically-
positioned distribution outlets in the major towns and cities of Uganda, South Sudan
and western DR Congo. The dairy products will primarily be distributed to A and B
class outlets with exclusive shelf positioning having different POP‟s displays.

Pricing:
The prices of the proposed dairy products will be competitive. The prices will be
UShs2,000 for 1 litre of pasteurized milkUShs 4,000 for 1 litre of yogurt; UShs 20,000 for
1 kg of butter; and UShs 32,000 for 1 kg of cheese.

8.3.2 Segmentation Variables

Caremark Investments Limited has segmented the market according to characteristics

of people.

Geographic
Region (city): Kampala, Jinja, Entebbe, Mbarara, Masaka, Mbale, Gulu, Arua, Soroti,
etc.
Density Urban

Demographics
Age: Above 4 years
Income: US$ 200 per month and above
Social Class: Lower-middle Class; Middle-upper class; Middle-middle class.

Psychographics
Activities: Health related, education, convenience
Interest: Outdoors, active, sports, fashion, family values
Opinion: Social concern

65
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
8.3.3 Targeting and Positioning Strategies

The targeting strategy for composite dairy products is recommended to be selective due
to the following market and industry dynamics which are as follows;

 Stage of the Product Life Cycle

The Dairy Industry of Uganda is growing at a steady and consistent rate of about 15%
per year. The industry attractiveness is fairly high for the proposed composite dairy
products and opportunity to develop strong business within the segment.

 Diversity of Preferences
Consumer awareness for the health factor is on the rise due to media exposure and
education within certain segments. With shifts in priorities for hygienic consumption
and family health concerns increasing, packaged brands of milk are increasing for
various consumption usages of milk.

 Industry Structure
Competitive intensity is not as high and entry barriers are quite high. With the process
being a highly complex and delicate matter [any impediment or disruption in the
process can cause the entire batch processing to restart allover] which can cause
tremendous financial crunch to medium-sized organization.

 Competitive Advantage
In the packaged composite dairy products category, the competitive advantage that can
be obtained is through effective distribution and consistent marketing communications.

Target Strategy

Targeting approaches for developing the proposed composite dairy products will be
Selective Targeting since the industry is growing at a rapid pace and since the product
portfolio is fairly diversified [related] creating;
 Organization Fit all units operating under the Caremark Investments Limited
umbrella will have a high degree of synergy that can be capitalized to gain
competitive advantage and cost efficiencies
 Technology Fit since the Caremark Investments Limited will be using the
proprietary technology of Toning Processing and Double Sterilization technology
– it can be easily traded with the shared technology of other units i.e. Instant
[Powder], Homogenized etc.

66
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
 Management Fit resource of management can be cumulatively shared since the
learning curve is minimized.

Repositioning Strategy

Repositioning Concept

Trying to create the perception that drinking milk is healthy and is a quality habit that
should be a part of all family members – giving them nutrition, satisfaction and
happiness.

Repositioning Strategy

Shelved in A, B and C category retail outlets to create favorable brand associations and
using competitive unit prices that signal consistent quality in a new aseptic packaging.
Advertising and sales promotions will be focused according to the quality and fun
drinking association of the proposed composite dairy products as health assuring milk
beverages.

Repositioning Effectiveness

The objective is to monitor and evaluate how the positioning of the proposed composite
dairy products is received by the target market and according to what the core values of
the proposed UHT milk product brand communicates.

8.3.4 Product Strategies

The product strategy that Caremark Investments Limited will follow will be the
Product Line Strategy. Within this strategy, the company will also use the “Product
Improvement Strategy”. Through these strategies, Caremark Investments Limited
aims at improving the proposed composite dairy products product through:

1. Taste
2. Nutritional value – Added enriched vitamins and Zinc [fatty acids] with iron for
supplementing healthy growth. Milk for growth, enriched with zinc, vitamins,
essential fatty acids and, above all, iron, with content 25 times higher than
conventional milk. This is a decisive advantage when you know that 70% of
babies have an iron deficiency. With half a litre of pasteurized milk every day,
children will get 65% of the iron and 80% of the calcium they need.

67
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
3. Pasteurized Milk– Pasteurized milk products will be produced in 1000ml, 500ml
packs.
4. Yoghurt, in cups of 500ml, 250 ml, 150ml and 100ml as well as in sachets of 400ml
in plain, vanilla, mango, butterscotch, banana and strawberry flavours.
5. Butter will be made available in 250g and 500g packs.

Table 12: Mineral Salts Content of Milk

Why? 60 % of children Provides 11 vitamins Highly nutritional Milk-based, it has all
suffer from nutritional for energy and just milk drink: milk, the right qualities for
deficiencies the right amount chocolate, a child

Calcium (mg) 100 83 80 80 126

Magnesium (mg) 9.3 9 9 9 11
Phosphorus (mg) 75 75 65 65 109
Iron (mg) 1.3 0.03 0.03 0.03 0.05
Zinc (mg) 0.80 0.2 0.2 0.2 0.4
Potassium (mg) 127 152 138 138 176
Sodium (mg) 41 41 40 40 50

Table 13: Vitamin Content of Milk

Vitamins
A 60 34 34 34 47 65 65
B1 (mg) 30 0.04 0.04 0.04 0.07 0.08 0.08
B2 (mg) 0.11 0.17 0.17 0.17 0.23 0.25 0.25
B5 (mg) 0.20 0.35 0.35 0.35 0.44 0.45 0.45
B6 (mg) 0.03 0.03 0.03 0.03 0.04 0.04 0.04
B8 (mg) 3.54 3.54 3.54 4.77 4.7 4.7
B9 (mg) 3 6 6 6 9 9 9
B12 (mg) 0.30 0.33 0.33 0.33 0.45
C* (mg) 6.00 0.96 0.96 0.96
D3 (mg) 1.25
E (mg) 0.66 0.12 0.12 0.12 0.17 0.17 0.17
PP (mg) 60 0.06 0.06 0.06 0.08 0.08 0.08

8.3.5 Branding Strategy

Caremark Investments Limited will use the “Specific Product Branding” strategy
because the brand name gives a unique identification in the market place. Using an
identifiable brand name will enable the customers to associate this product with
Caremark Investments Limited so that it enhances the product‟s image and corporate
brand identity.

68
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
8.3.6 Distribution Strategy

Caremark Investments Limited will use conventional channels for product

distribution. The company will therefore build a consolidated network of distributors
in the major towns of Uganda to serve as the first-contact outlet points for the
composite dairy products. The distribution intensity will be “selective”. It is intended
that the distribution network will be the same as that one which is exclusively carrying
the product to the retail outlets. There would be dedicated shelf spacing to maintain the
SKU (stop keeping units) for example providing refrigeration and exclusively designed
sales outlets according to specifications as per the brand image and requirements. We
are providing the proposed composite dairy products to A, B and C class stores.

The reason why we have chosen this strategy is due to financial considerations. Profit
for the distributors will be 1.25%. Distributors will pay cash in advance to the Caremark
Investments Limited to obtain the composite dairy products.

8.3.7 Pricing Strategy

Pricing Objectives

1. Gain market position (Acceptance by the consumers).

2. Influence competition.

Caremark Investments Limited will use the “Price Penetration Strategy” of

maintaining product prices over considerable periods of time and also offering more
added features, which give the company a competitive edge. Added features include
more added mineral and vitamin elements values as well as specially designed
packaging materials.

Table 14: Product Pricing

Dairy Product Package Size Price (UShs)
Pasteurized milk 1 litre 2,000
Butter 1 kilogram 20,000
Cheese 1 kilogram 32,000
Yogurt 500 mls cup/Litre 4,000

The other considerations also include the Non-price factor. Buyers are always willing to
pay more prices to gain other competitive advantage, so taking this factor into
consideration; Caremark Investments Limited will include new nutritional elements in
its composite dairy products to maintain the quality and freshness of its composite
69
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
dairy products. The company is committed to giving added value to its customers as
one of the guarantees to provide quality products with a difference.

8.3.8 Promotion, Advertising, Sales Promotion Strategies

The Caremark Investments Limited advertising and promotion strategies will be based
on three phases.

Figure 11: Advertising and Promotion Strategies

Creating the Awareness, educating

the consumers providing information
about product benefits and what are
the diseases caused by lack of
consuming milk.

Increase Usage, advertising campaign

based on situation, fun, enjoy and
health.

1. Below the line activities (BTL)

2. Brand line extension (targeting kids)
3. Co-branding activities
4. Co-branding activities

Promotion

Caremark Investments Limited will comprehensively stock the manufactured

composite dairy products in the distribution network outlets it will have established for
the purpose. (Special Shelves for composite dairy products). This will give a unique
identity to the corporate name and also to the products. This will not only reinforce the
brand name of Caremark Investments Limited but also it will give promotion to all the
other brands of Caremark Investments Limited.

70
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Advertising and Sales Promotion Strategy

Caremark Investments Limited will also use the services of prominent doctors and
medical associations in its advertising campaign (1st phase).

These doctors will focus on the nutritional needs and advantages of Milk
recommending the Caremark Investments Limited composite dairy products.

MILK IS LIFE! (Advertising Campaign)

Caremark Investments Limited will devote a special issue to milk, because day after day we're reminded
of its many benefits. It helps prevent osteoporosis, especially if it's taken very early in life; and it is the ideal
way of for the body to obtain vitamins, minerals, trace elements and essential fatty acids that our bodies
need to avoid nutritional deficiency. Not to mention the numerous nutritional properties that make milk a
basic food for the infant and an ideal food for the adolescent, the pregnant or nursing mother and so on. In
short, we all need milk, whatever age we happen to be. Milk has always played an important part in our
diet.

1. Milk and children

2. Milk and women
3. Milk and older people

During the 2nd phase

 Caremark Investments Limited will also focus on different composite dairy products usage
situations like at playing sports; during tours and safaris; in hospitals during convalescence; etc.
 Caremark Investments Limited will also target kids having composite dairy products for fun and
enjoyment.
 Caremark Investments Limited will deliver composite dairy products in different packages and
flavors.
 Caremark Investments Limited will launch a campaign in Schools. Sticking Posters on Walls
near schools and providing mobile refrigeration.

During the 3rd Phase

Caremark Investments Limited will go for co-branding activities with companies that
use the company‟s composite dairy products‟ processing by-products in their products.
Caremark Investments Limited will also celebrate different occasions like Children
days and will provide various gift packs.

71
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
9.0 RAW MATERIALS

This section of the Business Plan assesses the source of raw materials for the proposed
Caremark Investments Limited Dairy processing plant. This section also takes a look at
the availability of the other raw material processing inputs for the dairy section of the
farm-industry enterprise.

9.1 Dairy Section Raw Material Requirements and Handling Procedures

The proposed Caremark Investments Limited will be producing and processing its
own on-farm produced organic milk and the surplus raw milk sourced from dairy out
growers as raw material feedstock to manufacture the indicated composite dairy
products of pasteurized milk, butter, yogurt, and cheese. Caremark Investments
Limited already keeps 40 high-yielding dairy cows (Holstein-Friesian) with a potential
daily milk yield of 400 litres of raw milk per day. The ambition of Caremark
Investments Limited is to set up a dairy hub with a milk collection, bulking and
processing capacity from the dairy producers in the neighbourhood that will start at
2,000 litres of raw milk per day or 730,000 litres of raw milk per annum – basing on the
assumption that the balance of 1,600-1,800 litres of raw milk will be collected from the
dairy out grower farmers daily as raw milk input for the proposed Caremark
Investments Limited mini dairy plant. As the Caremark Investments Limited‟s Dairy
plant‟s processing capacity gradually expands and grows to 5,000 litres of milk per day
by the fifth year of operations, additional raw milk input will be sourced from other
dairy farmers within Kabarole District to top up to the installed dairy plant‟s daily
maximum processing capacity.

Raw Milk: Dairy processing starts with raw whole milk. On average, the milk that
comes from a milking center will contain 87% water and 13% solids. The solids will be
made up of about 3.7% fat solids and 9% non-fat solids. The fat solids carry the vitamins
A, D, E, and K. The non-fat solids include protein levels that average 2.9%. It is
delivered to the processing center at a temperature between 36 and 42 degrees
Fahrenheit.

Raw Milk Storage: Caremark Investments Limited will have significant raw milk
storage capacity on-site that will include a 3,000 litre capacity milk cooler. The storage
capacity of the installed milk cooler will be adequate for the supply of the daily ram
milk inventory required by the installed multi-line dairy processor for processing it to
the end-use composite dairy products.

72
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Separation: The first step in processing is separation. No matter what product is to be
produced, the raw milk goes through a separation process. In theory, 100% of the fat is
removed and then re-blended to the different fluid products that are to be processed. In
practice, some of the fluid and a small amount of non-fat solids are removed with the
fat solids. Some plants do not separate all the fat and then re-blend. Instead, they
remove (separate) only the fat that needs to be removed for the product being bottled.

The separation process involves separating the 96.3% water and other non-fat solids
from the 3.7% fat solids. In some arrangements, the separation process simply removes
the amount of fat solids that are needed to push the amount of fat solids contained in
the milk down to 3.25% in order to reach the minimum required for whole milk. In
other situations, all of the fat solids are removed and then added back to the water to
push the fat solids up to the desired level. The excess fat solids (cream) that are not used
for the fluid milk process are used to make other dairy products (primarily ice cream)
or sold for use in other food manufacturing (i.e. candy).

Raw processing: This consists of putting the raw whole milk through a separator to
produce raw skim milk (96.5% water and other non-fat solids) and raw cream. Raw
skim milk will be piped to a raw skim storage tank, while the cream will be piped to
raw cream storage. There are very few dairy processing operations that would not
require a separation process.

Multi-Line versus Single Line Processing: The process for milk processing moves in
different directions from this point, based upon whether or not the facility is a Multi-
Line (several products) facility or a Single-Line facility. For the sake of explanation, the
following is a description of a Multi-Line processor that bottles Fluid Milk and
manufactures Cheese and Ice Cream.

Multi-Line Processing: After the separation process in a Multi-line operation, the cream
and skim can be blended for any product. This Business Plan assumes that the products
will be fluid milk products, full cream milk powder or yogurt. A multi-line processing
plant would likely sell as much milk as possible into the high-priced fluid market. The
raw milk and raw cream would be re-blended for whole milk, 2% milk, 1% milk, skim
and flavored milks such as chocolate or strawberry. Additives such as vitamins, non-fat
dry milk and stabilizers will be added when the milk products are blended.

73
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
9.2 Availability of other Processing Raw Material Inputs

Caremark Investments Limited will be able to easily source and procure other vital
composite dairy product production inputs such as packing materials, disinfectants,
dairy processing chemicals & detergents and other dairy industry consumables from
local suppliers in Uganda – who produce, stock, and supply them in abundance in
major towns including Kampala.

74
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
10.0 TECHNICAL ASPECTS

10.1 Dairy Processing Overview

In view of the growing acceptance by the consumers of pasteurized and homogenized

as well cultured milk products and the expected “white revolution” which should see
milk production and consumption of processed milk more than double in the medium
term, it is proposed to set up a Multi-Line Dairy processing plant of 5,000 liters per
day capacity. This is an economically viable sized plant basing on the on-farm raw milk
product output, although the market demand justifies a larger capacity, it is suggested
that the sponsors work with a smaller capacity till such time that they are able to the on-
site raw milk production system to provide larger raw milk inputs.

The technical assessment of the viability for setting up a 5,000 litres per day composite
dairy products processing plant depends on several major factors. These are discussed
below:

10.2 In-House Quality Assurance

Physical dispersal of small & medium dairy farms makes enforcement of quality
standards difficult, but crucial. One factor would be the on-site milk collection,
circulation, cooling and delivery system to the processing unit. Other issues where
control is expected to yield positive results include adequate testing/laboratory
facilities and close monitoring of staff to ensure that necessary quality checks are made
and standards enforced.

