Not so long ago, a commercial dairy industry in Laos was virtually non-existent. In a country with more than 700,000 buffalo and where 35 per cent of children are chronically malnourished, a thriving dairy sector could provide both family income and essential nutritional benefits. The question was: where to start?

Building a Dairy Sector in Laos from the Ground Up

Recognising the market potential, Susie Martin established Laos Buffalo Dairy (LBD) in Laos’s northern Luang Prabang region in 2016. Since launching, LBD has improved buffalo health, influenced dietary practices, and made buffalo dairies a viable commercial operation for smallholder farmers – including rural women. Farmers rent their female buffalo to the dairy for milking.

“The biggest challenge we had in the beginning was gaining the trust of the farmers,” says Martin, LBD Co-founder and entrepreneur. “We needed to demonstrate how better care could benefit their buffalo and their family income. Farmers were reluctant to rent us their pregnant buffalo. With a wet season and torrential downpours, reaching and transporting buffalo that farmers had agreed to rent us was – and remains – a huge challenge.”

Through a partnership established by the Australian Government’s Business Partnerships Platform (BPP), an initiative supporting inclusive businesses to create both development impact and sustainable commercial returns, LBD has scaled up operations. The partnership brings together LBD, the Northern Agriculture College, the Luang Prabang Provincial Health Department, and the Australian Government to reach more remote villages, expand the network of farmers and further promote the benefits of buffalo milk.

According to Martin, the dairy is driving positive change for Laos communities. “The most significant change is in the attitudes of the farmers with whom we work,” she says. “With the trust that [we] developed, we noticed that farmers were prepared to go further and learn about how they could milk their own buffalo and use the milk to help their children become healthier.”

But COVID-19 has brought on its own new challenges for LBD. As a tourism-dependent enterprise, the dairy sells much of its produce to local resorts and has been forced to adapt and adjust its model, including increased focus on international export markets such as Japan and Europe. The Australian Government’s Department of Foreign Affairs and Trade has been flexible and responsive to the business needs, and Martin remains hopeful. “We have appreciated the collaborative approach and navigating challenges together. We have big plans and hope to reach many more communities.”

Going One Step Further: Profit, Sustainability, and Environmental Impact

A second BPP partnership between Australian Agribusiness Four Seasons, the University of Sydney, and the Australian Government has also been working to improve the health of buffalo and cows in Laos.

The partners have helped farmers access nutritional support in response to significant health issues caused by internal parasites. This support has included access to vaccinations and medicated livestock feed blocks.

Much like LBD, improving the livelihoods of smallholder farmers is a core business goal. And though the medicated feed blocks were successful in improving livestock health, the local business environment meant the sale of the blocks was not profitable. Establishing a sales channel in Laos, a country with an emerging private sector and where the state’s free agricultural inputs and services dominate, was difficult.

Eventually, Four Seasons offered a compelling idea that could benefit both farmers and the environment: they would evolve their current business model to a carbon offset start-up where polluters take on the costs of the blocks, rather than the farmers. Four Seasons launched a new company AgCoTech earlier this year, with the aim of distributing medicated livestock feed blocks in return for carbon offset credits.

Charles Olsson, AgCoTech Co-founder explains: “The methane (greenhouse gas) reduction from one medicated feed block is estimated to be the equivalent of 1 tonne of CO2. This model sets us apart from other carbon offset programs which are mainly focused on planting trees or have significantly long lead times – ours is much more nimble and faster to roll out and get credits.”

When looking for a location to produce the medicated feed blocks locally, AgCoTech’s obvious answer was the site of Laos Buffalo Dairy. They share a similar mission to improve the rural prosperity, welfare, nutrition, and health of the local population, with a focus on buffalo farming and childhood nutrition, and a similar approach to business.

Once the mineral block factory is operating, it will employ a local team and the majority of the ingredients like molasses will be purchased from Laos farmers. Households will then be allocated blocks each year for free to distribute and improve the health of their livestock.

“Here at the Dairy, we love nothing better than to be involved in innovative ideas that help us meet our aim,” Martin explains. “AgCoTech is like us with its business model and inclusive approach focused on benefiting local farmers.”

“All stakeholders along the supply chain benefit,” Olsson adds. “From the animal itself, to the farmers, to the suppliers of the raw materials and to the organisations who want to offset their emissions.”

The carbon offset program, like Laos Buffalo Dairy, demonstrates the power of inclusive business partnerships to test and adapt innovative business models, which are needed now more than ever for greater social and environmental impact.

The Business Partnerships Platform is supported by the Australian Government and implemented by Palladium. Follow on Facebook for latest news and contact info@thepalladiumgroup.com for more information.