APU Dairy, a leading milk producer in Mongolia, has successfully secured a significant loan totaling Tg136.55bn ($40 million) from two esteemed development finance institutions to facilitate its growth plans in the competitive food and beverage industry.
The European Bank for Reconstruction and Development (EBRD) is providing half of this funding, contributing a $20 million loan, while an additional $2 million comes from Canada’s High Impact Partnership on Climate Action (HIPCA). This financial support aims to propel APU Dairy’s expansion initiatives, which are crucial for keeping pace with emerging food and drink consumer trends.
APU Dairy plans to enhance its processing capabilities significantly. The company intends to “triple” its processing plant’s capacity and invest in new processing and packaging lines. Furthermore, the funds will allow the business to improve its milk sourcing arrangements, ensuring greater efficiency in operations and supply.
In addition to expansion efforts, the financing will also address the company’s working capital requirements, enabling APU Dairy to sustain its operations smoothly and effectively.
The investment initiative receives backing from a comparable loan amount co-financed by the Asian Development Bank (ADB). APU Dairy is a wholly-owned subsidiary of APU JSC, recognized as the “oldest and largest beverage producer in Mongolia.” The collaboration with the ADB underscores the company’s commitment to enhancing agricultural sustainability and quality within the food and drink business sector.
One of APU Dairy’s key objectives is to bolster the climate resilience of over 1,700 local farmers who supply raw milk. The project is set to support small-scale yak herders in the Arkhangai region by introducing innovative technologies and market skills aimed at improving productivity and sustainability. APU Dairy seeks to “support nomadic herders by integrating them into the dairy value chain,” fostering a collaborative relationship within the food and beverage industry.
Despite a raw milk production of 800 million litres annually in Mongolia, only 10% is processed, primarily due to limited connections between herders and processors. Dairy plants currently operate at half capacity, and seasonal variations necessitate reliance on imported milk powder during winter months.
To combat these challenges, APU Dairy plans to establish 25 raw milk collection centers within a 450km radius of Ulaanbaatar. These centers will create a stable market for herders’ milk and, by 2028, are expected to support growing demand from the company’s expanded processing facility. This initiative will generate approximately 320 new jobs, contributing significantly to the local economy.
APU Dairy’s CEO, Bayarmagnai Galsumiya, expressed confidence in the project’s impact, stating, “I am confident that this loan and technical assistance will become a pillar of the future development of Mongolia’s agriculture and food production and will make a significant contribution to improving the livelihoods, knowledge, and skills of rural herders.”
In 2019, APU Dairy’s success in securing financing echoes the previous backing received by Mongolia’s Suu Milk, which obtained a five-year $12 million EBRD loan for enhancement of its production facilities, showcasing a growing trend of investment in the Mongolian food and drink sector.
