CHAPTER I

INTRODUCTION
1.1 History of Dairy Organization in Nepal
Nepal's first milk processing plant was built in Lainchaur 43 years ago with help from New
Zealand and the UN. Until then, even in Kathmandu, people kept cows at home and had no
reason to buy processed milk.
The Dairy Development Corporation (DDC) was formed in 1969 and as Kathmandu became
urbanized, demands for processed milk soared. Another plant capable of processing 5,000 liters
and hour was set up in 1978 in Balaju. Two more plants were built in Hetauda and Pokhara with
Danish assistance.
Veterinarian Heramba Rajbhandari oversaw the DDC's expansion during those heady days. But
he understood that the government would never be able to meet Kathmandu's growing demand
for milk and dairy products. In fact, by the early 1980s, Nepal had a milk deficit.
Pertaining to the context of Nepal's economy and uplifting the living standard of Nepalese
farmers, Nepal's dairy sector is providing handsome contribution. It is one of the nation's small
industrial sectors that are contributing for paving the path of economic growth. And Sita Ram
Gokul Milks Kathmandu Limited and DDC are helping in concreting the backbone of nation's
economy.
Dairy Development Corporation was established on 2009 B.S. in Tusal, Kavrepalanchowk,
Bhaktapur, Langtang, Rasuwa where it started with the collection of small amount of milk and
producing Yak Cheese as well. Then in Kathmandu, Bhotahiti too it was established on
2010/2011 B.S. starting the official milk processing process. It is established under corporation
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Act 2021 BS. DDC-a fully state owned corporation, initiated for the economic advancement of
the poor farming communities, has flourished into a nationwide movement with an annual
collection over 60 million liters of milk from more than 75 thousand milk producers through 888
milk cooperatives spread out in 33 district. The main objectives of DDC are:

Provide a guaranteed market for milk to the rural farmers with fair price.

Supply pasteurized milk and milk products to urban consumers.

Develop organized milk collection system to meet increasing demand for pasteurized
milk and milk products.

Develop an organized marketing system for milk and milk products in urban areas.

Sita Ram Gokul Milks Kathmandu Limited embarked its career in 2052 B.S. as mediator for
social welfare and development of Nepalese farmers. It was lead by Late Shankar Lal Kedia with
an investment about 26 corers, whose main objective was to act as mediator in transferring the
milk of farmers to the Nepalese homes. As the time changed, it established itself as one of the
emerging commercial organization by introducing product line of milk, ghee, butter, peda etc.
keeping the objective uniform. The main objectives of Sita Ram Gokul Milk are:
To help the local farmers and milk vendors to generate substantive income
Procuring milk from the surrounding villages and distributing it to the cities.

1.2 Objectives of the study

To observe the various capacities of the Organizations.

To tackle the random distractions occurred during production process.
To know the market pricing of their products.
To know their distribution channels.

1.3 Research Methodology

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We selected both primary and secondary data collection method following both the internal and
external sources. We referred to numerous sites for the information. We went through to many
articles written by a various writers for the collection of data. For the statistics we referred to the
reports submitted by the primary researcher few years back. We personally visited the head
office of both the organizations to collect important data and information required to complete
the report.

1.4 Limitations of the Study

This is simply a comparative study of Sita Ram Gokul Milks Kathmandu Limited and Dairy
Development Corporation. Its limitations can be pointed as below:

The report is mostly based on secondary data due to the difficulty in collecting primary

data.
This report is based on limited data available from the organization because the

organization wants to keep the transaction details secret.

Due to unavailability of data for the current year, this report is based on the data from

previous years.
The study was conducted with limited financial resources.

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CHAPTER II
ANALYSIS AND INTERPRETATION
2.1 Various products and service
DDC
Milk Production

Sita Ram Gokul Milk

Pasteurised milk

Butter Production

Butter

Ghee

Ghee

Yoghurt

Yoghurt

Cheese

Peda, etc.

Ice-Cream
Paneer
Skimmed Milk Powder
DDC Fresh
Lalmohan
Peda
Rasbari
Mozzarrella Cheese (Pizza Cheese)
From the above data we can clearly see that DDC has many products and services offered as
compared to that of the Sita Ram. The reason behind this is certainly the operating time period of
the organization. DDC being the first dairy in the nation because of which the company has high
source of raw milk and with which they produce numerous products like, ice cream, paneer,
lalmohan, etc.; people trust their products. They prefer DDC products rather than any other. The
taste, quality, quantity, different products offered are beyond comparison.
However, the products and services offered by the company are gaining the trust and faith of the
customers because of which the number of customer are increasing day by day. As compared to
DDC, Sita Ram Gokul Milk is new in the market even then they are establishing their market in
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the market very nicely. The management has been further planning to introduce new products in
the market. Slowly they are gaining popularity in the Nepalese society.
DDC and Sitaram Milk provide some package of milk for different social program like blood
donation, political seminar, and meeting for free of cost.

