The Dairy Farming Promotion Organisation, the manufacturer of Thai Danish dairy products, will invest 455 million baht to upgrade production facilities of its four milk plants across the country.
The DPO’s Thai-Danish brand now has a 28% share of the local UHT market.
The upgrades are a response to steady sales growth, to a forecast 6 billion baht in 2010, better than the previous projection of 5.8 billion baht the agency made early this year and far higher than last year’s sales of 3.86 billion baht.
The expansion would increase the use of raw milk by the DPO, the state agency, to 500 tonnes per day from 380, said director-general Winya Makarapong.
DPO sales have been strong since last year, especially UHT (ultra-high temperature) products made from 100% cow’s milk, as consumers have become more concerned about the safety of powdered milk since the tainted-milk scandal in China in late 2008.
While the overall UHT market last year declined by 1.1%, the DPO expanded its sales by 1% and improved its UHT market share to 28%, the second largest behind Foremost, said Mr Winya.
The four milk being upgraded are in Muak Lek in Saraburi, Pranburi, Khon Kaen and Sukhothai.
The budget includes 45 million baht for a new high-speed milk filling machine using aseptic technology from Germany, which will raise output to 12,000 packages per hour from 7,500.
The machine also enables the DPO to introduce more varieties of dairy products in different sizes, and to raise production capacity to meet market demand and absorb raw milk supplies, especially from the northern provinces, he said.
The DPO expects the improvement will help increase UHT sales revenue to about 4.2 billion baht this year. It is also the main supplier of the government-sponsored school milk project, which should generate sales of 1.8 billion baht, bringing its total to 6 billion baht.
Mr Winya said the government planned to spend about 14 billion baht this year for the school milk project to absorb about 1,200 tonnes of raw milk a day. Another 1,500 tonnes of raw milk are used commercially every day.
“Although there is no surplus problem so far, milk production is expected to increase every year and longer-term solutions are needed,” Mr Winya said.
The DPO therefore, has sought cabinet approval to build a powdered milk plant, with a capacity of 20 tonnes a day of powdered milk for infants and skimmed milk for the food industry.
“Considering to the capacity, the plant would be able to consume about 200 tonnes of raw milk per day, basing on the ratio between raw milk and powder at 10:1,” he said.
The powdered milk project has been shelved since 2006 because of political changes and uncertainties, and Mr Winya estimated that the cost would now exceed the 1.3 billion baht budgeted earlier.
The DPO will distribute powdered milk in Asean as well with competitive prices thanks to the elimination of import tariffs under the Asean Free Trade Area.