Asher, D.

Kilelu, C.W.

Knippenberg, Camee, van

Lee, J., van der

Mbera, Gloria

Mulwa, R.M.

Ndambi, O.A.

Ngigi, M.

Njiru, Ruth

Wageningen Yield 

   
 
 
    
 
Key messages 
 
 To make QBMPS work, robust action is 
needed on many fronts to create the 
market conditions and incentives for a 
quality-based dairy value chain in 
Kenya. 
 The KDB should ensure strict 
enactment, enforcement and 
monitoring of quality standards of 
milk. This needs to be a concerted 
effort at national and county-level in 
line with various policies. 
 Dairy processing enterprises and 
cooperatives should invest in well-
equipped laboratories and trained staff 
to ensure rigorous and regular quality 
control. 
 There is need to expand infrastructure 
to ensure efficient transportation of 
raw milk and consistent testing of milk 
at delivery, bulking points and 
processing centers. 
 Standards should be developed for 
dairy cooperatives and other private 
enterprises wishing to get into the 
business of milk collection and 
marketing. 
 Strengthen dairy extension services 
through both government and private 
sector delivery to support safe and 
quality milk production at farm level. 
 Consumer organizations need to 
conduct awareness raising and 
advocacy to strengthen demand for 
quality milk products. 
 
Introduction 
According to Kenya’s Ministry of Agriculture, Livestock and Fisheries 
(MoALF) the dairy industry accounts for 14% of Kenya’s agricultural gross 
domestic product (GDP) and 6-8% of the overall GDP (MoALF, 2013).  Milk 
production has been identified as a key contributor to at least three of 
Kenya’s Big Four strategic priorities: health, food and nutrition security, and 
manufacturing. Milk consumption continues to increase, with the Kenya 
Dairy Master Plan projecting that annual per capita consumption could reach 
220 kg by 2030, from the current average of 125 kg in urban areas and less 
than half of that in rural areas.  
Despite its strategic importance, Kenya’s dairy sector remains largely 
unregulated, with the bulk of milk sold in its raw unprocessed form in 
informal markets. Farmers are paid based on the quantity of milk produced 
rather than on its quality. Because most consumers prefer to purchase low-
cost raw milk, a major challenge for value chain projects has been to make 
formal sector dairying more attractive. The lack of adherence to milk quality 
and safety standards, which includes the use of poor quality livestock feed, 
non-food grade plastic containers for milking and transportation, and 
minimal testing and rejection at collection points, is an entrenched problem. 
This is further exacerbated by limited consumer awareness, processor 
competition for milk volumes at the expense of quality, poor milk handling 
practices along the chain, and minimal enforcement of milk quality and 
safety standards. 
Consumption of poor quality and unsafe milk can pose several hazards to 
human health. Unsafe milk may contain food-borne pathogens that cause 
diseases such as brucellosis, listeriosis and tuberculosis. Moreover, 
antibiotic residues in milk may cause antibiotics resistance, which makes 
treatment of illnesses more difficult. The presence of antibiotics in milk is 
also a serious problem in dairy value addition. Antibiotics inhibit useful 
microbes in starter cultures for yogurt, cheese and other fermented dairy 
products, leading to huge economic losses. 
Poor milk quality does not only lead to increased health risks, it also 
undermines the emergence of a competitive dairy value chain. To turn 
around the situation, some investments need to be made by all actors along 
the milk supply chain. This was the objective of a study exploring the private 
and public costs and benefits of implementing a quality-based milk payment 
system (QBMPS) pilot in Kenya (Ndambi et al, 2018), which is summarized 
in this Research Brief.  
In addition to highlighting some of the costs and benefits associated with 
enhancing quality and safety standards across the milk supply chain, the 
brief addresses a number of systemic issues and challenges facing the dairy 
sector and concludes with a set of recommendations aimed at encouraging 
all actors to “do their bit” to contribute to a productive, innovative and 
sustainable dairy sector in Kenya.  
 
 
.
                                                                                  
 
3R Kenya Project Research Brief 001 
Enhancing milk quality and safety:  
Towards milk quality-based milk payments in Kenya 
Asaah Ndambi, Ruth Njiru, Camee van Knippenberg, Jan van der Lee, Catherine 
Kilelu, Margaret Ngigi, Martin Mulwa, Daniel Asher, Gloria Mbera and Wangu 
Mwangi 
 
 3R Kenya project | Wageningen Livestock Research | 2  
Introduction to QBMPS 
This research brief summarizes the main findings and 
recommendations of a study that explored the private 
and public costs and benefits of implementing a quality-
based milk payment system (QBMPS) in Kenya (Ndambi 
et al, 2018). The study was based on a pilot project 
implemented by Nakuru-based processor Happy Cow Ltd 
and two of its suppliers – cooperative enterprises in 
Nakuru and Nyandarua counties – with support from SNV 
Netherlands Development Organisation.  
 
