Nepal’s largest dairy company, the Dairy Development Corporation (DDC), is facing a major financial crisis, struggling to pay its dairy farmers an outstanding Rs 580 million. The company, known for its long-standing presence in Nepal's dairy industry, is under increasing pressure after a significant drop in the demand for dairy products in recent years.

DDC has been dealing with unsold stock piling up in its warehouses, including packaged milk, powdered milk, and ghee, which have been sitting unsold for the past two years. Experts believe that the sharp drop in demand can be attributed to shrinking household incomes and the growing smuggling of cheaper Indian dairy products across Nepal’s 1,800 km border.

A liter of milk in Nepal costs Rs130, while in Uttar Pradesh, India, it’s only Rs100. This price difference creates an incentive for traders to exploit the porous border, flooding the market with cheaper milk.

DDC’s New Strategy: Exporting Dog Chew

In a surprising move, DDC has decided to sell 10,000 liters of milk daily to the Manaram Group, a leading Nepali exporter of pet food, to produce "chhurpi"—a protein-rich dog chew. This decision aims to generate cash flow and ease the company’s financial strain.

Manaram Group, which already exports 100 tons of dog chew monthly to the US, has been facing a growing demand for its products. By sourcing raw cheese (whey) from DDC, they can ramp up production to meet this demand.

“We expect this partnership to be a major breakthrough for DDC,” said Surya Prasad Paudel, general manager of DDC. “This deal will help ease our financial problems and ensure steady payments to farmers.”

The Booming Market for Himalayan Dog Chew

The demand for Himalayan dog chew, made from yak and cow milk, has surged in the US and Canada, especially after the COVID-19 lockdowns when pet ownership soared. This niche market has proven to be a lifeline for Nepal’s dairy industry, where local demand has been declining due to high prices and lower purchasing power.

According to the Trade and Export Promotion Center, exports of dog chew from Nepal increased by 17.6% in the first four months of the current fiscal year, reaching Rs1.15 billion. Most of the products were sent to the US, where the demand for dog chew has grown rapidly.

With this growing international demand, DDC’s partnership with Manaram Group could help stabilize its finances and allow it to clear its dues to local dairy farmers.

DDC’s Efforts to Export Butter and Meet Milk Demand

In addition to supplying milk for dog chew production, DDC is also preparing to export butter to China. The company has already submitted the necessary paperwork to begin exporting butter to Tibet, with plans to send 30 tonnes of butter on a regular basis.

Despite these international efforts, DDC continues to face challenges at home. The company has introduced a quota system to control milk collection from farmers, which has helped manage costs. However, with Rs 600 million in loans and unsold stock of 500 tonnes of powdered milk and 600 tonnes of butter, DDC’s financial situation remains precarious.

A Path Forward?

The partnership with Manaram Group represents a potential turning point for DDC, offering a chance to boost its cash flow and stabilize operations. However, it remains to be seen whether this move will be enough to overcome the financial troubles that have plagued the company for years.

For now, DDC is holding onto hope that its new strategy will provide the relief it needs to pay farmers and keep the business afloat. Whether this international venture can keep the corporation solvent and restore its reputation remains to be seen.