Powder milk imports dip to 8-year low as consumers tighten belts

Bangladesh's imports of milk and cream plummeted to 118,000 tonnes in the last fiscal year of 2022-23, the lowest in eight years, after a section of consumers cut consumption of milk-based foods and beverages in a bid to manage costs amid heightened levels of inflation. 

FY23's imports of milk and cream were nearly 16 percent lower than the volume imported the previous year, data from the Bangladesh Bureau of Statistics (BBS) showed.

Industry people attributed the drop to increased domestic production of milk and a reduction in consumption by budget-conscious consumers.

"Overall consumption has declined due to high inflation and the effects of the war in Ukraine and the Covid-19 pandemic," said SA Mallick, managing director of New Zealand Dairy Products Bangladesh Ltd.

Although the import volume fell, Bangladesh spent nearly Tk 4,000 crore to buy milk and dairy products from the external markets in the last fiscal year, up 21 percent year-on-year, Bangladesh Bank data showed.

"We have seen a significant decline in volume in the economy segment as many cannot afford to spend on milk for tea or milk-based sweets."

However, demand in the upper-middle-income segment remains unaffected, added Mallick.

The top official of New Zealand Dairy, which markets Diploma-branded powder milk, said difficulties in opening letters of credit (LCs) and increasing import costs due to the devaluation of the taka against the US dollar created more problems.

"Many traders who import skimmed milk powder have reduced their imports."

Since July 5 last year, the taka has fallen 17 percent in value against the greenback as Bangladesh grapples with a foreign exchange shortage resulting from a higher pressure for payments of imports and other bills compared to remittances and export earnings.

Consequently, overall import costs soared.

However, although the import volume fell, Bangladesh spent nearly Tk 4,000 crore to buy milk and dairy products from the external markets in the last fiscal year, up 21 percent year-on-year, Bangladesh Bank data showed.

Accordingly, the prices of powder milk have risen over the past year, showed the market prices data by the Trading Corporation of Bangladesh.

"We are facing increasing challenges to import products," said Saleh Uz Zaman, head of communications at Arla Foods Bangladesh Ltd, the marketer of Dano-branded powder milk.

It can be attributed to both unavailability of the US dollar, the difficulty in opening LCs, and unpredictable exchange rates, he said.

"However, we are always diligent in ensuring nutrition and dairy goodness for our customers at the best possible price."

Mallick echoed the sentiments, saying: "People will feel relieved if the exchange rate becomes stable."

Industry insiders said many consumers who used to drink milk tea have stopped doing so due to health concerns while increased costs of sugar and rice have also negatively affected the making of sweetened foods at home as many families are rationing expenses.

Bangladesh's consumers have been seeing their purchasing capacity worsen since the prices of goods and services began to rise more than a year ago.

Average inflation rose to 9.02 percent in the FY23 from 6.15 percent the previous year, according to the BBS.

"It seems that consumption has declined due to high inflation," said Kamruzzaman Kamal, director marketing at Pran-RFL Group, which markets both powder and processed liquid milk.

He said local milk production had risen but the spike would not be able to offset the decline in the rate of powder milk imports.

In Bangladesh, milk production has been steadily increasing over the years thanks to farmers' enthusiasm towards dairy farming.

Total domestic production of milk edged up 8 percent year-on-year to nearly 141,000 tonnes in the FY23, data from the Department of Livestock Services showed.