A nation that consumes 6.5 billion litres of milk annually has only recently started to hear about ‘pasteurised milk’, a sub-category of the milk market accounting for a negligible share of the dairy industry.

For context, Pakistan ranks as the third largest milk producer in the world, with an annual milk production of 36.6 billion litres (Source: Pakistan Dairy Development Company). The industry contributes 11.3% to Pakistan’s GDP, provides employment to 10 million farming families and is currently valued at $26 billion.

The consumption of milk for household use is dominated by the informal sector, which accounts for 97% of all milk sold in Pakistan. This channel includes shops selling unbranded milk and home delivery services by gawalas (milkmen). The remaining three percent of the milk sold is processed and includes UHT, pasteurised, flavoured and powdered milk.

A report by Tetra Pak (the largest UHT milk processing company in Pakistan), published in July 2011 revealed that owing to demographic changes, rapid urbanisation, a growing middle class, a larger number of young consumers and increased health awareness, the processed milk market grew at a rate of 19% in the last decade (1999-2010).

In the same decade, pasteurised milk was also introduced in Pakistan. However, although this packaged, branded and fresh form of milk is considered almost everywhere else in the world as the healthiest form of milk, in urban Pakistan, UHT milk is considered the best.

The pasteurised milk market is populated by local players only. Lahore is the more mature market and has been seeing activity in this category for the last seven to eight years. The major brands in Lahore include Anhaar (Sharif Group), Farm Fresh Milk (A&A Enterprises), Premá (At-Tahur), Gourmet, Halla, Nurpur and Prime. Karachi was introduced to the concept of pasteurised milk in 2009 and the major brands are Dayfresh (Dairyland) and Millac.

Pasteurised milk is priced competitively against khula doodh (unbranded milk). Dayfresh and Millac sell a one-litre pouch for Rs 68 and a 1.5 litre pouch for Rs 35 (loose milk retails for Rs 68-70 per litre), whereas a litre of UHT milk ranges from Rs 75-80. However, some pasteurised brands (Premá, Anhaar, Farm Fresh Milk) sell only Australian cow’s milk and are priced at Rs 75-85 per litre. This premium version of pasteurised milk, more widely marketed in Lahore, is sold in plastic bottles.

Although the competitive pricing of pasteurised milk makes it accessible to all socio-economic segments, Faisal Aman, Marketing & Sales Manager, Dayfresh, says the conversion rate is still slow. Moreover, pasteurised milk is so far only an urban phenomenon.

The players in this category are selling their product in the city in which the milk is processed mainly because of the short shelf life of pasteurised milk. (The pasteurisation process heats the milk to 72 degrees Celsius for 15-20 seconds, thereby accounting for the product’s short shelf life. In contrast, UHT milk is heated to 135 degrees Celsius for one or two seconds and has a typical shelf life of six to nine months.)

“If we want to give our consumers a sell-by date of five to six days, the milk has to be transported to the retail space on the day it is processed. Transit between cities takes at least two to three days and is impractical for us,” says

Yousra Taj, Assistant Brand Manager, Millac.

Not only does the short shelf life geographically limit the market, it also adds a convenience barrier for the consumers and according to Taj, “Households which buy cartons of UHT milk as part of their monthly grocery cannot buy pasteurised milk in the same pattern.”

However, pasteurised milk brands have tried to mitigate the problem by offering a number of retail channels:

Home delivery system

Millac, Dayfresh, Farm Fresh Milk and some other players are aggressively using a subscription-based delivery system to provide the milk to consumers at their doorstep.

Company owned milk shops

Millac and Dayfresh have their own shops throughout Karachi. They serve not only as a point of purchase for but also as a storage point, from where the milk is home-delivered to nearby neighbourhoods.

Distributor network

Some companies like Dairyland manage a network of independent milk distributors to supply to those parts of the city where the company does not have a shop.

Local and international modern trade

Most of the pasteurised milk brands available in Lahore are sold through modern trade where the refrigeration is reliable.

According to Aman, managing distribution and logistics is a challenge because pasteurised milk needs to be kept at a temperature of four degrees Celsius until consumed, a problem made worse by the onset of summer and the ubiquitous power breakdowns.

A short shelf life is not the only issue limiting the growth of pasteurised milk brands in Pakistan; the more pressing problem is the lack of awareness and misconceptions that tend to abound among consumers.

According to Suleman Shahbaz Sharif, Managing Director, Anhaar, many consumers try pasteurised milk but do not make the all important switch for a number of reasons, the most common being that the cream doesn’t rise to the top in the same way as it does in unbranded milk. (This is because pasteurised milk is also homogenised, so the fat is evenly spread in every drop.)

In such a landscape, pasteurised milk brands have to spend time and money to create awareness through marketing.

Very few brands have invested in the mass media because the market is geographically limited; the focus has been on below the line activities, educating consumers about the process of milk pasteurisation and the health hazards of loose and UHT milk.

Aman says that Dayfresh has run a campaign on cable TV hitting directly at the gawalas, while Sharif reveals that Anhaar plans to roll out a campaign in the coming months which will encourage consumers to “think about the source of their milk.”

Despite the challenges, pasteurised milk companies are positive about the outlook. The number of competing brands is likely to increase in the coming years, although it is unlikely that any of the UHT players will step into the pasteurised category any time soon, as they are aware of the difference in distribution and logistics and the related challenges.

Sharif believes that government regulation can bring about a revolutionary change by formalising the milk supply chain and thus reducing the share of loose milk. Observing the trend from India (where loose milk has been banned in several large metros and pasteurised milk dominates the market), it is only a matter of time before consumers will start to see the differences between the milk alternatives available, in which case pasteurised milk may evolve as a dominant category in the metros first and then in the rest of the country.