 
 
 
 
 
 
One of the objectives of the project was to test whether 
paying a “quality bonus” to farmers for supplying better 
quality milk would result in a consistent supply of quality 
milk for processing, and hence trigger upgrading and 
quality improvements along the entire dairy value chain. 
It was expected that by providing sufficient capacity 
building support to farmers, while also investing in the 
requisite quality control infrastructure by cooperatives 
and processors, would result in gains for all actors 
involved, including: higher income for  farmers; lower 
milk rejection rates at collection points; reduced 
processing costs; and improved access to safe and 
quality dairy products for end consumers.  
Private and public costs and benefits of QBMPS  
The costs and benefits of QBMPS are both private and 
public in nature. The 2018 QBMPS study analyzed the 
private costs and benefits for two main categories of 
dairy stakeholders – farmers, milk collection and bulking 
enterprises (hereafter simply referred to as 
cooperatives) and processors.  
Farmers: Farmers who met at least 40% of the 
prescribed quality standards (Grade A and B) were 
awarded a bonus payment linked to the quality of milk 
delivered. For example, farmers supplying the highest 
quality (Grade A) milk would receive an additional KES 
3.86/kg delivered. On average, this resulted in a net 
profit of KES 2.31/kg of milk after subtracting average 
production costs of KES 1.55/kg. The “quality dividend” 
for farmers selling an average of 10.71 kg of milk a day 
therefore amounts to approximately KES 742 in 
additional profit per month.  
As shown in Figure 1, farmers who did not raise the 
quality of their milk (Grade C) achieved a net loss due to 
rejection of their milk or not qualifying for a bonus 
payment. The study results further revealed that farmers 
who supplied milk of fluctuating quality, ranging from 
Grade A to C (represented by the column “Mixed”) 
achieved a lower net profit of 0.27 KES/kg of milk, 
compared to farmers who managed to consistently 
supply Grade A and B milk. Other benefits of participating 
in the QBMPS for farmers include: access to training and 
support on improved dairy management, as well as milk 
quality and safety requirements; and access to credit and 
other support provided through farmers’ groups linked to 
the QBMPS cooperatives and processors.  
Dairy cooperative 
enterprises and 
processing 
companies: For Grade 
A milk delivered by 
farmers, cooperatives 
incurred a cost of KES 
0.56/kg of milk on 
average and made 
additional revenue of 
around KES 0.32 /kg, 
leaving them with a net 
loss of KES  –0.24/kg. 
For the processor, 
investment costs for 
the QBMPS included 
equipping a laboratory, 
employing quality control 
personnel and acquiring software that amounted 
to KES 3.05/kg of milk. The processor accrued a benefit 
of KES 0.93/kg of milk from higher product yields and 
less returns on poorer quality products, leading to a net 
loss of KES -2.12/kg of milk. It is expected that in the 
long term processors will be able to recover these costs 
through efficiency gains along the dairy chain and 
increased sales of premium milk.  
At the moment however, the cost of implementing 
QBMPS outweighs the benefits, hence offering little 
incentive from a processor perspective.  
In addition to analyzing the private benefits to value 
chain actors (farmers, cooperatives and processors), the 
study found that investing in milk quality could lead to 
public health benefits amounting to KES 44.1/kg for 
Grade A milk, KES 18.17/kg for Grade B milk and KES 
9.52/kg for mixed milk. These public benefits are further 
discussed in the next section. 
Direct and indirect health costs  
The QBMPS study distinguished between direct costs 
associated with medical resource utilization and indirect 
costs incurred from the reduction of work productivity as 
Grade A: Good quality milk with less than 2 million total plate count 
Grade B: Moderate quality milk with 2-10 million total plate count 
Grade C: Low quality milk with above 10 million total plate count 
Mixed: Mixture of Grades A, B and C  
 
*Based on a classification by Happy Cow Limited 
In cash terms, 
farmers are 
the greatest 
beneficiaries 
of a well-
functioning 
QBMPS 
 