10.3 Rationale for Setting up a Dairy Processing Plant

The rationale for including a composite dairy products processing component y of 5,000
litres per day (LPD) capacity includes:

 Current availability of more than 4.38 million tonnes per day (projected figure
2012) of raw milk, out of which only 2 – 3% is actually being processed.
 A current market size of more than 30 million litres per annum of processed
milk, market for processed milk growing at more than 20% per annum for the
past 3 years and projected to continue growing at the same rate for the next 5
years.
 The Government of Uganda‟s Strategic initiative for the milk processing industry
which includes; increasing milk yield per animal, stronger enforcement of laws
relating to adulteration and hygiene, a media program aimed at informing
75
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
consumers about the dangers of consuming raw milk, a concentrated program by
the dairy industry promoting the use of yogurt and other cultured milk
products.
 Availability of requisite technology for setting up composite dairy products
processing plant and trained manpower for running the same.
 Huge export potential for yogurt and other cultured milk products in the East
and Central Africa Region, with Uganda being the only milk surplus country in
the East and Central Africa Region.

In view of the above it is suggested to establish composite dairy products processing

unit of 5,000 litres per day capacity with provision for expansion in the future.

10.4 Pasteurized Milk Processing

10.4.1 Milk Pasteurization and Bottling Equipment

The equipment considered for this production is as follows:

 Milk reception tank

 Continuous milk pasteurizer at 500l/hr
 Milk separator at 500l/hr
 Homogenizer
 Pasteurizer milk storage tank
 Poly bottle filler
 Chilled store
 Batch cream pasteurizer
 Hot water boiler and air compressor

10.4.2 Outline Manufacture – Pasteurized Milk

Pasteurization / homogenization / separation

Raw milk is pumped to the pasteurizer balance tank and into the regeneration section of
the pasteurizer plate pack where it is pre-heated to ~ 60 - 65°C.

Whole milk processing:

The milk passes into the heating section of the plate pack where it is subjected to the
legally required temperature / time combination of 71.7°C minimum for 15 seconds. It
is then cooled to 5°C and pumped into a holding tank.

76
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
If required, homogenization of the pre-heated milk takes place prior to the
pasteurization stage. Homogenization breaks the milk fat globules into smaller sizes
and distributes them evenly throughout the milk preventing them rising to the top
forming a „cream‟ line.

Skimmed Milk Processing:

The pre-heated milk at 60 - 65°C exits the pasteurizer plate pack and passes into a
separator, which removes the cream. The cream is transferred to a raw cream storage
tank prior to pasteurization in a dedicated cream pasteurizer.

The skim returns to the heating section of the milk pasteurizer and is subjected to the
legally required temperature / time combination of 71.7°C minimum for 15 seconds. It
is then cooled to 5°C and pumped into a holding tank.

Semi-skimmed milk processing:

The pre-heated milk at 60 - 65°C exits the pasteurizer plate pack and passes into a
separator, which removes the cream. Some of the cream is then blended back with the
skimmed milk to provide the required butterfat content. This „standardized‟ milk is
then pumped to a homogenizer, which breaks up the fat globules into smaller pieces
and distributes them evenly throughout the milk.

It is then returned to the heating section of the milk pasteurizer and is subjected to the
legally required temperature / time combination of 71.7°C minimum for 15 seconds.
The semi-skimmed milk is then cooled to 5°C and pumped into a holding tank.

The surplus cream is transferred to a raw cream storage tank prior to pasteurization in a
dedicated cream pasteurizer.

Filling / Capping:
The cooled, pasteurized milk in the finished milk holding tank is pumped or gravity fed
into a filling machine. Bottles are filled, capped and have labels and codes applied prior
to being crated and transferred to cold storage at less than 5°C in preparation for
dispatch and sale. Product testing for compliance with legal requirements is carried out
at this stage.

77
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
10.4.3 Pasteurized Milk Process Flow

Figure 12: Pasteurized Milk Process Flow

Raw Milk

Pasteurizer Plant

Pre-heating (60 – 650C) Pasteurization (71.70C for Cooling (50C)

15 sec)

Separation Homogenization (if required)

Holding

Standardization (skim and Homogenization (if

semi-skim) required)

Surplus Cream

Cream Pasteurization Filling/capping

Cream Label/Code
Filling/Capping/Label/Code

Cold Store (below 50C)

78
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
10.5 Cheese Processing

Cheese: -

 product made from the curd of the milk of cows (or other animals)

 casein coagulated by rennin and acid

 subsequent heating, salting, pressing, aging

Classification of Cheeses (Potter, 1995)

• Soft
- unripened: cottage cheese, cream cheese
- ripened: Brie, Camembert

• Semisoft
- Munster, Limburger, Blue

• Hard
- cheddar, swiss

• Very hard (grating)

- Parmesan, Asiago

• whey cheeses (ricotta)

• processed cheese

79
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Figure 13: Cheddar Cheese Making Process

Pasteurized milk

Setting the milk

Cutting the curd

Cooking the curd

Draining the whey

Milling and salting

Pressing

Ripening

 starting ingredient: pasteurized whole milk

 setting the milk

- while stirring heat to 31°C
- add lactic-acid producing starter cultures
- (add natural color) - add rennin to coagulate caseins and form curds
- stop stirring and let set

 Cut the curd - increase surface area - release the whey

 Cooking (38°C for 30 minutes)

- removes more whey
- increases growth and acid production of cultures
80
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
 Draining whey and matting the curd
- remove excess whey
- form curds into a slab
- cheddaring: cutting curd slab into blocks to allow excess whey to drain, and
allow acidity to increase

 Milling and salting

- cut curds into small pieces
- -2.5% salt is added: drains whey, inhibits spoilage organisms and adds flavor

 Pressing to remove more whey

- moisture content will affect bacterial growth and texture

 Ripening: bacteria develop flavor and texture over time

Ripening: flavor and texture development

 Primary proteolysis
- 60 days; residual chymosin
- caseins broken down into medium molec. wt. peptides

 secondary proteolysis
- starter cultures break down peptides to lower molec. wts.

 Temperature: 5-7°C

 pH: 5.0 - 4.7

- inhibits growth of spoilage organisms
- inhibits enzyme activity

Cheese Flavour Development

 A complex, dynamic process

 Nature of the flavor evolves

 Proteolysis essential for full flavor development

- Proteolytic enzymes

81
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
o Allow LAB to utilize proteins present in milk to obtain essential amino acids
necessary for growth
- Generates peptides and amino acids
o Impart flavor directly or serve as flavor precursors

10.6 Yogurt Processing

We assume that, the proposed Caremark Investments Limited „on farm‟ operation
keeps about 100 cows, producing around 3000 litres of milk per day. From the milk
produced, we can establish a clotted cream business but since this will leave us with a
lot of skimmed milk, we shall put up a Yoghurt production line. The Yoghurt
production facility can be set to work for three to four days per week with a maximum
capacity of 100 litres per batch. The number of batches produced per day will depend
on the market size and demand.

10.6.1 Yoghurt Processing Equipment

The equipment considered in this production facility is as follows:

 Milk reception tank

 100 litres batch heater, incubator and cooler
 Milk separator
 Yogurt pump
 Pot filling and sealing unit
 Two yogurt chillers
 Large walk in chilled store
 Hot water boiler and air compressor

With the above requirements, when considering an appropriate building and

equipment it is essential to involve the Environmental Health Officer (EHO) at the
earliest stages. It is also strongly recommended that an appropriate qualified and
experienced technology Consultant be used for the preparation of a robust HACCP
system. Waste Disposal also requires specialist advice as it will probably be classed as a
Product of Animal Origin (POA) and needs to be handled carefully and correctly.

10.6.2 Outline manufacture – Stirred Yoghurt

Note: Rigorous hygiene standards shall be observed at all stages of the process.

82
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Milk for Yogurt production:
The highest quality milk shall be used for yogurt production as poor bacteriological
quality inhibits the growth of the yogurt culture during incubation.

Residues of penicillin and cleaning and sterilising solutions also impede culture growth.
For low-fat or fat-free yogurt production the milk fat content of the milk is standardised
by separating off some of or all the fat.

A normal (full-fat) yogurt has butterfat content greater than 3%. The fat content of a
low-fat yogurt is greater than 1.5%, and for a fat-free yogurt about 0.1%.

Ingredients Addition:
Dry ingredients, skimmed milk powder, sugar, stabilizers and emulsifiers, are weighed
and added to a measured volume of milk in the manufacturing tank according to the
recipe to produce the base mixture.

Skimmed milk powder is used to increase the total solids content of the milk to produce
a firmer and more stable set when incubated.

Stabilisers, gelatine and pectin for example, increase the viscosity of the product and
help to minimize the risk of whey separation in the finished yogurt.

Stirring / Heating:
The yogurt base mixture is heated to ~ 60 to 70°C while continuously being stirred to
dissolve the ingredients.

High Shear Mixing:

The yogurt base mixture is thoroughly blended with a high shear mixer.

Homogenization:
The mixture is passed through a homogeniser to break the milk fat globules into smaller
sizes and aid even distribution throughout the mix. This process improves the stability
and consistency of the yogurt by preventing fat separation.

Pasteurisation / Cooling:
The yogurt base mixture is batch pasteurised at 90°C for 10 - 15 minutes then cooled to
35°C. This heat treatment provides a „clean‟ medium for culture growth and also
improves consistency by denaturing the whey proteins.

83
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document

Culture addition:
A culture of harmless micro-organisms, which converts the milk sugar, lactose, into
lactic acid, is added to the mixture and stirred. The yogurt can be filled at this stage and
incubated in the pot if „set‟ yogurt is required.

Incubation:
The yogurt mixture is incubated until the required acidity has been reached. Incubation
temperatures and acidities may vary depending on cultures used and final product
requirement.

Cooling and flavour addition:

The incubated yogurt mixture is cooled to ~ 12 - 15°C to retard any further increase in
acidity. Colours, flavours, fruit etc. are added and mixed as required by the recipe.

Filling:
The finished yogurt is filled into pots and lids and labels applied.

Storage / testing:
The finished product is transferred to a cold store and cooled to below 4°C ready for
despatch and sale. Product testing for compliance with legal requirements is carried out
at this stage.

84
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
10.6.3 Yogurt process flow

Figure 14: Yogurt Process Flow

Cooling

Ingredients Addition: Manufacturing Tank

Milk
Filling/lid
Skimmed milk powder
Sugar Stirring/Heating (60-700C)
Stabilizers & Emulsifiers
Cooling

High Shear Mixing

Store

Homogenization

Pasteurization (900C for 10 – 15 Min)

Cooling (350C)

Culture Addition

Incubation

Cooling (~10-150C)

Filling/lid label application

Cooling (below 40C)

Storage/Testing

10.7 Plant Machinery and Equipment

A modern Dairy processing plant of 5,000 liters per day needs to be purchased from a
reputable supplier of dairy processing machinery. There are a number of overseas
suppliers or their agents in Uganda. It is estimated that a plant of the capacity specified

85
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
above would cost UShs 470.22 million including storage tanks, processing machinery,
packaging machinery, quality control laboratories, installation, start-up etc.A list of the
most renowned and reputable international suppliers of dairy equipment is attached in
Appendix I on page 153.

The Business Plan suggests purchasing anirrigation system for year-round water
provision for pasture improvement on the farm. Other essential dairy farm equipment
that will be purchased include: a 3,000 litre-capacity milk cooler, a 16-unit cow milking
system (Vacuum Line System), a stand-by electricity generator, 2 portable livestock
scales, feeding troughs, and milk utensils. Additional dairy section farm equipment that
needs to be purchased includes 2 fodder/maize choppers, a water pump, water
troughs, and feeding mangers. These items (with the exception of the irrigation system
and milk cooler) are all categorized under Allied Service Equipment in Table 15 below.

Table 15: Dairy Farm Machinery and Equipment (In UShs)

Item Description Price (UShs)
Bulk Milk Cooler 3,000 lts/Day 15,300,000
Milk Storage Tanks: 1,000 lts 8,500,000
Yogurt Pasteurizer: 200 lph - 20,000 lph 41,820,000
Cream Milk Separator 6,970,000
Milk Pasteurizer: 1,000 lts/hour 36,244,000
Yogurt Inoculation Tank: 300 lts - 1,500 lts 7,548,000
Yogurt Filling and Sealing Machine 35,700,000
Two Stage Homogenizer 18,000,000
Aging Vats 12,000,000
Cheese Press 16,320,000
Ghee Boilers 13,940,000
Cheese Coagulation Tank 8,500,000
Butter Churner 7,582,000
Ghee Setting Storage Tank: 1,000 lts 10,608,000
Metal Separator 6,000,000
Complete Mini Milk Dairy: 1,000 lts/day – 10,000 lts/day with accessories 112,000,000
Semi-Automatic CIP System 21,340,000
Centrifugal Pumps 1,700,000
Allied Service Equipment 50,148,000
Irrigation System 40,000,000
Total Plan Equipment Cost 470,220,000

86
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
10.8 Irrigation Equipment

In order to improve on Caremark Investments Limited‟s on-farm milk productivity by

its current cattle stock of 40 heads of cattle, it will be necessary to acquire and install an
irrigation system to provide all-year-round farm pasture irrigation and reduce
dependence on unreliable weather patterns in the area. This irrigation system is
estimated to cost approximately UShs 40 million to purchase, transport and install at
the farm.

10.9 Office Equipment

The following tables present the office equipment and furniture/fixtures requirement
for a milk pasteurization unit.

Table 16-1: Office Equipment

Items No. of Cost per Unit Total Cost (UShs)
Items (UShs)
Computers 2 2,000,000 4,000,000
Printers 2 1,250,000 2,500,000
TOTAL 4 6,500,000

Table 16-2: Furniture, Fixture & Fittings

Items No. of Cost per Unit Total Cost (UShs)
Items (UShs)
Air conditioners 1 1,300,000 1,300,000
Office Furniture (tables, chairs, cabinets, etc.) 12,200,000
TOTAL 13,500,000

10.10 Vehicles

Caremark Investments Limited has its own light truck vehicle which it is currently
using to transport raw material inputs to the farm and the processed dairy products for
market distribution in Kampala and other major sales outlets in Uganda. The current
market value of this distribution van is UShs 35 million.

87
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
11.0 THE BUSINESS CASE FOR A DAIRY HUB

11.1 Overview

At the core of the intervention is the establishment of a MCC [Milk Collection Centre]
that acts as a central hub (a dairy hub). This dairy hub links the processor closely to the
farmers, both of whom benefit in terms of supply/sales security and quality control.
Besides storing and cooling, the dairy hub provides milking services for the farmers as
well. Additional business activities (not in this simulation model) are fodder and feed
supply and vet services.

Investment is needed if the model is to succeed. Most farmers have a low investment
capacity. Therefore finance needs to come from the processors, as they are able to raise
capital and need to develop their supply chain to secure a successful future for their
own businesses. To link farmers and processors and secure input and output of milk,
the model proposes shared ownership between the local farmers‟ cooperatives and the
processor. Dedicated staff (independent service providers or staff from the processing
company) will operate the dairy hub.

In this model, one of the most significant business risks is farmers selling their milk on
the side. This can be mitigated by agreeing contracts between farmers and the
processor, either directly or through the dairy hub. In return, the processor must
guarantee a minimum purchasing level of milk from the dairy hub. Shared ownership
also creates incentives for farmers to sell their milk to the dairy hub as they will benefit
from positive results through dividends.

11.2 Risk Assessment

Table 17 below gives an overview of the major risks associated with the
implementation of dairy activities on farmer and dairy hub level in Uganda.

