Ganesh Bahadur Shrestha was a civil servant in his native Pokhara, and his mother made pustakari at home and the children packaged it for sale in the market.
The milk sweets sold like, well, hot pustakari, and Shrestha invested NRs70 in new equipment to increase production. His mother could not keep up with demand. Soon, he left the government job and started a confectionary business making candy, toffee and chocolates.
But the business could not grow as fast as it could have because of the lack of raw materials: mainly milk and sugar. When the government decided to privatise the Dairy Development Corporation (DDC) in Pokhara, the family acquired it and launched a dairy processing business.
Today, Sujal Dairy is one of the most remarkable success stories of privatisation and business growth in Nepal. It is the tale, not just of self-made entrepreneurship, but how just one business idea can have such a dramatic socio-economic impact on a region, or even a country.
Twenty years ago, Pokhara used to be known for its milk production. But even though household dairies produced a lot of milk, and there was no market for the surplus. The DDC had ‘milk holidays’ and there was no incentive for farmers to increase productivity.
Once Sujal Dairy came into the picture with demand for new value-added products and a powder milk plant, milk production shot up. The veterinary industry thrived, farmers took loans to invest in buffaloes and cows. But it did not happen all at once.
“We had to start from ground zero,” says Niranjan Shrestha, Ganesh Bahadur Shrestha’s son who looks after the family’s dairy business in Pokhara. “We worked with Laxmi Bank to provide microcredit to farmers, but the dairy industry is a long gestation business and it takes time for full-scale production, so we initially faced a milk shortage at our plants.”
The livestock needed to be procured, they needed artificial insemination, the feed supply chain had to be established, and a cold chain needed for delivery. All this took more than three years.
Niranjan Shrestha says a dairy business and brewery are similar with pasteurisation and equipment made by the same companies. But a litre of beer sells for NRs1,000 while fresh milk sells for NRs60, and a dairy requires more expensive equipment, which takes much longer for a dairy plant to break even.
But the Shrestha family’s patience paid off. Not only is the company thriving, but its Safal brand has reduced Nepal’s total import of milk powder from NRs8 billion a year to NRs2 billion. The import bill for other confectionary, chocolates and ice cream have also come down. Farmers who would have otherwise migrated to the Gulf or Malaysia have stayed in Nepal as Sujal buys milk from households in a 100km radius around Pokhara.
The firm is already processing 4 million litres of milk a day, and adding more processing plants in other parts of Nepal for production of Safal milk, Loverbird ice cream and kulfi. Its Safal brand ghee is being exported to Japan and other countries.