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RFP: Processed Milk Products Market Analysis under the UNCDF Local Financing Initiative for Uganda
Procurement Process :RFP - Request for proposal
Office :Kampala Uganda - UGANDA
Deadline :28-Sep-12
Posted on :12-Sep-12
Development Area :AGRICULTURE GENERALAGRICULTURE
GENERAL
Reference Number :9707
Documents :
RFP: Processed Milk Products Market Analysis under the UNCDF Local Financing Initiative for Uganda
Overview :

Background:

Uganda Crane Creameries Cooperative Union (UCCCU) is an organization that brings together dairy farmers and farmer organizations in over nine districts in western Uganda. UCCCU represents over 16,000 dairy farmers in south western Uganda and, nationwide, serves over 30,000 dairy farmers through linkages to the market. UCCCU’s vision is "… to be a leading farmer owned provider of high quality dairy products and services in the East African region."

UCCCU is a registered limited liability cooperative currently owned by nine district unions.  It was established in 2005 and is registered under the 1991 Cooperative Union Act, registration number 7231, by the Ministry of Trade, Industry and Cooperatives (MTTI).  UCCCU is a commercial arm of Uganda National Dairy Farmers Association (UNDAFA) and is a national union. 

Dairy cooperatives are more developed in south-western Uganda than any other part of the country. At the time UCCCU was formed, a consensus among dairy farmers was reached that, with the cooperative movement in other parts of the country in transition, UCCCU should start working in south-western Uganda where cooperatives already existed, and other farmers would join later as their cooperatives develop. In 2007, a secretariat was established in Mbarara with support from Swedish Cooperative Centre (SCC), under the Enhancement of the Dairy Productivity (EDP) Project.  The secretariat coordinates all the processes of making the unions stronger to increase membership and advocates for better policies.  UCCCU has also mobilized funds from farmers and development partners to support the construction of a processing plant.

UCCCU has a three tier organizational structure – the Secretariat is answerable to the elected Board, which is appointed by the Annual General Meeting (AGM), the apex body comprised of the representatives across Uganda’s regions. Each of the district unions has a representative on the board of UCCCU who works in close collaboration with the resident field officer at the secretariat of UCCCU. Selection of a representative to the board of UCCCU is done by election in the AGM of the various member unions.  Mr. George W. Nuwagira is the current Chairman of the Board of UCCCU.  Mr. Arinanye Clayton, Project Manager /General Manager, heads the Secretariat.

The following district unions have been members of UCCCU since 2007: Bushenyi Dairy Industry Cooperative Union (BUDICU), INKA – IBANDA, Ankole Dairy Products (ADP), Rukungiri Dairy Farmers Union (RUKDFU), Mbarara Dairy Farmers Cooperative Union (MBADFCU), Ntungamo Dairy Farmers Cooperative Union (NDAFCU), and Banyakigezi.  Sheema union joined later in 2009 and Isingiro union has been admitted as the ninth member following a resolution of the Fifth Annual General Meeting held on 30th March 2012. 

Over the years, UCCCU has achieved successes in various fields such as member mobilization, lobbying and advocacy, farmer training, and organization development of member cooperatives.  UCCCU is also striving to increase its members’ income developing the milk processing supply chain. 

As a result of UCCCU’s effective lobbying, farm gate prices have risen from the UGX 100 per liter of milk that prevailed before the association was formed, to the prevailing farm gate prices of 500-600 UGX per liter.  Additionally a price floor of 300 UGX has been fixed with Sameer Agricultural and Livestock Limited (SALL), the largest milk processor in Uganda.

UCCCU is currently in the final stage of constructing a milk processing plant, where it plans to process its members’ milk. The plant will be equipped to produce three products – pasteurized milk, UHT milk and Yogurt.  The plant, when completed, will have the capacity to process up to 200,000 litres of milk per day.  Although UHT milk production is expected to start at later stage of the project, the processed milk products analysis will be conducted based on an assumption that UHT milk production will begin in 2013.  The selected consultant will be provided with a copy of UCCCU’s business plan to use in conducting the raw milk supply analysis.

The plant has been financed by the own contributions of the members.  Each dairy farmer in southwestern Uganda can buy at least one share. Each share is valued at 300,000 Uganda Shillings. The more the shares owned by a farmer, the higher the rate of return on investment.  In this way the project will have a big multiplier effect in the region because a big percentage of returns will trickle down to farmers who are the owners. Shares can be bought for cash, by offering live cows (which are later sold on open market or auctioned during UCCCU functions and the amount realized converted into shares) or through retainage from milk deliveries (the proceeds of which are deposited in UCCCU bank accounts).