88
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Table 17: Business Risks and Mitigation Strategies for a Dairy Hub
RISK EXPLANATION MITIGATION OPTIONS
Selling milk on the The dairy hub runs the risk of not Establish a relationship in which off-take
side (side selling) procuring milk in high-demand periods. during dry seasons is coupled with off-
take during peak seasons.
Off-take blocks during Processors may establish extra-high Improve milk quality to enable longer
fasting periods quality demands or completely block milk storage and engage in long-term
procurement during the fasting period. relationship with processors to enable
production schemes that meet demand
during fasting periods
Processor lacks Processors need both financial and milk Milk processing in the short-term will not
capacity processing capacity. be a problem as there is currently an
under-capacity. Financial capacity will
have to be identified per processor, but
the benefits of a secure supply chain will
possibly interest investors to ensure there
is enough capacity.
Dairy hub governance The dairy hub requires good governance Hire quality personnel, implement a good
to deliver consistently high-quality milk, management system and ownership
maintain impeccable financial standards model with appropriate checks and
and help farmers increase their herd and balances and ensure frequent training of
milk collection rates. personnel.
Lack of high-quality High-quality fodder availability is a key Fodder production should be part of any
fodder availability precondition for achieving efficient cows approach. Entrepreneurs can be
and higher farmer income. encouraged to start large-scale fodder
farms supported by technology to enable
storage and handle high production levels
during the wet season. Smallholders in
mixed crop systems can be included so
they become specialized fodder
producers
Smallholder farmer Despite the positive business case, The Uganda Development Bank [UDB]
financing financing smallholders remains difficult and MFIs in place can already partially
and will require support to convince banks extend credit but may need support to
and/or supply chain partners to extend release financing on a longer-term basis.
credit to smallholder farmers so they can Backing loans with securities to drive
initiate development. down interest rates will be key to
developing the initial business case and
enabling smallholder farmers to become
entrepreneurial 10/10 farmers
Climate impact Droughts and other climate-related events Within the approach, there should be
can have a big impact on smallholder attention to looking at farmers as
farmers. In particular, the farms not able businesses that through the
to build up reserves are at a high risk of implementation of improvements will be
losing everything they have. able to build up reserves and either deal

89
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
with climate events or have the capacity
to take out insurance policies.
Milk price and off take Milk prices fluctuate throughout the year Efficient high-quality production is
and can go down sharply or even lead to necessary to enable value-added
a lack of off-take during fasting periods. processing and overcome fasting periods.
Dairy hubs need to make sure that high
quality is key as this will increase
consumer trust creating local processing
and in the long term export markets which
are able to absorb fasting period
fluctuations.
Farm management & Farms their management and access to Ensure that the dairy hub will function not
access to services services plays a major role in achieving only as a simple provider of milk collection
high quantities and high quality milk. but ensure advice and linkages to
Without enough knowledge and proper services are available. The dairy hub
implementation or access to good manager that is recruited should be a
services it is hard to improve cow milk trusted adviser with connections to high
output. quality service providers in the region.

These risks are an initial selection that have arisen during development of dairy hubs
elsewhere in Uganda. In specific locations, there may be additional risks such as
cultural acceptance of changing methods, influence of local chiefs on business practices,
corruption blocking further development and the general risks of doing business in
Uganda. This overview is not exhaustive, but it gives an idea of the most important
risks associated with the business cases.

11.3 Conclusion

The business case of a smallholder farmer professionalizing dairy production is a

positive but risky transformation and will only work when access to market is
guaranteed and the transformation is supported by the dairy hub and an organization
that provides (hands-on) farmer support. Professionalizing dairy production requires
investments financed by the farmer personally in combination with subordinated debt
(at favorable conditions) and commercial financing.

Looking at the business case for dairy farmers who own ten or more milking cows that
are productive, it is clear that a significant return on investment can be achieved and
dairy can become a profitable business when this growth is realized. Accessing loans for
this group of farmers to invest in heifers and feed can be done via MFIs [Microfinance
Institutions], through joint initiatives (cooperatives) or seed capital provided by special
grants. TA [Technical Assistance] interventions can be provided by development

90
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
partners [i.e. Operation Wealth Creation and/or NAADS] in collaboration with local
government authorities.

To address the bottlenecks relating to milk quality, hygiene and safety of milk products,
investment in a dairy hub is an important and necessary development. This applies to
production zones, whether in urban or rural areas, since a constant supply of high-
quality milk can only be guaranteed through joint collection, cooling and milking at
village level. The business and investment case simulation is positive, with a positive
cash flow from year 2 onward and all debts and/or investments paid off in years 6 to 7.
Setting up the dairy hub requires a big initial investment, immediately generating cash
flow as long as supply and sales of milk are guaranteed through strong involvement of
both farmers and processors. Because farmers and cooperatives lack the capital to make
these investments themselves, the investment has to be made by private milk
processors.

Co-ownership with farmers is crucial to ensuring the financial sustainability of these

investments in the long run. Only medium-scale and professional farmers are able to
invest in a dairy hub; processors are the most obvious investors, and smallholders can
only participate when they grow to a 10/10 or 15/15 farming system. A gradual co-
ownership model is also a possibility, for example by using climate investments from
carbon emissions as a guarantee fund for local banks to provide loans to cooperatives.

91
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
12.0 CIVIL WORKS & BUILDINGS INFRASTRUCTURE

12.1 Site Development

The entire site shall be fenced with barbed wire or compound wall will be constructed
with gates at suitable places;

Internal roads shall be of tar/bricks/WBM depending upon the soil conditions, rainfall
and the number of vehicles moving every day;

The cost for site preparation and development shall be UShs 80.975 million as indicated
in Table 20 below and Schedule 02/2 on page 137.

12.2 Layout and Buildings

The total constructed area has been envisaged at 4,000 square meters to house the main
cow sheds and multi-line dairy production facility and storage of composite dairy
products infrastructure. The composite dairy products need to stay in the factory
warehouse for a minimum of 3 days to allow for stabilization before they can be
transported. The total cost of the buildings and civil works has been estimated at UShs
323,900,000 (Ref. Table 18 below & Schedule 02/2 on page 137).

The civil works comprise of factory building, administration offices, living quarters,
security post, etc. The factory building for the milk reception, quality control,
processing, packing and storage of milk products should be as per the BSI (British
Standards Institution). The total covered area depends on the processes involved,
products manufactured, the quantity of milk handled and the equipment chosen for
services and product manufacturing. About 3,000 sq. metres area of building is required
for handling 3,000 liters of milk.

The milk processing plant shall have the following essential facilities:

i) Raw Milk Reception Dock (RMRD) - consisting of can conveyor, can washer,
weighing balance, dump tank etc.

ii) Processing Hall - cream separator, chiller, homogenizer, pasteuriser and other
related machinery are installed.

iii) Storage area- for milk storage tanks.

92
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
iv) Products manufacturing area-depends upon the type of products, quantity of
milk handled and the machinery to be installed.

v) Packing area-for packing of liquid milk and other products.

vi) Cold storage-for keeping the milk and milk products before sending to market.

vii) Quality Control Laboratory-for testing the quality of milk and milk products.

viii) Utilities area-for installing boiler, generator set, water treatment plant,
maintenance and store area for spares.

ix) Waste water treatment plant area-for treating the dairy effluents before releasing
to the fields.

x) Quarters and office area-for all the essential staff.

xi) Vehicle parking area-both for the milk procurement and distribution vehicles.

xii) Input supply area- for providing veterinary service, supply of feed, fodder
seeds, etc.

Table 18: Building Area and Cost

Description Sq. Mtrs. Construction Cost Total Cost [UGX]
[UGX/Sq Mtr]
Management building 500 100,000 50,000,000
Store Room 255 60,000 15,300,000
Factory/Plant 3,064 75,000 229,800,000
Washrooms 100 60,000 6,000,000
Pavement/driveway 1,020 15,000 15,300,000
Grounds 1,000 7,500 7,500,000
Total Construction Cost 323,900,000
Total Cost of Land 160,000 1,250 200,000,000
Site preparation and development 80,975,000
TOTAL COST 604,875,000

93
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
12.3 Utilities and other Infrastructure Services

i) Power:

Normally a three phase electricity supply is required for milk processing plants. The
power requirement depends upon the load to be connected and the necessary approval
from UEDCL should be obtained for connection. Depending upon the position of power
supply, standby generators may be considered for connecting the essential sections.

ii) Water:

The mini-dairy processing plant infrastructure requires the water in the ratio of 2:1 (2
liters of water for 1 liter of milk processed) for cleaning of equipment, cold storage and
drinking purposes. The source of water for the proposed mini-dairy processing plant
infrastructure will be from a borehole water point within the precincts of the farm. A
water softening plant for the mini-dairy processing plant will also be considered.

iii) Fuel:

Fuel and oil requirements for the mini-dairy processing plant infrastructure will be
sourced directly from any of the local fuel product dealers and services providers in
Uganda.

iv) Compressed Air:

Compressed air will be needed for various pneumatic operations flow control
operations as well as for cleaning purposes.

v) Other Services:

An on-site maintenance workshop will be provided for as an integral part of milk

processing infrastructure for carrying out repairs and maintenance of equipment.

vi) Communication:

Proper communication facilities are essential.

94
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
13.0 OPERATIONS PLAN

13.1 Overview of Operating Procedures

The interface between construction and operations will require careful consideration,
especially as the plant moves from a construction environment to a „live‟ operational
environment.

The delivery of operating manuals and the training of operational staff should take
place during the commissioning of the plant and prior to full operations. Indeed, it
would be usual for this to be a precondition to taking over the plant. It is during this
period that the establishment of best practice and guidelines for cleaning and
contamination prevention should also be outlined.

As part of contamination control, cleaning procedures should adhere to the highest

possible international standards and should be strictly enforced. Monitoring of
compliance with agreed procedures and standards should take place regularly, with an
appropriate action plan agreed for any failure or potential failure. Experience shows
that prompt action to react to any contamination issue can have a dramatic saving in
terms of potential liabilities for the developer.

The operator may be responsible for maintenance and lifecycle replacement, or the
contractor may retain these responsibilities (at least, for a fixed period) under the terms
of a technical services agreement. Except where maintenance and lifecycle replacement
requirements are due to defects in the works or poor operating procedures, the
associated cost will usually be a developer risk and should therefore be planned for.

A further key stage of the operational process is the sampling and monitoring
procedures for the product. There will be a number of stages involved in this but, for
obvious reasons, the two key stages will be prior to the raw materials entering the plant
and prior to the end product leaving the plant.

Prior to raw materials entering the plant, the following should be verified to establish
whether raw materials or the product should be rejected:
 presence of antibiotics
 milk fat levels
 protein levels
 bulk milk cell count
 bacteria levels.

95
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Following processing, the final product will be checked for specification compliance
(e.g. fat content) and the presence of bacteria. If proper sampling and monitoring
procedures have been carried out, it is likely that any deficiency will have arisen due to
operational issues or a problem in the process plant. Either way, the cause should be
identified and appropriate actions taken (which may include a plant shutdown) until
the cause has been established and the problem rectified.

The extent to which the cost risk of a contaminated product may be passed down to the
supply chain (including any third-party operator) is a matter for negotiation.
Experience tells us that the extent to which a third-party operator will accept such risks
under a services contract may be limited, although exclusions from any limit on liability
have been achieved around particular project/sector-specific risks.

Care should be taken when drawing up the Operating and Maintenance (O&M)
contract. It will not usually be possible to pass off to the operator the full extent of the
developer‟s potential losses arising from poor operational performance or negligence.

The developer will therefore manage performance under the terms of the O&M contract
through a mix of monetary sanctions designed to incentivise good performance against
defined key performance indicators (KPIs). Also, the developer should have the right to
replace the operator in defined circumstances, with the additional cost to the developer
arising from such replacement being met by the operator.

The residual risks that are not passed off to the operator will typically be managed by
the developer, through a combination of risk management, monitoring and insurance.

13.2 Quality Control

Stringent quality control methodologies will be employed in Caremark Investments

Limited Dairy:

a) The milk will be tested for adulterations and quality at the time of collection
from the farmers.

b) The Milk that comes from the collection points to the Caremark Investments
Limited Dairy plant will be ensured to have a temperature of not more than 4°C
and is subjected to 15 product and quality checks.

96
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
c) The Milk quality will be checked repeatedly after each processing phase and the
temperature will be judiciously maintained less than 4°C always.

d) Before the milk leaves the plant for the delivery/distribution outlets the milk will
be tested again.

e) The temperature of milk in the delivery trucks will always be maintained at less
than 4°C.

f) All the trucks that deliver milk will have specified guidelines to bring back 100
litres of milk after distribution. This is done in order to test the delivered milk
and to ensure that the tankers are not adulterated during distribution.

g) Since all the employed processing procedures are automated, no contamination

by human hands will take place.

h) To ensure milk freshness the collection and distribution points will always be
chosen such that the travel time between them is always less than 36 hours.

Quality Process in Depth

Procurement:

Fresh milk will be sourced directly from the Caremark Investments Limited dairy farm
and other smallholder dairy producers in Kabarole District. Milk received from
individual producers will be checked for all basic quality parameters meeting company
specifications & requirements at respective collection & chilling centers. Milk is then
supplied to the Caremark Investments Limited Dairy processing plant through
insulated Milk Tankers under refrigerated conditions to maintain the freshness. Strict
Quality checks will be performed for all incoming Milk received at the Dairy processing
plant. These includes organoleptic (Taster, Odor & Appearance), Physico-chemical (e.g.
Temperature, Foreign matter, % Fat, % SNF, %Acidity, % Protein etc.), microbiological
(e.g. MBRT), also presence of any adulterations in Milk (e.g. Formalin, urea, starch,
sugar, Glucose, maltodextrin, nitrate, Salt, Hydrogen Per-oxide, neutralizer, ammonium
compounds and Fat adulterations). Commodities, ingredients & packaging material
used for our products are checked, approved and released by Quality functions as per
company specifications and requirements.

97
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
GMP & Hygiene:

Good manufacturing Practices (GMP) for the Caremark Investments Limited Dairy
processing plant will be part of our heritage of producing best quality and safe
products. Caremark Investments Limited will maintain highest level of GMP and
hygiene requirements for production and handling of safe products for our valued
customers and consumers.

Processing:

The products will be manufactured in a state of the art manufacturing facilities using
innovative Process & Technologies. The Milk received at the plant will undergo various
processing steps before it reaches to the customer. Process steps include filtration,
clarification, pasteurization, chilling, filling, packing and storage for our liquid milk
category. For other dairy product category, few of the process steps are
homogenization, etc. Cleaning & Sanitation of the processing equipment will be
ensured using automatic Cleaning in Place (CIP) systems by applying “5T‟ principles
viz. Technology, Time, Temperature, Turbulence and Testing. Critical control points
(CCP), Operational Prerequisite Programs (OPRP) will be identified for each process
using scientific methodology and appropriate control measures are applied to ensure
compliance of Quality and Food Safety requirements. Process control parameters will
be monitored, recorded and reviewed as per the Quality Plan to ensure right product
right at first time. Manufacturing processes will be benchmarked against best-in-class
standards towards continual improvement for infrastructure and system requirements.

Packing:

The Filling and packing is considered to be a most sensitive operation having

appropriate access control. Zoning principles will be applied in these areas to avoid any
cross contaminations in our Finished Product. Online quality control checks (e.g. net
weight, leakages, seal integrity, batch coding, packing material quality, filling
temperature etc.) are carried out and recorded by our Packing In-charges. Only QC
approved and released Packaging materials are used for packing operations. Packaging
material used for our products is with the objective of retaining taste, freshness and
unique natural appeal.

98
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document

Product Testing & Release:

Finished products will be tested for the specified quality parameters of each product
category as per our internal standardized sampling plan and test procedure. Test results
will be recorded, reviewed by Quality functions. It will be ensured that only good
quality product will be released for dispatch to reach our valued customer & consumer.

13.3 Raw Product Acceptability

 Antibiotic screening prior to processing of each lot of milk/cream is required. If

the establishment is using milk from only their own herd and they have
documentation to show the treatment of the animals and withdrawal times,
antibiotic screening may not be necessary prior to the milk entering the
establishment. If the establishment is receiving milk/cream from other herds
then the screening of each lot is required prior to receiving the milk into the
establishment.

 Raw milk/cream must be negative for the presence of veterinary drug residues
and inhibitory substance residues as tested by an approved screening method or
testing below the MRL by an approved quantitative method.

 In addition to antibiotic screening, raw product is monitored for microbiological

standards, acidity, incoming temperature as per the National Dairy Code,
Production and Processing Regulations or Provincial Regulations. Records for
monitoring of raw product must be kept and available at the establishment.

 Temperature of incoming raw milk into the dairy establishment should not be
greater than 4ºC. Milk coming directly from the barn and being processed within
2 hours (i.e. for cheese making) may be acceptable at higher temperatures. Time,
temperature and processing parameters must be made available to the inspector
for review and evaluation if milk is received at temperatures greater than 4ºC.
Provincial requirements must be met.

 All raw milk shall be filtered at receiving prior to storage.

 There must be provisions in place for storing raw milk/cream if it is not

processed immediately. The storage time/temperature must be controlled so that
there is no detrimental effect on the quality and safety of the product. Raw

99
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
milk/cream should not be stored longer than 72 hours at a temperature of 4ºC or
less.

