Ugandan milk exports are slowly eating into the Kenyan dairy market, with Lato Milk and Fresh Dairy making significant inroads.
However, the country has been finding it hard to penetrate markets in Tanzania and Rwanda, something which International Farm Comparison Network, an organisation that researches on daily products and farming, blames on low demand and purchasing power.
In an interview yesterday, Mr Steven Aikiriza, a Ugandan research representative at International Farm Comparison Network, told Daily Monitor that whereas Ugandan milk products have been penetrating Kenya they are yet to make significant inroads in Tanzania and Rwanda, partly because of low demand in the two counties, purchasing power and tariff restrictions, especially in Tanzania.
"In Rwanda it could be an issue of purchasing power while Tanzania has restrictions in regard to milk exports," he said, adding: "The size of the market and purchasing power could only be sufficient to sustain their [Rwanda] factories."
According to a report published by The East African Lato Milk, which has a shelf life of 90 days without refrigeration, is the dominant brand in particularly Kenya. Fresh Daily has also been making inroads.
"There is a significant increase of Ugandan milk in the Kenyan market, mainly driven by lower production costs in Uganda, which allows processors to sell their products at low prices," Mr Nixon Sigey, the chairman of Kenya Dairy Processors Association, said.
Uganda is a key exporter of milk and milk products, with the value of exports rising from nearly zero 10 years ago to about $80m (Shs284.8b) currently.
The growth of the dairy sector has diversified Uganda's milk export market with processors such as Fresh Dairy, which is jointly owned by Kenya's Brookside Dairy and the Ugandan government being among the top exporters.
Fresh Dairy is Uganda's leading processor with a capacity of 560,000 litres per day and its exports have grown from $13m Shs47.4b) in 2015 to $18m (IShs65.7b) last year.
Pearly Dairy, Uganda's second largest processor owned by Midland Group of Dubai, has a daily capacity of 500,000 litres, and plans to invest in a processing plant in Kenya.
According to Rinus van Klinken, the project manager of the Netherlands-funded Inclusive Dairy Enterprise project in Uganda, the country is rivalling Kenya due to its approach to dairy farming.
While many dairy farmers in Kenya use the zero grazing system, their Ugandan peers have adopted the extended grazing system, which has significantly increased milk production while keeping costs low.
Mr van Klinken said the increase in the number of milk processors has resulted in a ready market for farmers, pushing farm gate prices to $0.34 Shs1,241) from a low of $0.10 (Shs365) a few years ago.
This, in effect, has pushed milk production from about 500 million litres in 2015 to 2.2 billion litres currently. Mr van Klinken added that while Ugandan processors are fast growing their Kenyan market, efforts to penetrate Tanzania and Rwanda are being hampered by non-tariff barriers.
"Milk is not flowing freely in accordance to the Common Market Protocol, mainly because of non-tariff barriers," he noted.
According to Dairy Development Authority (DDA), Uganda currently produces 2.2 billion litres.
Dairy farming is a major activity in the south western, central, and north eastern parts of the country, with the sector contributing significantly to the economic, nutritional, and employment opportunities of the rural communities in those areas.
The central and western regions account for about 50 per cent of national milk production.
The production is predictable and available all year round.
During the dry season, the northern, north eastern, and eastern parts of the country experience a drastic reduction in milk output.