Even though 20 years remain before import tariffs are to be fully eliminated, Thai dairy farmers and manufacturers of dairy products are boosting both the quality and the volume of their production to cope with the expected flood of high-quality dairy products from Australia and New Zealand.

Minor Food Group subsidiaries Minor Cheese Ltd and Minor Dairy Ltd have managed to produce not only more value-added products but also a greater variety of goods.

The companies also are planning for both direct and indirect exports to potential markets via their food and ice-cream franchises.

And the Muaklek Dairy Coopera-

tives Ltd in Saraburi, which is not part

of the Minor Group, is planning to expand its ties with other cooperatives in nearby provinces such as Lop Buri

to strengthen its long-term competitiveness.

Thailand has  made a commitment to eliminate import tariffs on dairy products from Australia to zero by 2025. Before reaching this goal, the Thai government will gradually reduce its current import duty of 30 per cent by 2 per cent every year. Thai farmers will be protected under safeguard measures by import quotas.

The Minor Food Group is one of the country's major users of dairy products, which it supplies to The Pizza Company, Swensen's, Sizzler and Dairy Queen. The group is also a major dairy-products supplier to restaurants, hotels, "modern trade" outlets - supermarkets and hypermarkets - and food shops.

Minor Cheese produces mozzarella, cheddar, Parmesan and other cheese products with a total capacity of 1,500 tonnes per year. Minor Dairy concentrates on ice-cream, ice-cream cake, frozen cake, ready-to-decorate cake and whipping cream. The two companies are located at Pak Chong district in Nakhon Ratchasima, about 200 kilometres northeast of Bangkok.

Tanomsri Pretikul, vice president and general manager of the two subsidiaries, said as part of Minor's development plans consultants from leading cheese-exporting countries have been invited to help the Kingdom develop its cheese production.

In addition, Minor's cheese-manufacturing plant is concentrating on training and improving efficiency. To improve milk quality, the company will work closely with its raw-milk suppliers.

The company's cheese products supplied to the domestic market are traded under its own brand, "Dairy Valley".

Tanomsri said that cheese production requires fresh, high quality raw milk.

"If the local raw milk price is stable while the world price is climbing, and if we don't have to import any milk, our competitiveness will grow," she said.

The world's average cheese prices are traded at US$3,200-3,500 per tonne compared with Thai cheeses of US$2,000-3,000.

Local demand takes 70-80 per cent of the company's total production. The rest is exported.

While the ratio of exports to local sales is expected to grow to 50 per cent, both markets have high growth potential.

The company has drawn up a three-phase plan, which will be gradually implemented until 2010. The first phase is focused on cold-storage expansion, with an investment of Bt40 million.

The expansion will serve the company's exports through The Pizza Company and Swensen's franchises.

So far, targeted export markets are in the Middle East, where shops are already open in Kuwait and Bahrain.

In Asia, the company has also formed a joint venture with Chinese investors to operate franchises in Beijing. Shops have also been opened in the Philippines and Cambodia.

Combined revenues from Minor Cheese and Minor Dairy are expected to reach Bt800 million this year. Sales are projected to grow by 25 per cent next year.

Jakreechai Na Nan, manager of the Muaklek Dairy Cooperatives, said its plan for stronger ties with seven other dairy cooperatives in Saraburi and Lop Buri would strengthen competitiveness, ensure sustainable development and make it easier to solve unexpected problems.

The expansion is expected to create economies of scale in terms of feed meal and other raw materials.

"The bigger network will also strengthen our bargaining power," he said.

Jakreechai added that farmers were upgrading their farms to meet international standards, a process that will, however, take some time before all the farms meet international requirements.

With financial support from the Agriculture and Cooperatives Ministry, Muaklek has developed its quality-control system by installing modern technology and equipment.

"We can say that our operation is a modern system with the same technology that is used in private companies to ensure high-quality raw milk and fast distribution," he said.

Jakreechai predicted the cooperative and its new partners would survive through the next 20 years by concentrating on quality.

Achara Pongvutitham

The Nation