 If raw milk/cream (generally applies to sheep milk, because with other milks the
protein coagulates out and causes damage to the milk) is being frozen to
accumulate a larger volume for processing, proper procedures should be in place
so that milk does not go through a period of freeze, thaw, and freeze prior to use.
An establishment that stores frozen raw milk/cream and then tempers it from a
frozen state will require a written protocol of how the product will be handled so
as to minimize the growth of micro-organisms, including routine documented
temperature checks and microbiological testing. Consideration should be given
to the following:
o Warm milk should not be poured directly onto frozen milk. It should be
cooled to 4ºC before adding it to the frozen.

o Raw milk that is to be frozen should be frozen within 72 hours and

remains in a frozen state until it is going to be processed.

o Each container of milk should be uniquely identified and a record kept by

the processor so that the milk can be traced back to each producer.

o When an establishment is tempering milk from the frozen state it must be

done under controlled conditions.

o After defrosting, every pail of milk from each producer should be

inspected for odour and quality and all the milk is to be filtered prior to
processing.

o The freezer unit should be equipped with an accurate temperature

measuring device. A daily record of freezer temperature shall be kept.

o Re-useable milk storage containers must be thoroughly cleaned, sanitized

and dried after emptying and before the next use. If used, pail liners shall
only be used once. Containers shall be stored so that the exteriors remain
clean and free of contaminants.

 Where more than one dairy species are being processed in the same facility,
procedures are in place to prevent the unintentional mixing of the milk between
dairy animal species.

100
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Rationale:

Contamination of milk from animal and environmental sources during production

should be minimized to reduce the risk of unsafe dairy products. Pathogen
contamination and/or recontamination from poor handling procedures and growth of
toxins from temperature abuse may cause a health hazard in the dairy product.

13.4 Employee Training

Personnel, including the operator/owner, need to have the necessary knowledge and
skills to enable them to process and handle dairy products in a safe and sanitary
manner.

 Adequate and suitable training needs to be provided to owners, managers,

trainers and all production personnel directly related to the processing of dairy
products appropriate for the complexity of the manufacturing process. Training
courses may be available on-line or from teaching facilities. An effective training
program should consider instruction in the following:
o basic microbiological training
o knowledge in general food handling practices
o hygienic practices including clothing, grooming, health conditions and
behaviour and habits
o handling of materials (ingredients, packaging materials and finished
product)
o pasteurization, reasons for and the microbiological consequences of
inadequate pasteurization
o pasteurization equipment, proper operation, maintenance and testing
o dairy plant cleaning, equipment cleaning and the sanitary maintenance of
the equipment
o control of post pasteurization contamination including environmental
contaminants
o chemical contamination such as antibiotics, allergens and cleaning
chemicals
o other topics that may be specific to the dairy product being processed

Rationale:
The implementation of an effective and up-to-date training program for dairy
establishment workers is critical to ensure that the procedures and practices of these
personnel are such that the final product will not be contaminated.

101
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
13.5 Recall Programme

 This program highlights the step-by-step procedures that would be implemented

by Caremark Investments Limited in the event of a recall. Each unit/package
must be coded. Information about the product coding system, including details
on how codes are cross-referenced with clients or buyers, and procedures for
contacting clients in the event of a recall must be included in the program. This
must also cover a coding or tracking system for product sold directly to
customers at the establishment. The recall program is to indicate the individuals
within the company who are responsible for carrying out recall activities and
telephone numbers where they can be reached during off hours.

 The recall program must include a mock recall (testing at a minimum frequency
of once per year that demonstrates that the affected product can be traced back to
the distribution level).

 All ingredients used (by lot number) should be documented on the

manufacturing records.

 Caremark Investments Limited must maintain a complaint file that includes the
initial complaint information, investigation of the complaint, a record of the
findings and action taken,

 In the case of safety concerns, the establishment must notify the UNBS for
consultation if unsure of the need for a recall or to ensure the action/decision
taken is correct.

Rationale:

The implementation of an effective recall system is essential to ensure that effective

procedures are in place to deal with any food safety hazard and to enable the complete,
rapid recall of the implicated lot from the market.

102
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
14.0 HUMAN RESOURCE AND MANAGEMENT STRUCTURE

14.1 Governance Structure

It is proposed that a special purpose company be set-up to establish and operate the
proposed dairy unit. This company will be known as Caremark Investments Limited.
The Companies Act (cap. 110 of the Laws of Uganda) regulates the establishment and
governance of a limited company (public of private) in Uganda.

Corporate Governance is a set of institutional and market-based mechanisms that

encourage controllers of a company to maximize the value of a company for its owners.
The conduct of the corporation is a three-way process involving the board of directors,
top management and the employees. At the core of corporate governance is
empowerment at all levels – shareholders, the board, and top management. The law
applicable to a company is the law of the country.

Principles and rules on corporate governance need to be laid down in the Articles &
Memorandum of Association (Incorporation) and the Regulations of Board of Directors.
The proposed governance structure is illustrated on the following page.

The business of the company is to be managed under the directions of the Board of
Directors. The Board is responsible for establishing broad corporate policies and for the
overall performance of the company. The core responsibility of the directors is to
exercise their business judgment and to act in what they reasonably believe to be in the
best interests of the company.

The Board‟s Corporate Governance Committee is required to review the principles and
rules regularly in the light of prevailing best practices and it is required to forward
suggestions for improvement to the board for approval.

The Board‟s Corporate Governance Committee is also responsible for considering

matters of corporate social responsibility and matters of significance in areas related to
corporate public affairs and the company‟s employees and shareholders.

The Board‟s job should be to create and maintain a structure that will ensure harmony
and cooperation between management and the employees in pursuing the goals and
objectives of the organization rather than simply rubber-stamping the actions of
management.

103
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
The Board‟s Audit Committee will have two fundamental responsibilities: internally it
will oversee the annual external audit to ensure the accuracy and integrity of the
financial statements as required by legislation. It will also ensure that there are no
breakdowns in corporate governance rules and procedures, including the rules of
ethical conduct and internal control. The Audit Committee would also be the practical
monitor collecting information regarding corporate misconduct and encouraging those
with such information to come forward.

Figure 15: Proposed Governance Structure

Share-Holders
The Company

Corporate Board of Directors Corporate

Governance Chairman Audit
Committee Committee

Chief Executive
Officer

Skilled & Semi-Skilled

Personnel – Dairy
Processing Plant

14.2 Management Structure

The paramount duty of the Board of Directors is to select a Chief Executive Officer
(CEO) and to oversee the CEO and the other senior management staff in the proper and
ethical operation of the company.

The Board would identify, and periodically update the qualities and characteristics
necessary for an effective CEO of the company. With these principles in mind, the
Board should periodically monitor and review the development and progression of

104
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
potential internal candidates against these standards.

The CEO will be in-charge of the day-to-day management of operations and is

responsible for ensuring that the company and management functions are organized,
run and developed in accordance with the law, Articles of Association and decisions
taken by the Board, and the Annual General Meeting of the Shareholders.

The selected CEO will be responsible for delivering policy and performance for
customers, society, staff, suppliers and the business. The core activities are briefly
described as under:

14.3 Roles and Responsibilities

Chief Executive Officer – CEO (Owner):

 Increases management‟s effectiveness by recruiting, selecting, orienting, training,

coaching, counseling, and disciplining managers; communicating values,
strategies, and objectives; assigning accountabilities; planning, monitoring, and
appraising job results; developing incentives; developing a climate for offering
information and opinions; providing educational opportunities.
 Creating, communicating, and implementing the organization‟s vision, mission,
and overall direction – i.e. leading the development and implementation of the
overall organization‟s strategy.
 Responsible for fixing prices and signing business deals.
 Responsible for providing direction for the business.
 Creating, communicating, and implementing the organization‟s vision, mission,
and overall direction – i.e. leading the development and implementation of the
overall organization‟s strategy.
 Responsible for signing checks and documents on behalf of the company.
 Evaluates the success of the organization.

Plant Manager (General Manager)

 Responsible for overseeing the smooth running of the dairy processing plant.
 Part of the team that determines the quantity of drinks that are to be produced.
 Map out strategy that will lead to efficiency amongst workers in the plant.
 Responsible for training, evaluation and assessment of plant workers.
 Ensures that the steady flow of both raw materials to the plant and easy flow of
finished products through wholesale distributors to the market.

105
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
 Ensures operation of equipment by completing preventive maintenance
requirements; calling for repairs.
 Ensures that the plant meets the expected safety and health standard at all times.

Human Resources and Admin Manager

 Responsible for overseeing the smooth running of HR and administrative tasks

for the organization.
 Updates job knowledge by participating in educational opportunities; reading
professional publications; maintaining personal networks; participating in
professional organizations.
 Enhances department and organization reputation by accepting ownership for
accomplishing new and different requests; exploring opportunities to add value
to job accomplishments.
 Defining job positions for recruitment and managing interviewing process.
 Carrying out staff induction for new team members.
 Responsible for training, evaluation and assessment of employees.
 Oversee the smooth running of the daily office and factory activities.

Food Technologist

 Responsible for the production of all the flavors of yogurts produced by the
company.
 Ensures that the organization follows due process as it applies to the nature of
business we are into.
 Serve as the quality assurance officer of the organization.

Sales and Marketing Manager

 Manage external research and coordinate all the internal sources of information
to retain the organizations‟ best customers and attract new ones.
 Model demographic information and analyze the volumes of transactional data
generated by customer purchases.
 Identify, prioritize, and reach out to new partners, and business opportunities et
al.
 Responsible for supervising implementation, advocate for the customer‟s needs,
and communicate with clients.
 Develop, execute and evaluate new plans for expanding increase sales.
 Document all customer contact and information.

106
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
 Represent the company in strategic meetings.
 Help increase sales and growth for the company.

Factory Workers

 Responsible for carrying out all casual or unskilled jobs in the plants.
 Responsible for operating sealing and packaging machines.
 Handles any other dusty as assigned by the plant manager.

Accountant / Cashier

 Responsible for preparing financial reports, budgets, and financial statements for
the organization.
 Provides managements with financial analyses, development budgets, and
accounting reports; analyzes financial feasibility for the most complex proposed
projects; conducts market research to forecast trends and business conditions.
 Responsible for financial forecasting and risks analysis.
 Performs cash management, general ledger accounting, and financial reporting
 Responsible for developing and managing financial systems and policies.
 Responsible for administering payrolls.
 Ensuring compliance with taxation legislation.
 Handles all financial transactions for the organization.
 Serves as internal auditor for the organization.

Distribution Van Drivers:

 Delivers customer‟s orders promptly.

 Runs errand for the organization.
 Any other duty as assigned by the sales and marketing executive and plant
manager.

Client Service Executive

 Ensures that all contacts with customer (e-mail, walk-In center, SMS or phone)
provides the client with a personalized customer service experience of the
highest level.
 Through interaction with customers on the phone, uses every opportunity to
build client‟s interest in the company‟s products and services.

107
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
 Manages administrative duties assigned by the store manager in an effective and
timely manner.
 Consistently stays abreast of any new information on Caremark Investments
Limited products, promotional campaigns etc. to ensure accurate and helpful
information is supplied to customers when they make enquiries.

Cleaners:

 Responsible for cleaning the store facility at all times

 Ensure that toiletries and supplies don‟t run out of stock
 Cleans both the interior and exterior of the store facility
 Any other duty as assigned by the dairy processing plant managers

14.4 Proposed Organization Structure

The proposed organizational structure for the proposed Caremark Investments

Limited dairy processing enterprise is presented in Figure 16 below.

Figure 16: Proposed Management Structure

GM

Machinery Lab Finance

Dept. Head Technician (1) Manager

Purchasers Accountant
Processing &
(4)
Packing (10)

Milk Cashiers
Receptionists (2)
(5)

Drivers (2)

Security (2)

Cleaners (6)

108
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
14.5 Manpower Requirements

The proposed Caremark Investments Limited requires skilled manpower to operate

production equipment. Administration manpower is also required to carry out the
managerial work of the plant. The unit will be working on one 8 hours shift basis.
Details of manpower together with monthly wages and annual payments are shown in
Table 19 below.

Table 19: Manpower Requirements

Position No. Salary/Person Total Monthly Total Annual
/Month (UShs) (UShs) Payroll(UShs)
General Manager 1 2,500,000 2,500,000 30,000,000
Finance Manager 1 2,000,000 2,000,000 24,000,000
Accountant 1 2,000,000 2,000,000 24,000,000
Cashiers 2 800,000 1,600,000 19,200,000
Drivers 2 800,000 1,600,000 19,200,000
Cleaners 6 400,000 2,400,000 28,800,000
Security 2 500,000 1,000,000 12,000,000
Purchasers 4 800,000 3,200,000 38,400,000
Machinery Dept. Head 1 1,200,000 1,200,000 14,400,000
Processing & Packing 10 800,000 8,000,000 96,000,000
Laboratory Technician 1 1,000,000 1,000,000 12,000,000
Milk Receptionists 5 800,000 4,000,000 48,000,000
SUT-TOTAL 30,500,000 366,000,000
NSSF Contributions (15%) 4,575,000 54,900,000
TOTAL 36 35,075,000 420,900,000

109
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
15.0 PROJECT ECONOMICS

15.1 Outline of Project Economics

The total project cost for setting up the proposed Caremark Investments Limited is
UShs 2.057 billion. The capital cost incurred is UShs 1.655 billion and the working
capital and contingency expense on account are altogether UShs 0.402 billion. The total
cost, project returns and financial plan are given in Tables 20-1 to 20-3 below.

Table 20-1: Total Project Cost

Account Head Total Cost (UShs)
Capital Cost 1,655,095,000
Physical Contingencies (5%) 82,505,000
Working Capital Cost 319,260,000
Total Project Cost 2,056,860,000
Table 20-2: Project Returns
NPV (UShs) @ 17% 6,340,336,000
FIRR 66.06%
Payback Period (Years) 3.20
Table 20-3: Financing Planning
Financing Ratio UShs
Equity 50.77% 1,041,640,000
Debt 49.23% 1,015,220,000

15.2 Jobs Creation

Caremark Investments Limited dairy processing enterprise will create 36 direct

employment opportunities and thousands in indirect jobs through the interlinked
induced activities.

The net employment effect is generally expected to grow in tandem with the
establishment of the dairy hub as a viable agri-business entity and the consolidation of
its business/ marketing position within on the local market.

The throughput of Caremark Investments Limited‟s products on the markets will

definitely induce a positive beneficial growth impact on other inter-related areas that
will lead to the creation of more jobs for a broad category of both skilled and semi-
skilled labour.

110
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
As a measure of national economic benefit, the calculation below gives an indication of
the investment to jobs created ratio (Over the 10-year financial analysis period).
Investment to Jobs Created Ratio (IJCR)

UShs. 2,056,860,000 = UShs. 57,135/job

36

15.3 Socio-economic Development Impacts

The project will beget several positive impacts to the economy. It will create 32 direct
employment opportunities for Ugandans, and will also play an important role for rural
families in Kabarole District, especially in the areas of nutrition, income and jobs and in
integrating farming systems (crop-fish-livestock) to optimize the use of available
resources, including feed/fodder, land, water, etc. The success of the Caremark
Investments Limited dairy processing project will also function as a private
entrepreneur dairy hub business model in Kabarole District providing value addition
for smallholders in the area in terms of livestock development services. The success of
the Caremark Investments Limited dairy processing enterprise will also create a strong
interest for investment in the local dairy sector that will definitely impact quite
positively on the economic out-turn of the sector and its importance in Uganda‟s overall
GDP output. There is quite likely to be an increasing awareness among local
governments, NGOs and the private sector about the significant economic and
environmental benefits of sustainable and profitable social and private-sector oriented
dairying in rural areas.

111
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
16.0 KEY SUCCESS FACTORS

 High level quality control.

 Another important aspect is the quality check at different stages of the composite
dairy products production and sales chain. This is very important because there
is a need to check and ensure that the company composite dairy product
distributors do not supply poor quality to compromise the standards and quality
of our products.
 Individualized customer service – providing our customers with what they want,
when and how they want it.
 Fully integrated distribution channels to help customers increased access to
Caremark Investments Limited dairy products.
 Smart composite dairy product distribution networks will also play an important
role in the success of this business.
 Integrating the changing market fundamentals into the business.
 Long-term partnership with both farmers and our customers so as to acquire
guaranteed market.
 The commercial viability of this project depends upon the availability of regular
dairy production raw material supply.
 To establish a brand name, aggressive marketing efforts are recommended.

