Milk

   

In rural regions across the world, from Latin America to Asia to Europe, many thousands of dairy farmers supply our factories directly. With close links to farmers around the world, Nestlé can provide facilities and support to help develop a supply chain on which our business depends – for the right quality and quantity of milk, in the right place, and at the right time.

Below, we report on our successful milk district model, first used in the 1870s, which is an integral part of our Farmer Connect direct sourcing programme.

At a glance

  • We purchased 7.2 million tonnes of fresh milk in 2012, of which around 68% was bought directly from dairy farmers;
  • More than 11 700 Nestlé sourcing staff and supply chain support staff currently work in the field to support about 413 500 dairy farmers; and
  • Around 45 200 farmers benefitted from a total of CHF 47.6 million of financial assistance.

What we’re doing

Assuring a regular supply of high-quality fresh milk means working in true partnership with local farmers. This is the essence of our milk district model, currently operating in 31 countries including Brazil, Chile, China, India, Mexico and Pakistan.

Our milk district model

Milk district model
Milk district model: A farmer delivers milk to a Nestlé collection centre close to our factory in Shuangcheng, China.

Most of our rural factories are located within our milk districts – areas in which farmers supply our milk factories directly. We, in turn, provide facilities and support the local supply chain, helping to fuel rural development.

Creating a greatly expanded dairy industry through the Nestlé milk districts has not only benefitted milk farmers and their families, it has also had a significant impact on nutrition levels in the country. Milk and milk products play an essential role in the nutrition of consumers, serving as an important source of energy, protein, calcium, magnesium and phosphorus, as well as many essential vitamins and trace minerals. Milk not only contains a good quantity of protein, but the nutritional quality of its protein is also first-rate.

Sourcing safe, high-quality milk, a key ingredient, is a chief priority, and direct procurement from farmers makes traceability easier. To ensure quality, we have an assurance plan with training and manuals detailing good farm practices for each district; farms are audited regularly to ensure that requirements are met.

In 2012, we purchased more than 7.2 million tonnes of fresh milk from dairy farmers – about 68% of our total fresh milk required comes from Farmer Connect, direct sourcing activities.

  • Farmers supply milk daily to our collection centres, directly to the factory or to contracted third parties. In many cases, we collect milk in trucks that go around to the dairy farms. The price paid varies according to the quality of the milk.

    As milk is highly perishable, we also provide the storage and cooling infrastructure needed to maintain a constant supply of high-quality milk to our factories, many of which are located in the heart of our milk districts.

  • Our milk district model brings us close to the farmers who we rely on for quality milk – from small-scale producers supplying us with less than five litres a day to large dairy farms supplying thousands of litres.

    Building close links with farmers means we understand the practical problems that affect their businesses – and ultimately ours – over the long term. Issues such as how to keep animals healthy and productive, how best to store silage, how to deal with organic waste and manage water supplies – in other words, how dairy farming can be profitable and sustainable.

    All these challenges influence quality milk supply, responsible sourcing and environmental sustainability – and matter to the millions of people whose livelihoods depend on dairy farming. But our approach means that whether it’s an individual farmer with one buffalo in Sri Lanka or a large farming business in the USA, every single litre of milk we purchase, from anywhere around the world, will meet our stringent compliance, quality and safety standards.

    Each farming environment has a different set of individual, regional or national characteristics and challenges, so we don’t impose a one-size-fits-all approach; whatever the context, the long-term relationships we build with farmers enable us to identify the issues and work together to resolve them.

  • Value for Nestlé Value for farmers Value for rural communities

    Quality, safety, volume growth, cost efficiency.

    Regular, long-term, local supply. Close links with local farmers.

    Continuously enhancing farming practices and standards.

    Regular income.

    Secure route to market.

    Access to local infrastructure for collection, storage, chilling and transport.

    Milk factory opportunities: employment, training, personal development.

    Indirect employment and economic activity (local contractors, agents).

  • The expertise and dedication that make it possible for us to assist on quality and other issues comes from more than 11 700 Nestlé sourcing staff and supply chain support staff working in the field. Their knowledge and relationships with small-scale dairy producers and co-operatives help build a responsible milk supply chain, from farm to factory.

    The assistance we offer our dairy farmers takes many forms, depending on individual needs – from direct technical advice to linking up with relevant agricultural service providers, such as veterinary services. And in some cases, we provide access to finance to enable farmers to expand their operations.

  • Our sourcing staff use the structured RISE evaluation method to work with farmers, identify potential quality and sustainability issues, and track progress.

    Based on farm-level RISE assessments, we know the wide variety of challenges affecting dairy farming and sustainable milk supply. The following is a brief snapshot of the issues faced by one of our milk districts, and the outcomes achieved by working in partnership with farmers and other stakeholders.

    For example, between 2009 and 2012, Nestlé milk suppliers across five regions in Mexico had their performance and practices assessed using the RISE tool and, as a result of the findings, some built large biogas digesters with support from the Mexican Government and Nestlé Mexico. These have reduced the amount of electricity sourced from the grid, while decreasing environmentally harmful emissions of ammonia and methane. For more information, read our case study on the rise of biogas in Mexico.

  • Pontecesures Galicia Sevares Asturias La Penilla Cantabria
    % certified raw milk 50 75 71
    Millions of litres 37 29 47
    % certified farms 28 49 40

    After a little over two years:

    • 113 million litres are sourced from certified farms in the three districts;
    • A shared database has been created containing information on chemical fertilizers, animal feed, veterinary drugs and other products used by Nestlé suppliers, as well as agricultural land area and livestock numbers;
    • The detection of contaminants (e.g. aflatoxins, heavy metals, pesticides) raises a food safety alert and allows Nestlé to take immediate action;
    • Farmers have enhanced their management abilities at a farm level, are more aware about food safety, and have improved farm facilities and animal welfare; and
    • Nestlé Spain has greater confidence in its raw material suppliers and has been able to add value to the final product.

    The certification scheme will be extended to other milk-sourcing areas in Spain and Nestlé Spain plans to increase the share of certified milk.

Next steps

  • We will continue with our approach, which has been successfully implemented over the years in very diverse environments, using RISE to improve long-term sustainability; and
  • We will continue to provide technical assistance and financial assistance where appropriate.

Related content

Find out more in our Creating Shared Value full report



Notes:

Nestlé's milk report for 2013 is published in April 2014 which falls out of scope of the 2013 CSV reporting cycle. The 2013 figure for amount of milk purchased will be published in the 2014 CSV report.