 3R Kenya project | Wageningen Livestock Research | 3 
a result of the morbidity and mortality associated with a 
given disease.  
The equivalent of 53,093 healthy life years (DALYs) are 
lost annually in Kenya due to milk-related infectious 
diseases, this 
excluding losses 
due to use of 
antibiotics and 
other harmful 
preservatives like 
hydrogen 
peroxide. 
Considering an 
average lifespan 
of 62.13 (World 
Bank, 2017), this 
equates to an 
average loss of 
855 full lives per 
year due to milk-
related infectious 
diseases. 
The total annual public health costs in Kenya linked to 
consuming unsafe milk were estimated at KES 436 billion 
with direct costs constituting the bulk of this amount. In 
this estimate, costs of antibiotics resistance linked to 
residues in milk account for approximately KES 4.3 billion 
KES each year. Consumption of safe milk therefore can 
significantly contribute to achievement of Food and 
Nutrition Security and Health, key pillars identified for 
economic growth in Kenya. 
Conclusions 
According to Pašić et al. (2016) quality-based milk 
payment systems have been successful in controlling and 
improving milk quality along the dairy chain by providing 
incentives to all players to improve the quality of milk 
including improved revenues for farmers. However, the 
cost–benefit analysis undertaken as part of the study 
found that under current circumstances, a QBMPS may 
not be financially viable. Robust action will be needed on 
many fronts to create the market conditions and 
incentives for a quality-based dairy value chain in Kenya. 
Such action could, additionally, help to streamline the 
further formalization of the dairy sector.  
Although some measures have been taken, ensuring full 
and consistent regulation of milk quality will help to 
enhance a more competitive market environment and 
reduce the current high levels of unsafe milk. 
Furthermore, there is need to expand infrastructure to 
ensure efficient transportation of raw milk and consistent 
testing of milk at delivery, bulking points and processing 
centers. This will create the right incentives and market 
signals for a range of dairy stakeholders including 
farmers, cooperatives and processors, industry training 
centers and consumer bodies to invest in upgrading for 
quality milk production.  
Recommendations 
To move from the business as usual scenario of a largely 
unregulated milk supply chain, towards a more 
formalized and accountable dairy sector in Kenya, there 
is need to address both the supply and demand sides, 
through more stringent enforcement of safety and 
quality standards and better consumer education on the 
risks and impacts of drinking unsafe milk and milk 
products.  
This calls for coherent policy development and 
enforcement by government agencies and other 
stakeholders responsible for setting standards, including 
ministries of Education and Training, Agriculture and 
Livestock Development, Health, Energy and so on. The 
following are some specific recommendations targeted at 
key stakeholders in a QBMPS.  
Government and Regulatory agencies (through the 
Kenya Dairy Board, KDB): 
 Enforce milk quality compliance to existing standards, 
under the framework of Kenya’s Veterinary Policy 
2013, which calls on county governments to oversee 
the enforcement of laws governing food safety and 
food defence. As the national regulatory authority, the 
KDB should ensure the strict enactment, enforcement 
and monitoring of quality standards through, among 
other activities:  
o Banning the use of non-food grade plastic cans.  
o Devising a model for regulating the sale and use of 
dairy inputs such as livestock feed and antibiotics. 
o Promoting public information and awareness 
campaigns to enhance milk quality. 
o Establishing accredited laboratories at county level 
to ensure consistent and continuous monitoring of 
milk quality.  
o Developing specific standards for dairy cooperatives 
and other private enterprises wishing to get into the 
business of milk collection and marketing. These 
could include standards on cleaning and cooling 
infrastructure, milk testing equipment, quality 
assurance staff, and standard operating procedures 
for safe milk handling. 
 Explore opportunities to incentivize quality 
improvements by processors through tax exemptions 
on laboratory testing equipment and other core 
infrastructure required to establish quality-driven milk 
bulking and transportation, as espoused in the Dairy 
Development Policy, 2013. 
 Strengthen dairy extension services to farmers by both 
government and private sector extension agents 
through inclusion of quality standards of inputs, 
Investing in 
milk quality can 
result in public 
health benefits 
up to KES 44/kg 
of milk 
consumed  
 