112
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
17.0 ENVIRONMENTAL ASPECTS AND POLLUTION CONTROL

17.1 Emissions

17.1.1 Solid waste

Hardly any solid waste is produced by the dairy industry. The main solid waste
produced by the dairy industry is the sludge resulting from wastewater purification.
There are figures available about the amount of sludge production: in aerobic systems
the sludge production is about 0.5 kg per kg of removed COD and in anaerobic systems
about 0.1 kg per kg of removed COD.

17.1.2 Wastewater

Wastewater from dairy industry may originate from the following sources:

Milk receiving

Wastewater results from tank, truck and storage tank washing, pipe line washing and
sanitizing. It contains milk solids, detergents, sanitizers and milk wastes.

Whole milk products

Wastewater is mainly produced during cleaning operations. Especially when different

types of product are produced in a specific production unit, clean-up operations
between product changes are necessary. In developing countries, the main problem is
pollution through spoilage of milk.

Cheese/Whey/Curd

Waste results mainly from the production of whey, wash water, curd particles etc.
Cottage cheese curd for example is more fragile than rennet curd which is used for
other types of cheese. Thus the whey and wash water from cottage cheese may contain
appreciably more fine curd particles than that from other cheeses. The amount of fine
particles in the wash water increases if mechanical washing processes are used.

Butter/Ghee

Butter washing steps produce wash water containing buttermilk.

113
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Skim milk and buttermilk can be used to produce skim-milk powder in the factory itself
or itself or these materials may be shipped to another dairy food plant by tank truck.

The continuous butter production process materially reduces the potential waste load
by eliminating the buttermilk production and the washing steps (Harper et. al., 1971).

Milk powder

Environmental problems are caused by high energy consumption (= emission of CO 2,

CO etc.), by cleaning and by emission of fine dust during the drying process.

Condensed milk/Cream

Environmental problems related to the production of condensed milk and cream are
mainly caused by the high energy consumption during the evaporation process.

The main suspended solids mentioned in the literature are coagulated milk and fine
particles of cheese curd.

Table 21 gives an overview of the waste production data for the dairy industry.

Table 21: Waste Production Data

Reference (1) (2)
Average Range Average Range
Waste water production 2400 100 - 12400 2400 100 - 7100
BOD 6 0.2 – 71.2 5.5 0.2 – 7.1
SS (2.0) (0.06 – 10.8)
Nitrogen (0.15) (0.002 – 0.43)
Phosphorus (0.012) (0.007 – 0.16)
(1): Taiganides (1987), referring to EPA (1971).

(2): Barnes et al (1984), referring to EPA (1971) and Kearney (1973). Values between
brackets are recalculated, assuming 2400 kg waste water/ton milk processed, thereby
overestimating the range to some extent.

Table 21 confirms that it is hard to give general characteristics of dairy plants. This is, as
mentioned before, caused by the variation in the sizes of the plants and variation in
types of product manufactured. The effect of the type of product produced is illustrated
in Table 22.

114
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Table 22: Effect of Waste Products
Type of product Wastewater volume BOD
Average Range Average Range
(1)
Milk 3250 100 - 5400 4.2 0.20 – 7.8
Condensed milk 2100 1000 – 3000 7.6 0.20 – 13.3
Butter 800 0.85
Milk powder 3700 1500 – 5900 2.2 0.02 – 4.6
Cottage cheese 6000 800 – 12400 34.0 1.30 – 71.2
(2)
Milk (canned) 320 – 1870 0.02 – 1.13
Condensed milk 800 – 7290 0.17 – 1.48
Butter 800 – 6550 0.19 – 1.91
Natural cheese 200 – 5850 0.30 – 4.04
Cottage cheese 830 – 12540 1.30 – 42
(3)
Milk 0.2 – 4.0
Cheese 0.9
Butter/milk powder 0.3
Total 4000
(1): Taiganides (1987), refering to EPA (1971).
(2): Middlebrooks (1979), refering to EPA (1974).
(3): RIVM (1993): Dutch situation in 1990.

The ranges in Table 22 also indicate that the production of wastewater is highly
influenced by management practices (see next paragraph). It is not possible to identify
particular waste producing practices. The way in which the water consuming and
operation processes are carried out is indicative of the management quality. The major
contribution to the waste load comes from cleaning operations, which take place
throughout the production process. Only in the production process of (hard) cheese, is
whey sewering one of the main contributors to the waste load.

- Waste generating processes of major significance include:

- Washing, cleaning and sanitizing of pipelines (metals), pumps, processing

equipment, tanks, tank, trucks and filling machines (high N load);

- Start-up, product change over and shut down of HTST and UHT pasteurizers;

- Breaking down of equipment and breaking of packages resulting in spilling

during filling operations;

115
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
- Lubrication of casers, stackers and conveyors.

17.1.3 Air Pollution

In dairy plants air pollution is mainly caused because of the need for energy. In the
process gasses may be discharged such as CO2, CO, NO2 and SO2.

Table 23 gives the emissions into the air as a result of gas- and oil-combustion. No
figures are available about the emissions into the air resulting from the use of electricity.

Emissions of CFC‟s and NH3 into the air may come about as a result of leakage and
stripping of chilling machines when out of use.

Table 23: Air emissions

Process: Air emission (kg/ton processed milk)
Heating by burning gas or oil CO: 0.03
CO2 92
NO2: 0.1
SO2: 0.05
Producing milk powder Fine dust: 0.39
Cleaning VOC: 0.05

17.2 Prevention of Waste Production

The waste load, expressed as BOD depends to a large degree on the style of
management. Table 25 gives an example of the relationship between management
practices and waste production in terms of BOD and the amount of wastewater
produced. The table shows that a large quantity of processed milk does not necessarily
lead to higher waste loads or to higher levels of wastewater production.

Management practices cover a wide range of water consumption and process operation
activities. Well controlled processes reflect good management qualifications, while bad
practices are a reflection of poor management. Table 24 shows the relationships. The
qualification “fair” signifies that good as well as bad practices occur. With good
management practices, values of BOD 1 kg/ton and produced wastewater below 1
kg/kg may be reached. Poor management will result in values greater than 3 kg/ton
resp. 3 kg/kg.

For the evaluation of management practices, the following indicators are useful:

116
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
1. Housekeeping practices;

2. Water control practices; frequency with which hoses and other sources of water
are left running when not in actual use;

3. Degree of supervision of operations contributing to either the volume of

wastewater or to BOD coefficients;

4. Extent of spillage, pipe-line leaks, valve leaks and pump seals;

5. Extent of carton breakage and product damage in casing, stacking and cooler
operations;

6. Practices followed during the handling of whey;

7. Practices followed in handling spilled curd particles during cottage cheese

transfer and/or filling operations;

8. The following of practices that reduce the amount of wash water from cottage
cheese or butter operations;

9. Extent to which the plant uses procedures to segregate and recover milk solids in
the form of rinses and/or products from pasteurization start-up and product
change-over;

10. The procedures used to handle returned products;

11. Management attitude towards waste control.

117
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Table 24: An example of the relationship between management practices and waste production
Product Milk processed BOD Wastewater Management level
(kg/day) (kg/ton) (kg/kg) Range
Milk 181,600 0.3 0.4 excellent: 19, 25, 26
227,000 0.2 0.1 excellent: 19, 21, 26, 27
113,500 0.7 1.0 good: 8, 10, 18, 20
68,100 7.8 5.2 poor: 1
Cottage cheese 272,400 2.0 0.8 good: 8, 15, 16
135,200 1.3 4.7 good: 8, 17
295100 71 12.4 poor: 2
Milk, cottage cheese 454,000 4.1 1.2 good: 2, 19
211,110 1.8 1.1 good: 21, 22
408,600 3.3 1.1 fair: 8, 9
454,000 8.6 2.0 poor: 8, 3, 4
Milk, butter 135,200 0.9 0.8 good: 23, 24, 28
Whey powder 227,000 0.3 0.4 excellent: 19, 25, 26
Milk powder, butter 90,800 0.2 0.1 excellent: 19, 21, 26, 27

Description of management level:

Poor = 1. no steps taken to reduce waste; 2. whey included; 3. many drips, leaks; 4.
Returns included; 5.sloppy operations; 6. spillage leaks; 7. hoses running; Fair = 8. whey
excluded; 9. good water volume control; 10. wash water excluded; 11. no entertainment
losses; 12. all powder handled as solid waste; 13. no leaks/drips; 14. Continuous churn;
Good = 15. fines screened out; 16. wash water to drain; 17. spilled curd handled as solid
waste; 18. rinses segregated; 19. rinses saved; 20. returns to feed use; 21. returns
excluded; 22. good water control; 23. buttermilk excluded; 24. few leaks; Excellent = 25.
hoses off; 26. filler drip pans; 27. cooling tower; 28. dry floor conditions.

Source: EPA, 1971

In the following a summary is given of suggestions for the prevention of dairy waste.
At the same time they are indicative of what is to be understood when speaking about
good management of waste control (EPA, 1971):

1. Instruction of plant personnel concerning the proper operation and handling of

dairy processing equipment. Major losses are due to poorly maintained
equipment and to negligence by inadequately trained and insufficiently
supervised personnel.

2. The carrying out of a study of the plant and the development of a material
balance to determine where losses occur. Modification and replacement of ill-

118
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
functioning equipment. Where improper maintenance is the cause of losses, a
specific maintenance programme should be set up.

3. The use of adequate equipment for receiving, cooling, storing and processing of
milk, so as to take care of the maximum volume of flush production and of
special products. All piping, around storage tanks and other areas, should be
checked on mis-assembly and damage that may lead to leakage.

4. Accurate temperature control on plate, tubular and surface coolers to prevent

freeze-on, which may result in loss of products.

5. Elimination of valves on the outlet sides of internal tubular or plate heaters and
coolers and maintenance of plates and gaskets in good repair so as to eliminate
waste due to blown or broken gaskets.

6. Installation of suitable liquid level controls with automatic pump stops, alarms,
and other devices at all points where overflows could occur (storage tanks,
processing tanks, filler bowls etc.).

7. Keeping in good order of vats, tanks and pipelines so as to eliminate and reduce
to a minimum the number of leaky joints, gaskets, packing glands and rotary
seals.

8. Proper design and installation of vats and tanks at a level high enough above the
floor for easy drainage and rinsing if hand cleaned. Tanks should be pitched to
insure draining.

9. Correct connections on plate type heat exchangers so as to avoid milk being

pumped into the water side of the exchanger or water being pumped into the
milk side.

10. Provision and use of proper drip shields on surface coolers and fillers so as to
avoid products from reaching the floor. Avoidance of cheese vats, vat processors
or cooling tanks being overfilled so that no spillage occurs during product
agitation. The liquid level in cheese vats should be at least three inches below the
top-edge of the vat.

11. Avoidance of foaming of fluid dairy products, since foam readily runs over
processing vats and other supply bowls and contains large amounts of solids and

119
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
BOD. The use of air tight separators, proper seals on pumps and proper line
connections to prevent inflow of air when lines are under partial vacuum, will
avoid foam production.

12. Turning off of water hoses when not in use. Use should be made of hoses
equipped with automatic shut-off valves so as to avoid excessive water usage.

120
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
18.0 SCHEDULE OF IMPLEMENTATION

It is expected that it will take approximately 9 months to have this project put into
operation from the day funds for its execution are secured. The preparatory stage which
involves the eventual approval for funding is assumed to take 3 months from the date
of its final submission to project financiers by the project promoters. The follow-on
project implementation activities are expected to take an additional 6 months to
completion – which altogether adds up to 9 months (approximately 1 year).

The following Gantt chart presented in Figure 17 highlights the important project
implementation milestones.

121
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Figure 17: Project Implementation Milestones
Commence Operations
Commissioning of Industry
Full Staffing
Hiring Key Executives
Arrangements for Industrial Input
Supplies
Procure Project Office Stationery
and or Equipment
Industry Plant& Equipment:
Installation
Industry Plant& Equipment:
Shipment & Delivery
Industry Plant& Equipment:
Identification of Equipment
Suppliers/Opening of LCs and
Order of Equipment
Industry Plant Infrastructure/Site
Development
Surveys & Demarcation
Seed Financing
Period (Months) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

122
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
19.0 FINANCIAL EVALUATION

This section evaluates various financial aspects of the project (cost of project, earnings
forecast, rates of return, payback period, cash flow, balance sheet, etc.). Wherever
calculations, workings, etc. are voluminous, a summarized version is presented in this
chapter and detailed calculations are given in the relevant Schedules of Financial
Analysis 01 – 14 on pages 134 – 152 of this Business Plan.

19.1 Capital Cost of Project

Total project cost is estimated at UShs 2,057 billion as shown below in Table 25 in
summarized form.

Table 25: Cost of Project (In UShs)

Description Local Foreign Total (UShs)
Currency Currency
(UShs) (UShs)
Existing Land (40 Acres) 200,000,000 0 200,000,000
Existing Cattle (40 heads) 80,000,000 0 80,000,000
Land and Site Development 80,975,000 0 80,975,000
Buildings & Civil Works (including
QC Lab) 323,900,000 0 323,900,000
Yogurt Cold Room (US$ 100,000) 370,000,000 0 370,000,000
Machinery & Equipment (including
Irrigation System) 47,022,000 423,198,000 470,220,000
Industrial Generator 20 kVA (US$ 20,000) 75,000,000 0 75,000,000
Vehicles 35,000,000 0 35,000,000
Office Furniture & Equipment 20,000,000 0 20,000,000
Total Fixed Costs 423,198,000 3,736,020,000
Physical Contingencies (5%) 82,505,000 0 186,801,000
Working Capital 319,260,000 0 319,260,000
TOTAL PROJECT COST 1,633,662,000 423,198,000 2,056,860,000

Funds will be required for the purchase of packaging materials, purchase and
installation of the multi-line dairy processing plant machinery and equipment, purchase
of an industrial generator, payments for site development, payments for building and
civil construction of the dairy processing plant, payments for construction of the yogurt
cold room, office furniture and equipment, etc. The production process for the multi-
line dairy processing plant is a continuous process and capacity has been calculated
basing on 8 hours per day, the integrated dairy processing plant must be compulsorily

123
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
shut down for cleaning on a daily basis and the cleaning and sterilization time is 8
hours. It is expected that the dairy processing plant will run for 360 days a year and in
the second year capacity utilization will start off 40% in Project Year 2 and then expand
to 100% in Project Year 5, for the reason that the project has to utilize economies of scale
to break even early and effectively service debt.

Land:
Caremark Investments Limited proposes to base the dairy processing plant on its
own400-Acre farm land at Nyamuhuti Village in Hakibale Sub-County of Kabarole
District in the south-western cattle corridor of Uganda. The farm is located 12 kms to
the west of Fort Portal town along the Fort Portal – Kijura road with an estimated
market value of UShs 200 million at a land market rate of UShs 5 million/Acre.

Site Improvement:
The project promoter of Caremark Investments Limited will have to undertake some
extensive land improvement works at the proposed site including site surveys, land
leveling and drainage, and other structural land design works that are estimated to cost
UShs 80,975,000.

Building & Construction:

The total constructed area is estimated to cover approximately 4,000 square meters (1
Acre)to house dairy processing plant building (processing and storage areas) and milk
reception and storage section, generator room, and the main administration building.
The total cost of the building and civil works has been estimated at UShs 323,900,000.

Machinery and Equipment:

A modern Multi-Line dairy processing plant of 5,000 liters per day needs to be
purchased from a supplier of integrated dairy processing plant. There are a number of
overseas dairy equipment suppliers (as indicated in Appendix I on page 153) or their
agents in Uganda from whom such equipment can easily be purchased. Other
equipment that will be purchased are the dairy section equipment (e.g. 3,000 litre-
capacity milk cooler, vacuum line system milking machine, dairy cow section
equipment), an irrigation system for farm pasture improvement, and
yogurt/butter/cheese processing machines. It is estimated that the cost for the multi-
line dairy processing line would cost UShs. 470,220,000. This cost also includes milk
storage tanks, processing machinery, packaging machinery, quality control laboratories,
installation, start-up etc.