2.2 Pricing
The pricing of the products manufactured by both the dairies are quite similar. It is due the neck
to neck competition between these dairies. The price of milk equals at the level of Rs 22 per
500ml.
The price of curd produced by both the dairies is Rs 125 per liter. DDC produces various other
products like ice cream, paneer, cheese, and their rates are quite affordable.
The government policy of fixing the producer and retail prices is a major deterrent to the
development of the dairy industry. Prices are set under a climate of political influence with no
relevance to general market conditions inside Nepal or to border prices.

2.3. Distribution Channel

Whatever is the milk production, first they try to sell it in nearer market instead of dairy
cooperative because they get better price from local consumers as compared to dairy
cooperatives and they also save transportation. DDC has 40 franchises, where the shops are only
allowed to sell the products of DDC. Further it has 4 distributers who bring out the milk from
dairy and sell them to the various shops. There are two distributers inside the valley and 2
outside the valley.

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Compared to DDC, Sita Ram Gokul Milk has less number of distributers and franchises. Due to
less number of distributors, the company itself delivers the milk packet to the respective places
every day. It has six hundred distribution booth and forty-eight salesperson and good
infrastructure.

2.4. Source of raw material and supply chain management

DDC and Sita Ram Gokul Milk collects milk from farmers, through chilling centre, local
collection agent and diary a cooperative processes it and distributes it through its own retail
chain and other independent distributor.
At present, there are eight milk supply schemes in different parts of the country under DDC.
DDC has been collecting cow, buffalo and chauri milk from 40 districts. Milk is collected
through the farmers owned, Milk producers Cooperative Societies (MPCS). Its present milk
collection network has spread from Panchthar in the East to Surkhet in the West. In the Fiscal
Year 2065/2066 DDC purchased about (approx.) 1,48,000 liters of milk per day from the
farmers. Chilling Centers (CC) established under the Milk Supply Schemes is in operation across
the country for chilling the milk collected from the MPCCs. There are total 791 MPCCs to
collect milk from farmer and 63 Chilling Center are established in 34 districts.
Sita Ram Gokul Milks Ktm. Ltd. is supplying the milk and various products to Nepalese
consumer by collecting raw milk mainly from Chitwan, Nawalparasi, Kavre, Nuwakot,
Biratnagar and Rupendehi. It collects buffalo and cow milk in 3:2 ratios. Raw milks are collected
from farmer with the help of local collection agent and chilling centre established locally.
Chilling centers are collect milk by measuring percentage of fat and quantity of milk. These
collected milk are brings to its manufacturing office Kritipur by 7 road tanker. It is collect milk
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from 13 chilling centers among which 11 are run by the organization itself and the remaining by
the co-operatives. Received milks are first pasteurized in pasteurized tank to kill all bacteria in
milk. It makes it standardized pasteurized milk and package it.

Market Share

DDC (60%)

Sita Ram (20%)

Others (20%)

FIGURE: PIE CHART SHOWING THE MARKET SHARE OF THE DIFFERENT DAIRY
ORGANIZATION

2.5 Collection Network

The MPCs (Milk Producers Co-operatives) collect milk from member farmers and supply milk
to chilling centers owned by the DDC. The DDC has 43 chilling centers located in 28 districts,
collecting milk from 34 districts and supplying milk to 6 different milk supply schemes. The
milk supply schemes of the DDC also receive milk directly from the MPCs rather than via
chilling centers. The milk collection channels for the Sita Ram Gokul Milk are fairly similar to
those of the DDC.
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Very few private sector dairies own chilling centers or receive milk through chilling centers. Sita
Ram Gokul Milks collects milk through eight chilling centers located in five districts. They have
eleven chilling centre of their own and two with association with corporate chilling centre.