Various development partners like Swedish Cooperative Center (SCC), Land O’ Lakes and Agriterra have given support to UCCCU to mobilize farmers into cooperatives, capacity building and  institution  development.   

UCCCU is in the process of completing construction of the milk processing plant in Mbarara.  It is currently working with UNCDF and the Global Clearinghouse for Development Finance (GlobalDF) as part of the Local Financing Initiative in Uganda to secure technical support and funding to complete the milk processing plant (including the purchase of the necessary equipment) and to make it operational.  UCCCU and GlobalDF have signed a Memorandum of Understanding to work together and for GlobalDF to serve as UCCCU’s main financial advisor to arrange financing for the completion and operation of the milk processing plant.

Introduction:

A key part of GlobalDF’s efforts is to assist UCCCU obtain commercial funding to complete, equip and operate the milk processing plant in Mbarara. GlobalDF will assist with the preparation of adequate documentation to allow lenders to evaluate the feasibility of the project and to understand the risks involved in its achieving financial viability.  The ability of UCCCU to sell its processed milk products at an adequate level of profit is critical to the success of the new UCCCU processing plant.  The analysis called for by this RFP is designed to: (1) assess the market for processed milk products in the domestic and export markets being targeted by UCCCU, (2) identify risks to UCCCU’s ability to sell its processed milk products at prices that will cover its operating costs and debt service payments, and (3) identify the specific steps and measures that can be taken to minimize such risks.


Purpose of the Assignment:

The purpose of this analysis is to gather factual information about the market for processed milk products in the markets that UCCCU is targeting, analyze the risks in the marketing of processed milk products, and propose measures that can be taken to minimize such risks.

Objectives of the Study:

The objective of the study is to assist UCCCU in implementing an independent technical study of the market required for securing commercial financing for the new UCCCU plant in Mbarara.

Scope of Work:

The contractor will need to undertake a survey to obtain information on the processed milk product market needed to prepare a financial model for the UCCCU milk processing plant in Mbarara and to analyze key opportunities and risks that UCCCU will face in establishing itself in the processed milk business.

Detailed information should be provided for the following processed and packaged milk products: pasteurized milk (whole, full cream and skim milk), UHT milk (whole, low fat and skim; plain and flavored), and yoghurt.  Additional summary information should be provided for powdered milk, cheese, butter, ghee and ice cream. It should be noted that UCCCU may delay the production and sale of UHT milk until later in the project development.

Whenever possible, historical time series information should be provided for the period 2007-2011.
As background, the consultant will need to review the UCCCU business plan and other documents and information required to conduct the study.

The below topics need to be covered in the study:

Domestic Market and Competitors;

  • Provide information on the production capacities and sales for the milk product companies with sales in Uganda (include Ugandan companies -- Sameer Agriculture and Livestock Limited, Jesa Farm Dairy, Hillside, White Nile Dairies, Toro, Mama Omulungi Dairy, Birunga Dairy, MADDO Dairies, Paramount Dairies, NIRMA Dairy and Foods, Tooro Dairy Cooperative, G.B.K Dairy, Shumuk Dairy, Pearl Dairies, Gouda Gold -- and Kenyan companies – Brookside and New KCCC)
  • Provide information on production capacities and sales by informal raw milk vendors and yoghurt microprocessors.  
  •  Provide information on potential offtake contracts, for example with schools and government entities, such as hospitals. 

Export markets;

  • Provide assessments of the current and potential market for milk products in the key target markets of South Sudan, DR Congo, Rwanda, Burundi, Kenya and Tanzania; and
  • Discuss the requirements for exporting into these markets: product preferences and specifications, import procedures and restrictions.

Key marketing factors;

  • Provide a general analysis of the key marketing factors that milk product companies have to deal with:  branding, pricing, product distribution, promotion, export; customer handling and service delivery; public and media relations, etc.; and
  • Identify which of these factors have been instrumental in determining the success or failure of companies to gain market share and describe why these factors have been important.

Distribution channels;
Describe the distribution channels by which milk products go from the factory to the consumer, including milk agents/stockists, direct sales to hypermarkets and supermarkets, factory outlets, schools, hotels, dukas, kiosks, milk vending machines.

Distribution infrastructure;

  •  Describe the distribution infrastructure used by milk product companies in Uganda and targeted export markets, including information on delivery equipment (trucks, bicycles) and milk agent storage centers.

Display infrastructure;

  • Describe methods used in Uganda and targeted export markets to display milk products for retail sale (shelf display, store refrigerator display cases, kiosks, vending machines).