 
 3R Kenya project| Wageningen Livestock Research | 4 
products and food safety in trainings, as called for in 
the National Agriculture Sector Extension policy.  
Dairy cooperatives and processing enterprises:  
 Invest in well-equipped laboratories and trained staff 
to ensure rigorous and regular quality control of milk 
delivered at all collection points. 
 Reject milk that does not meet quality and safety 
standards. 
 Provide feedback and follow up training to farmers and 
transporters responsible for delivering poor quality 
milk to prevent further losses.   
 Ensure continuous training and extension, as well as 
credit provision to farmers, targeting improving milk 
quality, and facilitate farmers to acquire the necessary 
inputs such as aluminium cans and aflatoxin-free 
feeds, as well as access to veterinary services.  
 Strengthen self-regulation mechanisms within 
processor associations and other industry networks to 
promote uniform quality and safety standards across 
the dairy sector. 
Consumer organizations:  
 Conduct awareness raising and advocacy campaigns at 
county and national levels to enhance understanding 
of the health impacts of unsafe milk consumption and 
strengthen demand for quality milk products. If 
consumers are made aware of the differences in 
quality of milk that goes through the QBMPS, they may 
accept a higher price for products it generates, which 
in turn could (partly or entirely) compensate the 
processor’s costs. 
 In collaboration with industry organizations, civil 
society organizations and other interested parties, 
jointly explore gaps in current policy and regulatory 
environment to enhance milk quality and safety
References 
MoALF (Ministry of Agriculture, Livestock and Fisheries), 2013. The National Dairy Development Policy: State 
Department of Livestock, Nairobi, Kenya. https://goo.gl/iuChny  
MoALF (Ministry of Agriculture, Livestock and Fisheries), 2013. Kenya Veterinary Policy: Towards a Competitive 
and Sustainable Dairy Industry for Economic Growth in the 21st Century and Beyond. Sessional Paper No 5. State 
Department of Livestock, Nairobi, Kenya. https://goo.gl/G51Y31  
Ndambi, A., Njiru, R., Knippenberg, C., Lee, J., Kilelu, C., & Ngigi, M., 2018. “Private and public costs and benefits 
of implementing a quality-based milk payment system in Kenya: Case study of Happy Cow Ltd.  
Pašić, V., Tudor Kalit, M., Salajpal, K., Samaržija, D., Havranek, J. & Kalit, S. 2016. The impact of changes in the 
milk payment system & season on the hygienic quality of milk. J. of Central European Agriculture, 17(3), 629–639.  
World Bank. (2017). World Development Indicators. Retrieved October 2, 2017, from 
http://databank.worldbank.org/data/reports.aspx?source=world-development-indicators.  
 
 
 
  
Contact:  
Catherine Kilelu 
3R Kenya Project Coordinator 
E: C.Kilelu@acts-net.org 
W: http://www.3r-kenya.org 
 
 
Jan van der Lee 
Senior Advisor Sustainable Livestock Systems 
Wageningen Livestock Research 
E: jan.vanderlee@wur.nl  
 
Acknowledgements  
The 3R Kenya Project appreciates the collaboration with Kenya Market-led Dairy Program (KMDP) and SNV’s Voice for Change Programme 
and their partner Consumer Unity and Trust Society – Kenya (CUTS), in the production of this research brief. This brief is based on the 
QBMPS pilot project implemented by Happy Cow Ltd in Nakuru and two of its suppliers, New Ngorika Milk Producers Ltd. and Olenguruone 
Dairy Cooperative Society. The project is co-financed by the KMDP of SNV-Netherlands Development Organisation with support from the 
Embassy of the Kingdom of the Netherlands in Nairobi. 
We are grateful to Gerard Oosterwijk, Teresiah Ndungu and staff of Happy Cow Ltd and members of New Ngorika and Olenguruone for 
their contribution to the study.  
We also acknowledge support from: Dries Liesbeth from WUR; Delia Grace and Silvia Alonso from ILRI; Sam Kariuki, John Njeru and 
Robert Onsare from KEMRI; Jackson Ombui, Erastus Kang’ete and John Mburu from the University of Nairobi; Anton Jansen, Judy Kithinji, 
Mary Nganga, Mary Njuguna and SNV team, Dirk Harting of Bles Dairies, Biofoods, Gogar Farm, KDB, KEBS, VetLab, ZDU and all medical 
doctors and lab technicians who were interviewed. 
The brief is a summary of a more comprehensive research report available at http://www.3r-kenya.org/wp-
content/uploads/2018/05/QBMPS-Cost-Benefit-Analysis.pdf   
 
3R Kenya Project  
The 3R Kenya (Resilient, Robust, Reliable. — From Aid to Trade) project is a learning initiative supported under the Agriculture and 
Food and Nutrition Security (FNS) program of the Embassy of the Kingdom of the Netherlands. 3R Kenya seeks to generate evidence 
and lessons from FNS and other related programmes that support competitive, market-led models in spurring agricultural 
development. It focuses on the aquaculture, dairy and horticulture sectors. 3R Kenya is executed at a time when Dutch government’s 
bilateral relations in Kenya are transitioning from a focus on Aid to Trade to enhance the development of agri-food sectors. Through 
evidence generation and stakeholder dialogue, 3R seeks to contribute to an understanding of effective conditions for sustainable 
inclusive trade for transforming resilient, robust and reliable agri-food sectors.  
 
 


Enhancing milk quality and safety: : Towards milk quality-based milk payments in Kenya

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