124
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Yogurt Cold Room:
Caremark Investments Limited will need a yogurt cold room for storage of processed
yogurt, butter and cheese before it can be transported out for market distribution. A
standard-sized and fully equipped yogurt cold-room is estimated to cost about US$
100,000 or UShs 370,000,000.

Transportation Vehicles:
Caremark Investments Limited already has its own transportation van with an
estimated value of UShs 35,000,000.

Furniture & Fixtures:

This will include office furniture and fixtures as well as office equipment like
computers, operational software etc. The total cost is estimated at UShs 20,000,000.

Stand-by Electric Generator:

Given the unreliability and erratic nature of mains electricity in Uganda, Caremark
Investments Limited has budgeted for a stand-by industrial diesel electric generator of
20 kVA capacity capable of supplying power 24/7 to the dairy processing plant in the
event of unexpected or abrupt power outages with and estimated market purchase
value of UShs 75 million.

Working Capital:
Milk is a business in which cash flow is very high and companies in the industry tend to
generate cash surpluses on a regular basis, most of the milk is purchased on a 1-week
credit basis and the finished product is sold on cash. Some advances are paid especially
in the summer months when raw milk production goes down. Working capital is
mostly required for paying for purchase of vital production inputs such as milk product
packaging materials, dairy cattle feed raw material ingredients and supplements, drugs
and medication (including vaccines), agro-industrial consumables, finished goods in
warehouse that have to be preserved and stabilized before release into the market, for
payments of utility bills, wages, fuel for vehicles and for spares. There is also a variety
of other initial (business start-up) working capital expenses that are detailed in
Schedule 02/1: Initial Project Investment Costs – Initial Working Capital on page 136
of this Business Plan. The Working Capital requirements have been estimated at UShs
300,000,000 for the first three months of operation.

125
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
19.2 Financial Plan

The project is proposed to be financed through a combination of equity and

development banking institutional financing in the ratio of 51:49 respectively. The
development banking institutional loan will carry an interest rate of 12 percent per
annum payable over a period of ten years.

Table 26: Financial Plan (In UShs)

Source of Finance/Component Share Local Foreign Total
Currency Currency
1) Financial Assistance
Long-Term Development Loan
Yogurt Cold Room (US$ 100,000) 17.99% 370,000,000 0 370,000,000
Machinery & Equipment (including
Irrigation System) 22.86% 47,022,000 423,198,000 470,220,000
Industrial Generator 20 kVA (US$ 20,000) 3.65% 75,000,000 0 75,000,000
Working Capital 4.86% 100,000,000 0 100,000,000
Sub-Total (1) 49.36% 592,022,000 423,198,000 1,015,220,000
2) Equity
Project Promoter
Existing Land (40 Acres) 9.72% 200,000,000 0 200,000,000
Existing Cattle (40 heads) 3.89% 80,000,000 0 80,000,000
Land and Site Development 3.94% 80,975,000 0 80,975,000
Buildings & Civil Works (including QC Lab) 15.75% 323,900,000 0 323,900,000
Vehicles 1.70% 35,000,000 0 35,000,000
Office Furniture & Equipment 0.97% 20,000,000 0 20,000,000
Physical Contingencies 4.01% 82,505,000 0 82,505,000
Working Capital 10.66% 219,260,000 0 219,260,000
Sub-Total (2) 50.64% 1,041,640,000 0 1,041,640,000
TOTAL (1) + (2) 100.00% 1,633,662,000 0 2,056,860,000

19.3 Profit & Loss Account

The projected income statement for the proposed Caremark Investments Limited is
given in Table 27 below.

126
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Table 27: Summary Profit & Loss Account for First Five Years of the Project (In UShs ‘000)
Description Year 2 Year 3 Year 4 Year 5 Year 6
Sales 2,383,200 3,784,320 5,343,192 7,075,013 7,497,043
Less: Cost of Goods Sold 534,600 825,147 1,100,196 1,375,245 1,415,225
Gross Profit 1,848,600 2,959,173 4,242,996 5,699,768 6,081,818
Less: Operating Expenses 1,145,706 1,484,510 1,797,108 2,110,897 2,187,060
Operating Profit 702,894 1,474,663 2,445,888 3,588,870 3,894,759
Less: Interest service 121,202.4 115,200 100,800 86,400 72,000
Less: Loan service 50,020 120,000 120,000 120,000 120,000
Provision for Tax 159,501 371,839 667,526 1,014,741 1,110,828
Net Profit 372,170 867,624 1,557,561 2,367,729 2,591,931
Cum. Retained Earnings 372,170 1,239,795 2,797,356 5,165,085 7,757,016

19.4 Rates of Return

On the basis of the projected income statements and related projections, rates of return
for the project are calculated and shown in Table 28:

Table 28: Rates of Return (In Percentages)

Description Year 2 Year 3 Year 4 Year 5 Year 6
Gross Profit to Sales 77.57% 78.20% 79.41% 80.56% 81.12%
Operating Profit to Sales 29.49% 38.97% 45.78% 50.73% 51.95%
Net Profit to Sales 15.62% 22.93% 29.15% 33.47% 34.57%
Net Profit to Investment 18% 42% 75.73% 115% 126.01%

19.5 Payback Period

Payback period for the project, both in terms of owner‟s equity and total investment, is
calculated below:

Total New Investment = UShs 2,056,860,000

Promoter‟s Equity Investment = UShs 1,041,640,000

“Profits” = Net Profit + Interest + Depreciation

127
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Table 29: Calculation of Payback Period for Equity and Total Investment (In UShs)
Year Amount paid back from Balance of Total Balance of Total
“Profits” Investment Equity
1 0 -2,056,860,000 -1,041,640,000
2 610,090,000 -1,446,770,000 -431,550,000
3 1,099,541,000 -347,229,000 667,991,000
4 1,775,078,000 1,427,849,000 2,443,069,000
5 2,570,846,000 3,998,696,000 5,013,916,000

Payback period for Existing Equity = 3.20 Years

Payback period for Total New Investment = 2.39 Years

19.6 Capital: Output Ratio

Capital output ratios, representing the production potential of the project in relation to
the investment involved in its establishment, are calculated in Table 30:

Table 30: Capital: Output Ratios (In UShs „000)

Description Year 2 Year 3 Year 4 Year 5 Year 6
Total Investment 2,056,860 _ _ _ _
Sales (Output) 2,383,200 3,784,320 5,343,192 7,075,013 7,497,043
Capital: Output Ratio 1: 1.16 1: 1.84 1: 2.60 1: 3.44 1: 3.65

19.7 Cash Flow

The projected cash flow for the first five years of the project is shown hereunder:

128
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Table 31: Projected Cash Flows (In UShs „000)
Project Year 1 2 3 4 5 6
Costs (UShs)
A. Cash inflow 2,056,860 2,383,200 3,784,320 5,343,192 7,075,013 7,497,043
1. Financial resources total 2,056,860 _ _ _ _ _
2. Sales revenue total _ 2,383,200 3,784,320 5,343,192 7,075,013 7,497,043

B. Cash outflow -2,056,860 -2,482,984 -3,130,952 -3,979,641 -4,901,457 -4,979,033

1. Total assets schedule
including replacements -2,056,860 -463,954 -206,256 -186,010 -186,173 -65,920
2. Operating Costs _ -1,680,306 -2,309,657 -2,897,304 -3,486,142 -3,602,285
3. Debt Service
a) Interest _ -121,202 -115,200 -100,800 -86,400 -72,000
b) Repayments _ -50,020 -120,000 -120,000 -120,000 -120,000

4. Corporate tax _ -159,501 -371,839 -667,526 -1,014,741 -1,110,828

5. Dividends 4% on equity _ -8,000 -8,000 -8,000 -8,000 -8,000

C. Surplus / deficit 0 -99,784 653,368 1,363,551 2,173,556 2,518,011

D. Cumulative cash balance 0 -99,784 553,584 1,917,135 4,090,691 6,608,702

19.8 Balance Sheet

Projected balance sheet for the first five years of operation is shown below:

129
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Table 32: Projected Balance Sheet (In UShs „000)
CAPITAL EMPLOYED: YR.1 YR.2 YR.3 YR.4 YR.5 YR.6
Share Capital 200,000 200,000 200,000 200,000 200,000
Retained Earnings 372,170 1,239,795 2,797,356 5,165,085 7,757,016
Shareholder's Equity/Deficit 572,170 1,439,795 2,997,356 5,365,085 7,957,016
Long-Term Liabilities 1,010,020 960,000 840,000 720,000 600,000
1,582,190 2,399,795 3,837,356 6,085,085 8,557,016
EMPLOYMENT OF CAPITAL: `

Plant Buildings 323,900 307,705 291,510 275,315 259,120 242,925

Yogurt Cold Room 370,000 333,000 296,000 259,000 222,000 185,000
Production Plant Equip. & Machinery 470,220 423,198 376,176 329,154 282,132 235,110
Diesel Electric Genset 75,000 67,500 60,000 52,500 45,000 37,500
Office Furniture & Equipment 20,000 18,000 16,000 14,000 12,000 10,000
Vehicles 35,000 28,000 21,000 14,000 7,000 50,000
LONG-TERM ASSETS: 1,177,403 1,060,686 943,969 827,252 760,535
CURRENT ASSETS: 662,317 1,643,082 3,231,931 5,631,047 8,164,974
Accounts Receivable 140,026 192,471 241,442 290,512 300,190
Stock (Inventory) 273,511 414,817 540,676 666,549 685,342
Bank Balance and Cash 50,418 62,922 74,103 85,333 87,782
Other Current Assets 198,364 972,872 2,375,711 4,588,653 7,091,660

CURRENT LIABILITIES/DEBT: 257,530 303,974 338,544 373,214 368,493

Accounts Payable 136,328 188,774 237,744 286,814 296,493
Current Portion of Long-term
Liabilities 121,202 115,200 100,800 86,400 72,000
NET CURRENT ASSETS: 404,787 1,339,109 2,893,387 5,257,833 7,796,481
TOTAL CAPITAL 1,582,190 2,399,795 3,837,356 6,085,085 8,557,016

19.9 Break-Even Analysis

The project‟s commercial break-even level (profitability break-even) in Project Year 5 is

calculated below:

130
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Table 33: Break-Even Analysis in Project Year 5 (In UShs)
Items Variable Cost Fixed Cost Total Cost
Packaging material 223,965,000 0 223,965,000
Raw Material (Milk) 1,151,280,000 0 1,151,280,000
Salaries 365,433,000 121,811,000 487,244,000
Office & Admin Overheads 95,929,000 47,965,000 143,894,000
Marketing Expenses 55,991,000 18,664,000 74,655,000
Transportation Costs 279,956,000 93,319,000 373,275,000
Chemicals & detergents 55,991,000 18,664,000 74,655,000
Maintenance (2.5%) 18,037,000 9,019,000 27,056,000
Insurance (1.6%) 11,544,000 5,772,000 17,316,000
Utilities (power & water) 111,983,000 37,328,000 149,310,000
Fuel & Lubricants 68,698,000 22,899,000 91,597,000
Milk distribution costs 251,961,000 83,987,000 335,948,000
Commission to agents on milk marketed 223,965,000 111,983,000 335,948,000
Depreciation 0 116,717,000 116,717,000
Financial Expenses 0 86,400,000 86,400,000
TOTAL 2,914,733,000 774,526,000 3,689,259,000

Sales Value of Production = UShs 7,075,013,000

Break-even Sales = 774,526,000 = 774,526,000 = 774,526,000

1 – 2,914,733,000 1 –0.41 0.59
7,075,013,000

Break-even Sales = UShs 1,317,166,000

Capacity utilization required to Break-even = UShs 1,317,166,000 x 100 = 18.62%

UShs 7,075,013,000

Margin of Safety = 100% – 18.62% = 81.38%

19.10 Value Added/Contribution to GDP

Implementation of the project is expected to have a beneficial economic impact on

regional/national economic development. The project‟s contribution towards the
country‟s Gross Domestic Product (GDP) is estimated below.

131
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Table 34: Value Added/Contribution to GDP (In UShs „000)
Description Year 2 Year 3 Year 4 Year 5 Year 6
Value of Production (Sales) 2,383,200 3,784,320 5,343,192 7,075,013 7,497,043
Less Intermediate Inputs:
Cost of Goods Sold 534,600 825,147 1,100,196 1,375,245 1,415,225
Utilities 56,880 89,586 119,448 149,310 152,296
Office & Admin Overheads 133,620 136,961 140,385 143,894 147,491
Depreciation 116,717 116,717 116,717 116,717 116,717
Total Intermediate Inputs 841,817 1,168,411 1,476,746 1,785,166 1,831,730
Value Added 1,541,383 2,615,910 3,866,446 5,289,846 5,665,313
Value Added as a %age of Output 64.68% 69.12% 72.36% 74.77% 75.57%
Value Added per Worker 42,816 72,664 107,401 146,940 157,370

132
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
20.0 CONCLUSION

It can be concluded from the foregoing business analysis and financial modelling that
the proposed full-scale establishment and operation of the proposed Caremark
Investments Limited at Nyamuhuti in Kabarole District is extremely viable from a
financial and commercial point of view; and it is further recommended that an early
decision to facilitate it with the requisite line of credit be expedited such that
implementation of the project follows the fastest track possible for the benefit of the
project promoters, the dairy sub-sector, the regional dairy industry and market, and the
Ugandan economy at large.

133
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Schedule 01: KEY FINANCIAL MODELLING ASSUMPTIONS (DAIRY FARM & PLANT)

Table 35-1: Dairy Processing Plant Production Assumptions

Maximum capacity utilization 100%
Fixed year capacity utilization (Project Years 2 – 10) 40% - 100%
Plant Capacity:
Year 2 2,000 Litres/Day
Year 3 3,000 Litres/Day
Year 4 4,000 Litres/Day
Year 5 – 10 5,000 Litres/Day
Product mix
Pasteurized milk 30%
Butter _
Cheese 20%
Yogurt 50%
Product Yield
Pasteurized milk 95%
Butter 1%
Cheese 10%
Yogurt 95%

Table 35-2: Operating Assumptions

Hours operational per day 10
Processing Hours 8
Days operational per year 360

Table 35-3: Economy-Related Assumptions

Electricity price growth rate 10%
Diesel price growth rate 5%
Wage growth rate 5%

Table 35-4: Cash Flow Assumptions

Accounts Receivable cycle (in days) 30
Accounts Payable cycle (in days) 30
Raw material inventory (in days) 3
Equipment spare parts inventory (in days) 30

134
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Table 35-5: Revenue Assumptions
Pasteurized Milk in UShs/Litre 2,000
Butter in UShs/Kg 20,000
Cheese in UShs/Kg 32,000
Yogurt in UShs/Litre 4,000

Table 35-6: Operating Expense Assumptions

Operating Expense Item Rate in UShs Annual Rate of
Change %
Packaging materials in UShs/Litre 150/Ltr 5%
Raw Material (Milk) in Project Year 2 800/Ltr 2.5%
Total Salaries in Project Year 2 420,900,000 5%
Office & Admin Overheads in Project Year 2 133,620,000 2.5%
Marketing Expenses in UShs/Litre 50/Ltr 5%
Transportation Costs in UShs/Litre 250/Ltr 5%
Chemicals & detergents in UShs/Litre 50/Ltr 5%
Maintenance (2.5% of Plant Buildings & Machinery) straight line
Insurance (1.6% of Plant Buildings & Machinery) straight line
Utilities (Power & water) in UShs/Litre 100/Ltr 2.0%
Fuel & Lubricants in in Project Year 2 34,894,000 2.5%
Milk distribution costs in UShs/Litre 225/Ltr 2.5%
Commission to agents on milk marketed in UShs/Litre 225/Ltr 2.5%

Table 35-7: Financial Assumptions

Project Life (Years) 10
Debt 25.08%
Equity 74.92%
Interest rate on long-term debt 12.0%
Debt tenure (Years) 10
Debt payments per year 1

