Akij Group, Bengal Group, Pran-RFL, Partex and some other private entrepreneurs have expressed their interest in running five closed Milk Vita factories, but they want the partnership tenure to be more than five years offered by the company.
In recent meetings, Milk Vita – a milk and dairy company owned by the Bangladesh Milk Producers Cooperative Union Limited – informed the representatives of the interested companies the detailed terms and conditions.
The private companies raised objections to some of the conditions. Milk Vita officials assured them that these conditions can be discussed further.
Dr Md Mahfuzul Haque, general manager (Administration, Finance and Audit) at Milk Vita, told The Business Standard, "The conditions we have set can be changed through discussions because we want them to invest here so that our loss-making companies can continue the business."
Representatives of the private firms who participated in the meeting said Milk Vita wants to conduct business on the Milk Vita brand under a partnership agreement for a period of five years.
In addition, interested companies will have to bear the costs of the modernisation of factories and necessary repairs and Milk Vita will have no financial involvement in these respects.
Milk Vita officials, however, said profit sharing will be determined through discussions.
An Akij Group official, seeking anonymity, told TBS that Milk Vita officials had invited the company for a factory inspection.
"During the inspection, we will assess the condition of the factories and how much investment will be required," he added.
He said the fact is that investing in a five-year contract is risky because the repairs of the factories, which have remained closed for around 8-10 years, will require a large investment.
The Akij official said another challenge related to doing business under the Milk Vita brand when Akij Group has its own brand. So more discussions are needed on these issues.
Earlier in September last year, Milk Vita invited expressions of interest (EoI) for repair, maintenance and operation of four factories that include two UHT milk plants, one condensed milk plant, and one can-making plant and installation and commissioning of a bottled water plant.
Of these factories, the can making plant, the condensed milk plant, and one UHT milk plant are at Baghabari Ghat in Sirajganj, one dairy plant is in Sirajganj, the second UHT milk plant and the second dairy plant are in Dhaka, and the water bottling plant is at Shibpur, Narsingdi.
The shuttered factories
Milk Vita's condensed milk plant can process one lakh litres and its three UHT milk processing and packaging units have a daily capacity of two lakh litres. All of the four factories have remained closed for around 8-10 years.
The company had also tried to break into the bottled water business and to that end built a plant in Narsingdi's Shibpur three years ago. It bought modern machinery from the USA to go into production but could not start the plant as it did not have trained workers.
Milk Vita has strong competitors in such big firms as Coca-Cola, Ifad, Partex Group, Transcom, Meghna, Acme and Pran. These companies have been doing well in the bottled water business.
According to industry insiders, the present market size of bottled water in the country is around Tk1,000 crore.
The current business of Milk Vita
Milk Vita went into production under cooperative management in 1973. It has 11 factories all over the country and each of them has separate plants for manufacturing multiple products.
The company is run by farmers' associations across the country and supervised by the Ministry of Local Government, Rural Development and Co-operatives.
It currently manufactures and markets 22 dairy products such as milk, curd, rasgolla, labang, matha, flavoured milk, butter and ghee.
The company had a turnover of around Tk500 crore in fiscal 2020-2021, an increase from around Tk300 crore two years ago.
Milk Vita is one of the market leaders in the pasteurised milk sub-sector. Latecomers like Aarong, Pran, Akij, Aftab and Rangpur Dairy are its competitors in the market.
The country produced 1.19 crore tonnes of milk in FY21. However, all the brands market pasteurised milk and UHT or ultra-high temperature milk by processing 7.5 lakh tonnes of milk every year.
Company officials say Milk Vita products have a huge market. But being a government-run company, it cannot be agile enough to change its marketing strategy like that of its competitors.
The company had also started chocolate and ice cream factories for product diversification, but they also are non-operational.
It is planning to transfer these factories too to private management, officials have said.