An Echelon Media Company
Wednesday February 1st, 2023

The tenacity of Pelwatte Dairy: Finding opportunity in a crisis

Akmal Wickramanayake Managing Director of Pelwatte Dairy

The ongoing economic crisis has forced many businesses to focus on survival rather than growth. But Pelwatte Dairy has proven that it is still possible to create opportunity and grow amidst a crisis, nearly quadrupling their farmer network in the past two months. Managing Director of Pelwatte Dairy, Akmal Wickramanayake, revealed to Echelon some of the secrets behind their monumental growth post-pandemic.

How has the economic crisis affected you, and how have you responded to those challenges?

Inflation has impacted smallholder farmers, the people who supply fresh milk, our raw material. It has increased the cost of their farming operations. From the cost of feed to the transport of fresh milk to chilling stations, farmers have been significantly affected by this economic crisis.

Naturally, this cost adds up to the price of a litre of milk, raising it by almost 30% in around three months. It immediately affects the cost of our products, from milk to butter and yoghurt.

Our retail prices have had to be raised to a certain level, which made purchasing a little more difficult for our customers.

As a result, purchasing has dropped significantly to an almost 30-40% decline in volumes. It has forced us to become more agile and adapt our strategy according to the market, offering our products in different market segments.

From selling in smaller pack sizes for one customer group to making our product more accessible and in a different size for another segment to repositioning our brand to tap into new market segments and creating greater awareness, Pelwatte Dairy has evolved to face these challenges.

Have your plans succeeded?

The impact on prices resulted in a sharp drop in sales, but after we repositioned our product, improved our distribution and allocated our products to different market segments, we improved our market position. It has helped our growth trajectory, and we are now considering possible export initiatives. We also aim to begin exporting to a few markets, including the Maldives and the UAE in the coming year.

Our ability to look at every challenge as an opportunity has been key to our success

How have you supported your farmer network during this difficult time?

Because of the situation, we partnered with a few stakeholders to assist our farmer community, providing access to fuel and feed, providing veterinary equipment, medication, materials and more for their farms and the cows. We even began to provide animal feed which we manufactured ourselves to help with their operations. Providing them with a supply of fuel was also very effective. We also provided easy-payment schemes for some to reduce the impact of their cash flow shrinking.

How has helping the farmer community directly or indirectly affected you?

Having a consistent supply chain has been a positive impact. We have been able to manufacture uninterrupted as a result. While some companies struggled, we were quick on our feet and made the right decisions.

These allowed us to connect with more farmers, bringing them into our network because of the stability and security we provided during the crisis period. Of course, there are other non-financial benefits such as our added credibility and the loyalty we’ve managed to foster among our farmers.

How has the Pelwatte Dairy family grown in the past two years?

Around the latter half of 2019, our farmer network was close to about 3,000 to 4,000 in number. But over the past two and half years, we have grown to 12,000.

Regardless of the crises or challenges, we’ve faced, we’ve been able to procure throughout the year. The stability we provided and our fair pricing were the main reasons behind this growth. We plan to remain a stable customer of theirs, providing competitive and fair market prices in the future as well.

That’s a pretty impressive indicator. How has being a fair and stable customer helped grow your network of farmers?

Smallholder farmers want dependability, to be around in both the good times and bad. Sales and procurement dip in times of bad weather or a crisis. Being able to purchase milk from farmers consistently has also been a reason behind the growth of our farmer base in the past couple of years.

There has been a concept of being self-sufficient in milk for some time. Do you think that it is possible?

I believe we have achieved this to a certain degree already. Becoming fully self-sufficient is possible. Increasing productivity at farmer level is the critical factor in achieving this. Most companies in dairy processing can process more, but the supply of fresh milk has been a limiting factor.

With fair, competitive pricing for milk, providing incentives for expanding farms or increasing productivity, it’s only a matter of time before we achieve self-sufficiency. It may not happen in the immediate future, but in a couple of years, we can reach this as an industry.

What are the problems impacting the industry, and what would you suggest implementing to break these shackles?

The lack of consistent government policy and strategy has led to the dairy farming sector’s slow growth. Those in the dairy sector lobby with the government and other stakeholders to improve the situation. There are ample resources to tap into, from foreign embassies to NGOs willing to share their expertise. If the government uses these resources to build a stable, longterm plan, it won’t be long before we see the industry transform.

The other factor would be the enthusiasm of corporate entities to develop the country’s dairy industry. I don’t feel a lot of companies are doing enough to improve productivity, and they aren’t making an effort to retain their farmer network either. Companies can do more to take responsibility and develop their network because these people deserve to progress in their lives and enterprises. Unfortunately, some players aren’t doing enough in this aspect.

Consumer behaviour and expectations are constantly evolving. How can a brand respond to these ever-changing consumer trends?

Innovation is the solution. Successful brands stand out because they proactively develop innovative products with great value and keep consumers engaged. People’s buying patterns change, and it’s essential to keep providing them with appealing products that are healthy and can become part of their lifestyle. It’s all about knowing your customer, understanding their pulse, and what they find important. That’s what will change the game.

What makes your brand and products unique and appealing to customers?

Freshness is the greatest value we bring to the table. We ensure our products reach store shelves from the farm in 48 hours, manufactured following the highest global standards. We focus on delivering nutritious products without the excessive use of chemicals.

We also create unique products. For example, our ice creams provide flavours that other brands might not. We strive to deliver products that are different, providing variety and more choices for the consumer.

In a time when we are facing probably the worst economic crisis we’ve ever had, what advice do you have to share with businesses or people in general about facing its challenges?

Our ability to look at every challenge as an opportunity has been key to our success. Just as there is a silver lining in every grey cloud, we must be able to identify what opportunities exist during challenging times and turn a bad situation around. It will take you beyond your comfort zone, but that is where the opportunity exists.

Not many would understand how difficult it would have been to achieve what you have, especially during this challenging period. Could you give us a sense of the work that had to be exerted by the company to create this successful result?

Our success is the result of a lot of internal soul-searching, hard work and critical decisions we made. It involved bringing more dynamic individuals into the business, even at the Director and board levels. We created a vision and carved our future path, working together and working hard.

Reaching this point wasn’t easy. We had to battle the pandemic internally as staff began testing positive, decreasing our available staff numbers drastically for months. But we still worked exceptionally hard, improving our supply chain and manufacturing side. None of it would have been possible without good teamwork and the increased dynamism we brought to the business.

How do you align all your people towards the company’s vision?

Transparency is what made it possible. Everyone needs to be aware of the plan in place, and what we all want to achieve and do. Having a good line of communication with clarity and transparency throughout the entire organization from top to bottom is the best way to align people and motivate them to drive towards a common goal.

Large companies are often reluctant to divulge certain data and information to their peers within the organization, especially if they feel they aren’t privy to that information. We were similar a few years ago.

Once we started being more open, more transparent with our staff across the board, we began to see a change. Everyone began driving towards a common goal. People even began to go out of their way to help one another, taking an active interest in supporting each other. That transparency led to greater teamwork and helped align everyone to a common goal and vision, and it has made a difference in taking us forward.