Table 35-8: Depreciation Rate Assumptions

Land 0%
Buildings 5%
Machinery and Equipment 10%
Office Equipment 10%
Furniture & Fixtures 10%
Vehicles 20%
135
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Schedule 02/1: Initial Project Investment Costs – Initial Working Capital (UShs)
Description Amount (UShs)
Licenses & Permits + Accounting Software 1,768,000
Initial Marketing Promotion Expenses 4,868,800
Insurance 3,264,000
Consulting Expenses 2,720,000
Rentals for K‟la Marketing Outlet (3 months) 8,160,000
Other Start-up Expenses 3,400,000
Operational Costs for the first 3 months 136,000,000
Start-up Inventory 108,800,000
Storage hardware 5,059,200
Cost of counter area 12,920,000
Cost of Store Equipment 18,700,000
Miscellaneous 13,600,000
TOTAL W/CAPITAL COST 319,260,000

136
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Schedule 02/2: SOURCE AND STRUCTURE OF PROJECT FINANCING (In UShs ‘000s)
S. No. Project Investment Component Share Equity Loan Finance Total
Capital Finance
1 Existing Land (40 Acres) 9.72% 200,000 0 200,000
2 Cattle (40 heads) 3.89% 80,000 0 80,000
3 Land and Site Development 3.94% 80,975 0 80,975
4 Buildings & Civil Works 15.75% 323,900 0 323,900
5 Yoghurt Cold Room (US$ 100,000) 17.99% 0 370,000 370,000
6 Machinery & Equipment 22.86% 0 470,220 470,220
7 Industrial Generator 20 kVA 3.65% 0 75,000 75,000
8 Vehicles 1.70% 35,000 0 35,000
9 Office Furniture & Equipment 0.97% 20,000 0 20,000
10 Sub-Total 80.47% 739,875 915,220 1,655,095
11 Physical Contingency (5%) 4.01% 82,505 0 82,505
12 Working Capital 15.52% 219,260 100,000 319,260
13 TOTAL PROJECT FUNDING 100.00% 1,041,640 1,015,220 2,056,860
14 %age of Total Project Funding 50.77% 49.23% 100.00%

137
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Schedule 03: Loan and Interest Service Schedule (In UShs „000s)
Item Years
Loan Amount 1,010,020
Year 1 2 3 4 5 6 7 8 9 10 Total
Interest @ 12% p.a. 0 121,202.4 115,200 100,800 86,400 72,000 57,600 43,200 28,800 14,400 639,602.4
Loan Repayment 0 50,020 120,000 120,000 120,000 120,000 120,000 120,000 120,000 120,000 1,010,020

138
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Schedule 04/1: CALCULATION OF WORKING CAPITAL

(a) Accounts receivable: 30 days at production costs minus depreciation and

interest
(b) Inventory:
Raw Material Inputs: 30 days at packaging materials + raw materials (milk).

Salaries & Wages: 90 days

Industrial Plant Operations: 60 days at office & administrative overheads +

marketing expenses + transportation costs +
chemicals & detergents.

Machy& vehicle maintenance: 180 days

Work in progress: 9 days at utilities + fuel & lubricants + milk

distribution costs + commission to agents on milk
products marketed.

Finished products: 45 days at utilities + fuel & lubricants + milk

distribution costs + commission to agents on milk
products marketed.

© Cash-in-hand: 15 days, see separate calculations at the bottom of this

schedule.

(d) Accounts payable: 30 days of total operating costs (cost of sales) –

(maintenance & repairs + insurance).

N.B.: All the local cost price factors for cost of goods sold, utilities and working capital
are indicated in Uganda Shillings („000s) for the ease of computational and financial
analysis.

139
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Schedule 04/2: CALCULATION OF WORKING CAPITAL

I: Annual Production – Product Mix & Sales (UShs „000):

ITEM YEAR OF OPERATION
Year 1 2 3 4 5 6 7 8 9 10

Plant Capacity (LPD) 2,000 3,000 4,000 5,000 5,000 5,000 5,000 5,000 5,000

Milk Sales in Lts (30%) 205,200 307,800 410,400 513,000 513,000 513,000 513,000 513,000 513,000
Cheese Sales in Kgs (20%) 14,400 21,600 28,800 36,000 36,000 36,000 36,000 36,000 36,000
Butter Sales in Kgs 7,200 10,800 14,400 18,000 18,000 18,000 18,000 18,000 18,000
Yogurt Sales in Lts (50%) 342,000 513,000 684,000 855,000 855,000 855,000 855,000 855,000 855,000

Milk Sales Price 2 2.2 2.42 2.66 2.93 3.22 3.54 3.90 4.29
Cheese Sales Price 32 33.6 35.28 37.04 38.90 40.84 42.88 45.03 47.28
Butter Sales Price 20 21 22.05 23.15 24.31 25.53 26.80 28.14 29.55
Yogurt Sales Price 4 4.2 4.41 4.63 4.86 5.11 5.36 5.63 5.91

Milk Sales Revenue 410,400 677,160 993,168 1,365,606 1,502,167 1,652,383 1,817,622 1,999,384 2,199,322
Cheese Sales Revenue 460,800 725,760 1,016,064 1,333,584 1,400,263 1,470,276 1,543,790 1,620,980 1,702,029
Butter Sales Revenue 144,000 226,800 317,520 416,745 437,582 459,461 482,434 506,556 531,884
Yogurt Sales Revenue 1,368,000 2,154,600 3,016,440 3,959,078 4,157,031 4,364,883 4,583,127 4,812,283 5,052,898

Sales Revenue (USD) 2,383,200 3,784,320 5,343,192 7,075,013 7,497,043 7,947,004 8,426,973 8,939,203 9,486,132

140
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Schedule 04/3: CALCULATION OF WORKING CAPITAL

II: Annual Production - Cost Estimate (UShs „000)

ACCOUNT HEAD FINANCIAL YEAR OF OPERATION
YEAR 1 2 3 4 5 6 7 8 9 10
Operating Costs (UGX '000s)
Packaging material 85,320 134,379 179,172 223,965 235,163 246,921 259,267 272,231 285,842
Raw Material (Milk) 449,280 690,768 921,024 1,151,280 1,180,062 1,209,564 1,239,803 1,270,798 1,302,568
Salaries 420,900 441,945 464,042 487,244 511,607 537,187 564,046 592,249 621,861
Office & Admin Overheads 133,620 136,961 140,385 143,894 147,491 151,179 154,958 158,832 162,803
Marketing Expenses 28,440 44,793 59,724 74,655 78,388 82,307 86,422 90,744 95,281
Transportation Costs 142,200 223,965 298,620 373,275 391,939 411,536 432,112 453,718 476,404
Chemicals & detergents 28,440 44,793 59,724 74,655 78,388 82,307 86,422 90,744 95,281
Maintenance (2.5%) 27,056 27,056 27,056 27,056 27,056 27,056 27,056 27,056 27,056
Insurance (1.6%) 17,316 17,316 17,316 17,316 17,316 17,316 17,316 17,316 17,316
Utilities (power & water) 56,880 89,586 119,448 149,310 152,296 155,342 158,449 161,618 164,850
Fuel & Lubricants 34,894 54,958 73,277 91,597 93,887 96,234 98,640 101,106 103,633
Milk distribution costs 127,980 201,569 268,758 335,948 344,346 352,955 361,779 370,823 380,094
Commission to agents on milk marketed 127,980 201,569 268,758 335,948 344,346 352,955 361,779 370,823 380,094
Cost of Sales 1,680,306 2,309,657 2,897,304 3,486,142 3,602,285 3,722,858 3,848,050 3,978,057 4,113,083

Financial Costs (UGX '000s)

Interest on Medium Term Loans 121,202 115,200 100,800 86,400 72,000 57,600 43,200 28,800 14,400
Depreciation 116,717 116,717 116,717 116,717 116,717 116,717 116,717 116,717 116,717
Total Financial Costs 237,919 231,917 217,517 203,117 188,717 174,317 159,917 145,517 131,117

Total Production Costs 1,918,225 2,541,574 3,114,821 3,689,259 3,791,002 3,897,175 4,007,967 4,123,574 4,244,200

141
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Schedule 04/4: CALCULATION OF WORKING CAPITAL: WORKING CAPITAL REQUIREMENTS (UShs „000)
X Y Requirements (UShs ‘000s)
Minimum Coefficient
days of Full-Capacity
of
Item coverage turn-over 2 3 4 5 6 7 8 9 10

I. Current assets
A. Accounts receivable 30 12 140,026 192,471 241,442 290,512 300,190 310,238 320,671 331,505 342,757

B. Inventory
a) Raw Materials 30 12 44,550 68,762 91,683 114,604 117,935 121,374 124,923 128,586 132,368
b) Salaries & Wages 90 4 105,225 172,692 230,256 287,820 295,016 302,391 309,951 317,699 325,642
c) Plant Operations 60 6 55,450 75,085 93,075 111,080 116,034 121,221 126,653 132,340 138,295
d) Maintenance & Repair 180 2 13,528 13,528 13,528 13,528 13,528 13,528 13,528 13,528 13,528
e) Work-in-Process 9 40 9,126 14,125 18,689 23,253 23,805 24,370 24,949 25,542 26,150
f) Finished Products 45 8 45,631 70,625 93,445 116,265 119,024 121,850 124,745 127,711 130,748

C. Cash-in-hand 15 24 50,418 62,922 74,103 85,333 87,782 90,360 93,072 95,925 98,926
(from V below)

D. Current assets _ _ 463,954 670,210 856,221 1,042,394 1,073,314 1,105,332 1,138,491 1,172,836 1,208,413

II. Current Liabilities

A. Accounts payable 30 12 -136,328 -188,774 -237,744 -286,814 -296,493 -306,541 -316,973 -327,807 -339,059

III. Working Capital

A. Net Working Capital 327,626 481,437 618,476 755,580 776,821 798,792 821,518 845,029 869,354
B. Increase in Working Capital _ 153,811 137,040 137,104 21,242 21,970 22,726 23,511 24,325

IV. Total Production Costs _ _ 1,918,225 2,541,574 3,114,821 3,689,259 3,791,002 3,897,175 4,007,967 4,123,574 4,244,200

Less: Raw Material Inputs _ _ 534,600 825,147 1,100,196 1,375,245 1,415,225 1,456,485 1,499,070 1,543,029 1,588,410
Utilities _ _ 56,880 89,586 119,448 149,310 152,296 155,342 158,449 161,618 164,850
Depreciation _ _ 116,717 116,717 116,717 116,717 116,717 116,717 116,717 116,717 116,717
15 24 1,210,028 1,510,124 1,778,460 2,047,987 2,106,763 2,168,631 2,233,731 2,302,210 2,374,222
V. Required Cash Balance _ _ 50,418 62,922 74,103 85,333 87,782 90,360 93,072 95,925 98,926

142
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
SCHEDULE 05: FIXED ASSETS AND DEPRECIATION ALLOWANCES (UShs '000s)
Year 1 2 3 4 5 6 7 8 9 10
Initial Dep Dep Dep Dep Dep Dep Dep Dep Dep

Asset Value Allowance Allowance Allowance Allowance Allowance Allowance Allowance Allowance Allowance

Plant Buildings 323,900 16,195 16,195 16,195 16,195 16,195 16,195 16,195 16,195 16,195

Yogurt Cold Room 370,000 37,000 37,000 37,000 37,000 37,000 37,000 37,000 37,000 37,000

Production Plant and Equipment 470,220 47,022 47,022 47,022 47,022 47,022 47,022 47,022 47,022 47,022

Diesel Electric Genset 75,000 7,500 7,500 7,500 7,500 7,500 7,500 7,500 7,500 7,500

Office Furniture & Equipment 20,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000

Motor Vehicles 35,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000

TOTALS 1,294,120 116,717 116,717 116,717 116,717 116,717 116,717 116,717 116,717 116,717

143
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Schedule 06: TOTAL INVESTMENT COSTS (UShs '000s)
Period Construction Full Capacity
Year 1 2 3 4 5 6 7 8 9 10 Total

1. Fixed Investment Costs 1,655,095 0 0 0 0 0 0 0 0 0 1,690,095

a) Initial fixed investment costs 1,655,095 0 0 0 0 0 0 0 0 0 1,655,095
b) Replacement 0 0 0 0 0 35,000 0 0 0 0 35,000

2. Pre-operational expenses 401,765 0 0 0 0 0 0 0 0 0 401,765

3. Working Capital increase 0 327,626 153,811 137,040 137,104 21,242 21,970 22,726 23,511 24,325 869,354

Total Investment Costs 2,056,860 327,626 153,811 137,040 137,104 56,242 21,970 22,726 23,511 24,325 2,961,214

Schedule 07: TOTAL ASSETS (UShs '000s)

Period Construction Full Capacity
Year 1 2 3 4 5 6 7 8 9 10 Total

1. Fixed Investment Costs 1,655,095 0 0 0 0 0 0 0 0 0 1,690,095

a) Initial fixed investment costs 1,655,095 0 0 0 0 0 0 0 0 0 1,655,095
b) Replacement 0 0 0 0 0 35,000 0 0 0 0 35,000

2. Pre-operational expenses 401,765 0 0 0 0 0 0 0 0 0 401,765

3. Current Assets increase 0 463,954 206,256 186,010 186,173 30,920 32,018 33,159 34,345 35,577 1,208,413

Total Assets 2,056,860 463,954 206,256 186,010 186,173 65,920 32,018 33,159 34,345 35,577 3,300,273

144
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Schedule 08: PROJECTED CASHFLOW TABLE (UShs '000s)
Period Construction Full Capacity
Year 1 2 3 4 5 6 7 8 9 10 *Sal val Total
Costs (UGX „000s)
A. Cash inflow 2,056,860 2,383,200 3,784,320 5,343,192 7,075,013 7,497,043 7,947,004 8,426,973 8,939,203 9,486,132 _ 62,938,941
1. Financial resources
total 2,056,860 _ _ _ _ _ _ _ _ _ _ 2,056,860
2. Sales revenue total _ 2,383,200 3,784,320 5,343,192 7,075,013 7,497,043 7,947,004 8,426,973 8,939,203 9,486,132 _ 60,882,081

B. Cash outflow -2,056,860 -2,482,984 -3,130,952 -3,979,641 -4,901,457 -4,979,033 -5,154,440 -5,377,126 -5,612,905 -5,862,655 1,244,499 -42,293,553
1. Total assets schedule
including replacements -2,056,860 -463,954 -206,256 -186,010 -186,173 -65,920 -32,018 -33,159 -34,345 -35,577 1,244,499 -2,055,774
2. Operating Costs (Cost of Sales)
_ -1,680,306 -2,309,657 -2,897,304 -3,486,142 -3,602,285 -3,722,858 -3,848,050 -3,978,057 -4,113,083 _ -29,637,742
3. Debt Service
a) Interest _ -121,202 -115,200 -100,800 -86,400 -72,000 -57,600 -43,200 -28,800 -14,400 _ -639,602
b) Repayments _ -50,020 -120,000 -120,000 -120,000 -120,000 -120,000 -120,000 -120,000 -120,000 -1,010,020

4. Corporate tax _ -159,501 -371,839 -667,526 -1,014,741 -1,110,828 -1,213,964 -1,324,717 -1,443,704 -1,571,595 _ -8,878,415

5. Dividends 4% on equity _ -20,000 -20,000 -20,000 -20,000 -20,000 -20,000 -20,000 -20,000 -20,000 _ -180,000

C. Surplus / deficit 0 -99,784 653,368 1,363,551 2,173,556 2,518,011 2,792,564 3,049,847 3,326,298 3,623,477 1,244,499 20,645,388

D. Cumulative cash balance 0 -99,784 553,584 1,917,135 4,090,691 6,608,702 9,401,266 12,451,113 15,777,411 19,400,889 20,645,388

*Salvage values. Land: 200,000; 55% of buildings: 175,145; Working Capital: 869,354 1,244,499

145
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Schedule 09: PROJECTED CASHFLOW TABLE AND CALCULATION OF PRESENT VALUE (UShs '000s)
Year 1 2 3 4 5 6 7 8 9 10 *Sal val Total
Constr. Full Capacity