Price information;

  • Provide detailed information on current and historical wholesale and retail prices for pasteurized milk (1000 ml, 500ml and 250 ml sachets), UHT milk (1000 ml, 500 ml and 250 ml Tetra Brick aseptic packages, Tetra Fino aseptic carton pouches and Tera Cone aseptic packs), yoghurt (500 ml, 250 ml, 150 ml and 100 ml cups and 400 ml sachets).  (Wholesale price is the price that milk product producers receive for product while retail price is the price that consumers pay for the product); 
  • Provide an analysis of the margins needed to provide sufficient incentives to middlemen to distribute and sell products; and
  • Provide a projection of wholesale and retail prices for pasteurized milk (1000 ml, 500ml and 250 ml sachets), UHT milk (1000 ml, 500 ml and 250 ml Tetra Brick aseptic packages, Tetra Fino aseptic carton pouches and Tera Cone aseptic packs), yoghurt (500 ml, 250 ml, 150 ml and 100 ml cups and 400 ml sachets) for the five years beginning with the start of production by the UCCCU milk processing plant.

Promotion;

  • Describe how milk processors and distributors have promoted their products via billboards, television commercials and sponsored programs, newspaper advertising, promotional products (T-shirts, wall clocks, caps, pens, umbrellas, etc.); and
  • Discuss the promotional strategies that offer the greatest promise for UCCCU.

Branding;

  • Describe the branding strategies that milk processors have used to identify and promote their products; and
  •  Identify the branding strategies offer the greatest promise for UCCCU.

Infrastructure constraints;

  • Identify infrastructure constraints (shortage of storage facilities, cooling capacity, electricity supply, adequate roads, etc.) that could hinder the marketing of UCCCU milk products in Uganda and targeted export markets; and
  • Describe steps that UCCCU could take to overcome such constraints.

Competitive analysis;

  • Describe the likely reaction of other market participants to UCCCU’s entry to the processed milk product market;
  • Describe the most rational strategy that can be used by UCCCU in dealing with other competitors for the sale of processed milk products;
  • If one or more competitors react hostilely, describe effective counter responses; and
  • Describe the motivation for milk product consumers to switch to UCCCU products from raw milk or milk products sold by other companies.

Worst-case analysis;

  • Based on an assumption of a negative outcome of the competitive analysis provide a “worst-case” milk product prices forecast (not the “worst imaginable,” but the “worst realistically possible, given the practical constraints on competitors”); and
  • On the same basis provide a “worst-case” milk products sales forecast giving the level of sales relative to UCCCU’s expected processing capacity. 


Key Milestones, Deliverables, and Time Frame:

The contractor will be expected to deliver a written report covering all the above topics within 8 (eight) weeks of the signing of the contract.  At the mid-point of this period the contractor and staff from UCCCU, GlobalDF and LFI-Uganda will meet to discuss work progress and any issues that need to be addressed in order to ensure timely completion of the contract. The report is due no later than December 1, 2012.
Specifications of the Consultant Team

The terms of reference are designed for a consultant or team of consultants with expertise and knowledge of the following;

  • Value chain analytical and benchmarking techniques relevant to the industry;
  • Trade, economic, and industrial policies relevant to both product and service sectors in the country under review; global industry trends, practices, and business management strategies relevant in various segments of the tradable product(s) in the country; and 
  •  Business development services, good understanding of agribusiness and enterprises development using value chains.

Ideally, the consultant or team of consultants should have expertise in value chain analysis, past experience in multiple consulting teams, and ability to manage fixed scheduled assignment.

Management Arrangements and Logistics:

Strategic guidance for the Consultants will be provided by the UNCDF Country Director in consultation with UCCCU, GlobalDF and LFI-Uganda staff.

LFI-Uganda staff and UCCCU will assist the consultant for purposes of coordination, liaison with different local stakeholders, and organization and oversight of logistical arrangements.

Duration of the assignment:

The assignment should be be completed within 42 working days upon signing of the contract.

Payment schedule:

The payment will be made in three installments:
• 20 % of total costs upon the reception and approval of the inception report
• 50 % of total costs upon the reception and approval of the draft report
• 30 % of total costs upon the reception and approval of the final report

 

Technical proposal and financial proposal (one soft copy-data CD and one hard copy) in separate sealed envelopesclearly marked: “Proposal For "Processed Milk Products Market Analysis under the UNCDF Local Financing Initiative for Uganda ”  should be delivered through the Registry and addressed to the following address, and MUST be submitted before or not later 28th  September 2012, on or before 04:00pm Local Time:


The Resident Representative
Attention: Procurement Unit
United Nations Development Programme (UNDP)
Plot 11 Yusuf Lule Road,
P.O Box 7184
Kampala, Uganda
Tel: 256 414112100

Notes:

  • Please attach copies of the Registration Certificates and all other relevant documents partaining to the legality of existance of your firm
  • Please ensure that you should sign the Registry List when submitting the proposals.