2.6 Capacity management

Dairy faces two types of seasonal challenges, one is lean season (April-July) when milk
production is low but demand is high and another is flush season (August-March) when milk
production is high as compared to lean season. In lean season they are not getting sufficient milk
from the dairy cooperatives where as in flush season they doesnt buy all the milk as supplied by
the cooperatives. In flush season dairy offers a milk holiday to control excess milk supply. In
case of undersupplied they mix some powered produced during oversupplied to meets its market
demand. During this process they cannot mix extra powdered more than its standard product
quality.
DDC Hetauda Milk Supply Scheme also supports KMSS & BMSS by supplying excess milk
above their local requirement. Biratnagar Milk Supply Scheme manufactures skimmed milk
powder from its excess milk and milk excess from other supply schemes. However, Sita Ram
Gokul Milk doesnt collect excess raw milk than its market demand; in case milks are not totally
sold in any particular day, returned milks are re-pasteurized and send it to market next day. They
had introduced Milk holiday on certain days during the flush season to control excess milk
supply. To mitigate this problem, in according with the Ten Year Dairy Development plan
prepared with the assistance of Danish Government, project for establishing a Skimmed Milk
Powder Plant was initiated in 2048(1991)at BMSS and is in operation since December 1994.
Capacity of this powder plant is 3.0 MT. of powder per day.
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2.7 Problem facing by these organizations

2.7.1. Problem faced by DDC
1. Political influence: Due to the instability of political situation in the nation, there is
frequent change in management because of which decisions, future plans and polices
changes every now and then hindering the flourishment of the organization.
2. Insufficient Budget: Lack of budget affects the replacement of old equipments with the
new ones because of which the rate of productions gradually declines, and lower
production means, company cannot live up to the demand for the products in the society.
3. Appointment process: The organization cant hire employee as they want, in order to
appoint new employee lengthy process is to be followed which is time consuming and
troublesome.
4. Lack of infrastructure: This is the measure hindrance faced by the organization. Due to
lack of infrastructure DDC is not being able to reach every door steps in the nation and
which directly affects its rate of revenue.
5. Pricing: Even when the production cost is high, company cannot make decision on its
own to increase the price of the products, because of which company bare huge amount
of loss.
2.7.2. Problem faced by Sita Ram Gokul Milk
1. Lower demand: Due to high competitive market, the demand for Sita Rams products is
quite low as compared to that of DDC.
2. Labor union problem: Being the privately owned company, it faces the problem of labor
strikes time and again, that directly affects the production, distribution, collection
capacity.
3. Legal problem: Due to frequent changes in the rules and regulations, the management
faces the problem in managing its resources efficiently and effectively.

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4. Insufficient Budget: the replacement of old equipments with the new ones cannot be
done due to insufficient budget because of which the rate of productions gradually
declines and faces the problem of over demand.
5. Lack of infrastructure: Due to lack of infrastructure Sita Ram Gokul Milk is not being
able to reach many places to collect raw milk which helps in manufacturing various milks
products.

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CHAPTER III
CONCLUSION AND RECOMMENDATION
3.1. Conclusion
As we can see in the above, DDC has the maximum influence over the market i.e. up to
60% where as Sita Ram Gokul Milk and other dairies have only 20%, 20% influence
respectively. DDC is the first national dairy of Nepal that gave the farmers benefit of earning
reasonable price for the milk they produced in their home. No matter how good products Sita
Ram Gokul Milk launches, customers are always attracted towards the government owned DDC.
Being government owned company, the farmers wont have to face the risk of certain alternation
in the prices they receive for the milk produced.
However, these reason does not stop the up rising popularity of Sita Ram Gokul Milk, among all
the dairies present in the nation, it ranks in second after DDC. They can consistently increasing
their production capacity, collection capacity and various new products. Sita Ram Gokul Milk is
planning to launch new products like paneer, curd, etc in the near future. With such increase in
pace of development, the day when they will make it to the top is not far.
By observing, analysing, and studying above-mentioned all the factors we can conclude that this
company is established by Kedia group as a social service organization, which later turned as
business organization. They are helping four lakhs people of different districts like Nawalparasi,
Rupendehi,Kavre, Chitwan, Nuwakot etc.

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3.2. Recommendation
DDC has the benefit of being a public owned company but due to rise in competition it can face
hurdle any moments. It needs to maintain its quality, products type, quantity in order to prevail in
the competition and be in first rank among competitors forever. It should introduce new products
that would attract even new and more number of customers. DDC should make sure that it does
not degrade its products and services. It can further introduce new schemes for farmers so that
there would be increase in input of raw materials because raw milk is the only source for
producing its products.
Whereas, Sita Ram Gokul Milk should search new markets and consumers for competitive
advantage. The organization should also recruit more skilled manpower and should adapt new
technology in order to meet the goal. It should further introduce new products so that it can live
up to the expectations of its new customers and entertain new ones. With its strong manpower
and other resources it will overcome the challenges and will set itself as one of the leading
organization in the context of Nepalese economy.

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