Investment Costs -2,056,860 _ _ _ _ _ _ _ _ _ _ -2,056,860

Net Profit after Tax _ 372,170 867,624 1,557,561 2,367,729 2,591,931 2,832,582 3,091,006 3,368,642 3,667,055 _ 20,716,302
Depreciation _ 116,717 116,717 116,717 116,717 116,717 116,717 116,717 116,717 116,717 _ 1,050,453
Interest Add back
Mid-term Loan _ 121,202 115,200 100,800 86,400 72,000 57,600 43,200 28,800 14,400 _ 639,602
NET CASH FLOWS -2,056,860 610,090 1,099,541 1,775,078 2,570,846 2,780,648 3,006,899 3,250,923 3,514,159 3,798,172 1,244,499 21,593,996

Discount Factors at 14% 0.8772 0.7695 0.675 0.5921 0.5194 0.4556 0.3996 0.3506 0.3075 0.2697 0.2076 _
PV at 14% -1,804,278 469,464 742,190 1,051,024 1,335,298 1,266,863 1,201,557 1,139,774 1,080,604 1,024,367 258,358 7,765,221
NPV at 14% 7,765,221
Discount Factors at 17% 0.8547 0.7305 0.6244 0.5337 0.4561 0.3898 0.3332 0.2848 0.2434 0.208 0.152 _
PV at 17% -1,757,998 445,670 686,554 947,359 1,172,563 1,083,897 1,001,899 925,863 855,346 790,020 189,164 6,340,336
NPV at 17% 6,340,336

Internal Rate of Return = 66.06%

66.06%
NPV at 14% = UGX 7,765,221,000

NPV at 17% = UGX 6,340,336,000

146
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Schedule 10: PROJECTED INCOME STATEMENT (UShs '000s)
Year 1 2 3 4 5 6 7 8 9 10

Sales _ 2,383,200 3,784,320 5,343,192 7,075,013 7,497,043 7,947,004 8,426,973 8,939,203 9,486,132
Raw Materials _ 534,600 825,147 1,100,196 1,375,245 1,415,225 1,456,485 1,499,070 1,543,029 1,588,410

GROSS PROFIT _ 1,848,600 2,959,173 4,242,996 5,699,768 6,081,818 6,490,519 6,927,903 7,396,174 7,897,722

Less: Operating Costs

(excl. Raw Materials) _ 1,145,706 1,484,510 1,797,108 2,110,897 2,187,060 2,266,373 2,348,980 2,435,028 2,524,673

OPERATING PROFIT _ 702,894 1,474,663 2,445,888 3,588,870 3,894,759 4,224,146 4,578,923 4,961,146 5,373,050

Less: Accrued interest on

Long-Term Loan (@ 12.0% p.a.) _ 121,202.4 115,200 100,800 86,400 72,000 57,600 43,200 28,800 14,400
Less: Annual Repayments _ 50,020 120,000 120,000 120,000 120,000 120,000 120,000 120,000 120,000

NET PROFIT BEFORE TAX _ 531,672 1,239,463 2,225,088 3,382,470 3,702,759 4,046,546 4,415,723 4,812,346 5,238,650

Corporation Tax 30% _ 159,501 371,839 667,526 1,014,741 1,110,828 1,213,964 1,324,717 1,443,704 1,571,595

NET PROFIT _ 372,170 867,624 1,557,561 2,367,729 2,591,931 2,832,582 3,091,006 3,368,642 3,667,055

Accumulated Net Profit (Loss) _ 372,170 1,239,795 2,797,356 5,165,085 7,757,016 10,589,598 13,680,604 17,049,247 20,716,302
Net Profit Margin _ 15.62% 22.93% 29.15% 33.47% 34.57% 35.64% 36.68% 37.68% 38.66%
Gross Profit Margin 77.57% 78.20% 79.41% 80.56% 81.12% 81.67% 82.21% 82.74% 83.26%
Rate of Return on Investment _ 18% 42% 75.73% 115% 126.01% 137.71% 150.28% 163.78% 178.28%
Operating Profit Margin _ 29.49% 38.97% 45.78% 50.73% 51.95% 53.15% 54.34% 55.50% 56.64%

147
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Schedule 11: PROJECTED BALANCE SHEET (UShs '000s)
CAPITAL EMPLOYED: YR.1 YR.2 YR.3 YR.4 YR.5 YR.6 YR.7 YR.8 YR.9 YR.10
Share Capital 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000
Retained Earnings 372,170 1,239,795 2,797,356 5,165,085 7,757,016 10,589,598 13,680,604 17,049,247 20,716,302
Shareholder's Equity/Deficit 572,170 1,439,795 2,997,356 5,365,085 7,957,016 10,789,598 13,880,604 17,249,247 20,916,302

Long-Term Liabilities 1,010,020 960,000 840,000 720,000 600,000 480,000 360,000 240,000 120,000
1,582,190 2,399,795 3,837,356 6,085,085 8,557,016 11,269,598 14,240,604 17,489,247 21,036,302

EMPLOYMENT OF CAPITAL: `

Plant Buildings 323,900 307,705 291,510 275,315 259,120 242,925 226,730 210,535 194,340 178,145
Yogurt Cold Room 370,000 333,000 296,000 259,000 222,000 185,000 148,000 111,000 74,000 37,000
Production Plant Equip. & Machinery 470,220 423,198 376,176 329,154 282,132 235,110 188,088 141,066 94,044 47,022
Diesel Electric Genset 75,000 67,500 60,000 52,500 45,000 37,500 30,000 22,500 15,000 7,500
Office Furniture & Equipment 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000
Vehicles 35,000 28,000 21,000 14,000 7,000 50,000 40,000 30,000 20,000 10,000
LONG-TERM ASSETS: 1,177,403 1,060,686 943,969 827,252 760,535 640,818 521,101 401,384 281,667
CURRENT ASSETS: 662,317 1,643,082 3,231,931 5,631,047 8,164,974 10,992,921 14,079,677 17,444,470 21,108,094

Accounts Receivable 140,026 192,471 241,442 290,512 300,190 310,238 320,671 331,505 342,757
Stock (Inventory) 273,511 414,817 540,676 666,549 685,342 704,734 724,748 745,406 766,730
Bank Balance and Cash 50,418 62,922 74,103 85,333 87,782 90,360 93,072 95,925 98,926
Other Current Assets 198,364 972,872 2,375,711 4,588,653 7,091,660 9,887,589 12,941,186 16,271,634 19,899,681

CURRENT LIABILITIES: 257,530 303,974 338,544 373,214 368,493 364,141 360,173 356,607 353,459
Accounts Payable 136,328 188,774 237,744 286,814 296,493 306,541 316,973 327,807 339,059
Current Portion of Long-term
Liabilities 121,202 115,200 100,800 86,400 72,000 57,600 43,200 28,800 14,400

NET CURRENT ASSETS: 404,787 1,339,109 2,893,387 5,257,833 7,796,481 10,628,780 13,719,503 17,087,863 20,754,635
TOTAL CAPITAL 1,582,190 2,399,795 3,837,356 6,085,085 8,557,016 11,269,598 14,240,604 17,489,247 21,036,302

TOTAL ASSETS 1,839,720 2,703,768 4,175,900 6,458,299 8,925,509 11,633,739 14,600,778 17,845,854 21,389,761

148
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Schedule 12: PROJECTED PAYBACK PERIOD (UShs '000s)
YEAR/ITEM 2 3 4 5 6 7 8 9 10

Net Profit 372,170 867,624 1,557,561 2,367,729 2,591,931 2,832,582 3,091,006 3,368,642 3,667,055
Interest 121,202 115,200 100,800 86,400 72,000 57,600 43,200 28,800 14,400
Depreciation 116,717 116,717 116,717 116,717 116,717 116,717 116,717 116,717 116,717
"Profit" 610,090 1,099,541 1,775,078 2,570,846 2,780,648 3,006,899 3,250,923 3,514,159 3,798,172

Year Amount paid Balance of Balance of

back from Total New Equity
"profits" Investment Investment
1 0 -2,056,860 -1,041,640
2 610,090 -1,446,770 -431,550
3 1,099,541 -347,229 667,991
4 1,775,078 1,427,849 2,443,069
5 2,570,846 3,998,696 5,013,916
6 2,780,648 6,779,344 9,559,992
7 3,006,899 9,786,243 12,793,142
8 3,250,923 13,037,166 16,288,089
9 3,514,159 16,551,325 19,802,248
10 3,798,172 20,349,497 23,600,420
Pay Back Period = 3.20 YEARS

149
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Schedule 13: BUSINESS RATIO ANALYSIS (UShs '000s)
Period Constr Full Capacity
Year 1 2 3 4 5 6 7 8 9 10
Sales Growth 5% 5% 5% 5% 5% 5% 5% 5%

Percent of Total Assets

Accounts Receivable 7.61% 7.12% 5.78% 4.50% 3.36% 2.67% 2.20% 1.86% 1.60%
Inventory 14.87% 15.34% 12.95% 10.32% 7.68% 6.06% 4.96% 4.18% 3.58%
Other Current Assets 10.78% 35.98% 56.89% 71.05% 79.45% 84.99% 88.63% 91.18% 93.03%
Total Current Assets 36.00% 60.77% 77.39% 87.19% 91.48% 94.49% 96.43% 97.75% 98.68%
Long-term Assets 64.00% 39.23% 22.61% 12.81% 8.52% 5.51% 3.57% 2.25% 1.32%
Total Assets 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

Current Liabilities 14.00% 11.24% 8.11% 5.78% 4.13% 3.13% 2.47% 2.00% 1.65%
Long-term liabilities 54.90% 35.51% 20.12% 11.15% 6.72% 4.13% 2.47% 1.34% 0.56%
Total Liabilities 68.90% 46.75% 28.22% 16.93% 10.85% 7.26% 4.93% 3.34% 2.21%
Net Worth (Total Capital) 86.00% 88.76% 91.89% 94.22% 95.87% 96.87% 97.53% 98.00% 98.35%

Percent of Revenues
Revenues 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Gross Margin 77.57% 78.20% 79.41% 80.56% 81.12% 81.67% 82.21% 82.74% 83.26%
Management / Administration 5.97% 5.92% 5.59% 5.28% 5.23% 5.18% 5.13% 5.08% 5.02%
Net Profit (after Interest & Tax) 15.62% 22.93% 29.15% 33.47% 34.57% 35.64% 36.68% 37.68% 38.66%

Main Ratios
Current 2.57 5.41 9.55 15.09 22.16 30.19 39.09 48.92 59.72
Quick 1.51 4.04 7.95 13.30 20.30 28.25 37.08 46.83 57.55
Total Debt to Total Assets 54.90% 35.51% 20.12% 11.15% 6.72% 4.13% 2.47% 1.34% 0.56%
Pre-tax Return on Net Worth 33.60% 51.65% 57.98% 55.59% 43.27% 35.91% 31.01% 27.52% 24.90%
Pre-tax Return on Assets 28.90% 45.84% 53.28% 52.37% 41.49% 34.78% 30.24% 26.97% 24.49%

Business Vitality Profile

Revenue per Employee $66,200 $105,120 $148,422 $196,528 $208,251 $220,750 $234,083 $248,311 $263,504

150
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Schedule 12: BUSINESS RATIO ANALYSIS (UShs '000s)…. CONT‟D
Additional Ratios
Net Profit Margin 15.62% 22.93% 29.15% 33.47% 34.57% 35.64% 36.68% 37.68% 38.66%
Return on Equity 12.42% 60.26% 51.96% 44.13% 32.57% 26.25% 22.27% 19.53% 17.53%

Activity Ratios
Accounts Receivable Turnover 1.70 1.97 2.21 2.44 2.50 2.56 2.63 2.70 2.77
Collection Days 30 30 30 30 30 30 30 30 30
Inventory Turnover 0.31 0.32 0.33 0.34 0.34 0.35 0.36 0.37 0.37
Accounts Payable Turnover 1.20 1.20 1.20 1.20 1.20 1.20 1.20 1.20 1.20
Payment Days 30 30 30 30 30 30 30 30 30
Total Assets Turnover 1.30 1.40 1.28 1.10 0.84 0.68 0.58 0.50 0.44
Fixed Assets Turnover 1.43 2.18 3.07 4.21 4.74 5.81 7.38 9.91 14.60

Debt Ratios
Debt to Net Worth 0.64 0.40 0.22 0.12 0.07 0.04 0.03 0.01 0.01
Current Liability to Liability 0.25 0.32 0.40 0.52 0.61 0.76 1.00 1.49 2.95
Debt-Service Coverage Ratio 3.56 4.67 8.04 12.46 14.48 16.93 19.92 23.62 28.26

Liquidity Ratios
Net Working Capital $327,626 $481,437 $618,476 $755,580 $776,821 $798,792 $821,518 $845,029 $869,354
Interest Coverage [Times Inte-
rest Earned Ratio - TIE] 5.80 12.80 24.26 41.54 54.09 73.34 105.99 172.26 373.13

Additional Ratios
Assets to Revenue 0.77 0.71 0.78 0.91 1.19 1.46 1.73 2.00 2.25
Current Debt / Total Assets 6.59% 4.26% 2.41% 1.34% 0.81% 0.50% 0.30% 0.16% 0.07%
Acid Test 1.51 4.04 7.95 13.30 20.30 28.25 37.08 46.83 57.55
Sales/Net Worth 1.51 1.58 1.39 1.16 0.88 0.71 0.59 0.51 0.45

151
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
Schedule 14: SENSITIVITY ANALYSIS (UShs '000s)
Items PAT BEP IRR Payback
Base Case 2,367,729 18.62% 66.06% 3.20 Yrs
Increase in Operating Costs by 5% 2,293,848 19.67% 64.20% 3.26 Yrs
Selling Prices up by 25% 3,358,231 13.89% 85.86% 2.68 Yrs
Decrease in COGS by 10% 2,463,996 18.02% 68.17% 3.14 Yrs
Increase in COGS by 10% 2,271,462 19.25% 63.95% 3.45 Yrs

Legend:

PAT: Profit after Tax

BEP: Break-even Point
IRR: Internal Rate of Return

152
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
APPENDIX I: SUPPLIERS and / or PRODUCERS OF DAIRY / DAIRY PACKAGING
EQUIPMENT AND OTHER MATERIAL
Company Country Specialized in Email / Website
Tetra Pak International Whole range: processing, Contact Gary Zeller, Tetra Pak South Africa
packaging & filling (dairy and (Pty) Ltd
other products), distribution [email protected]
DeLaval International Whole range dairy systems Contact HoseinAminy, Food for Dev’t Office,
(“all but the cow”) from the Tuma, Sweden
barn to chilled milk [email protected]
Packo Belgium Wide range / general [email protected] /
equipment www.packo.com
Nile Star Import Ethiopia Wide range Tel. 011 - 6522751
Export
Serac Belgium Cooling Contact M. Petit
Elecster Finland Packing also UHT – Aseptic [email protected]
filling www.elecster.fi
Combiblock/ Germany Aseptic filling www.sigcombibloc.com
PKL/SIG
A.E.S. France Packing machines & materials Mr. Laurent Vizzavona
[email protected]
Sersia-Breeding France (contact M. Petit) Mr. Ali Haidar
[email protected]
I.P.I. France/Italy Aseptic packaging M Paul Furioux
[email protected]
www.ipi-srl.com
Novopac Germany Form-Fill-Seal Msses. Lang
[email protected]
www.novopac.de
Nova Socimec/ France Filling machines M R. Meneguz
Serac [email protected]
www.nova-packaging.com
Actini France Processing / Filling / UHT- M-. Francois Quenard
Aseptic [email protected]
www.actini.com
Promaco Kenya Everything in dairy Mr. Mulinge
Promaco.wananchi.
Com
Bernhardt France Packing machines & materials [email protected]
www.bernhardt.fr
www.bernhardt-sa.com
Thimonier France Packing machines & material [email protected]
www.thimonnier.com

153
 CAREMARK INVESTMENTS LIMITED Business Plan Corporate Document
ALPES France Processing & Packaging [email protected]
materials www.alpes-is.com
Prepac France / Packing machines & material [email protected]
(Canada)
Damy France Small equipment & packing [email protected]
machines
TOMEGA Belgium Small equipment & ingredients [email protected]
www.tomega.be
Acb/Hydrolog Sterilization www.acb-ps.com
Lagarde Sterilization www.lagarde-autoclaves.com
Steriflow France Sterilization
Tel. +33-1-40370845

154