Yak Milk: Niche or Nightmare?

YAK MILK: NICHE OR NIGHTMARE?

CASE STUDY ANALYSYS BY JOHN BERNING FOR MBA 565

Overview:

Dave Peters is the strategic sourcing director for ABCI, a subsidiary of Land O' Lakes, the dairy manufacturer from the United States. In the past 20 years, Mr. Peters has worked with other lesser developed countries around the world to help create international markets for locally grown agricultural products. ABCI had great success implementing agricultural programs in several Central European nations that helped improve the living standards among the impoverished farm communities in those nations. The government of Tibet was now reaching out to ABCI to see if a market could be created for yak milk and dairy products with the intention of raising the living standards of one of the poorest regions under the Chinese government, the Quinghai-Tibet Plateau.

Key issues:

1) The remoteness and harsh weather of the Quinghai-Tibet Plateau limit the amount of yak products that can be manufactured and transported out of the region.

2) The cultures of the Tibetan farmers and their use of the yak along with the wants of the Chinese consumers clash with the idea of creating a dairy-based business in Tibet.

Alternatives for Issue #1

1) Improve the infrastructures, facilities, and roadways in the Quinghai-Tibet Plateau region.

2) Attempt to increase the amount of yak products during the spring and summer months.

Analysis of alternatives for Issue #1

1) The Chinese government is taking the steps to improve infrastructure in this region. Electricity was introduced into the Hongyuan region in 2002 and many of the roads in the area were getting paved. A tunnel is currently under-construction to allow year-round transportation in addition to reducing the travel time via car or truck by two hours. An airport was also planned to eliminate the harrowing experience of driving a long distance into the region. This is all part of a program by the Chinese government to industrialize the yak to provide more food to China as a whole and help improve the economic standards of the Tibet region while keeping the region ecologically pure. However, two factors play a great part in the implementation of infrastructure in this region: weather and altitude. Winters are so harsh in this part of the world that virtually every outdoor function grinds to a halt for six months. There is a question if the cold weather would adverse affect the roadways. High altitude not only affects people, but the lack of oxygen affects the operation of machinery as well. One type of transportation that wasn't discussed in this case study was the extensive rail systems within China.

2) The Quinghai-Tibet plateau is home to 13 million yaks and is considered the major pastoral region in China. It was projected that the two million yak located in the Hongyuan region would produce 72,000 tons of yak milk per year. However, there are limitations to using the yak as a milk provider. While a dairy cow can produce 20-30 liters of milk a day, the yak produces only 2-3 liters per day. In addition, a yak's milk production is tied to the calving season and that always starts in the early spring the give the yak calves a chance to survive through their first winter. The Tibetan government could consider creating environmentally controlled "yak housing" to allow for year-round production, but the yak is a semi-wild bovine more related to a buffalo than a milk cow. It's more of a free-range animal and it could take many years to fully domesticate it in such an environment. Another possibility is to find other commercial uses for the yak. Their wool can be harvested year-round by combing it from their body, with no harm coming to the yak during the process. Yak could also be used for eco-tourism purposes by carrying travelers around the various provinces for tours.

Recommendation for Issue #1:

The Chinese and Tibetan governments should find the most-cost effective means for transporting goods out of the Quinghai-Tibet Plateau, whether it is via auto, airplane or railway. The governments should market the yak products as a seasonal treat rather than a staple to the Chinese people. An artificial demand could be created to inflate prices and be more profitable

Alternatives for Issue #2

1) Get the Tibetans to rely on other products as a staple to their existence.

2) Market and package dairy products in general to increase awareness among the Chinese people. Create a niche for yak products as "healthy item".

Analysis of alternatives for Issue #1

1) Tibetans rely on 75% of their meager income from the yak. However, the yak is more than just a source of income; it's a way of life for the Tibetan people. The yak is used for many purposes: meat and dairy products for food; yak dung for fuel; pulling a plow for planting crops; transportation in all Ð'-kinds of weather; and finally shelter and clothing for the entire family. Unless suitable, cost-effective alternatives for all