Koufuku International Limited redefines Bhutan’s dairy industry

Established as Bhutan’s first foreign direct investment (FDI) dairy venture, Koufuku International Limited (KIL) in Chenary, Trashigang, is transforming the dairy sector in eastern Bhutan.

By sourcing milk from 19 milk groups and over 1,046 micro-farms and farmers groups, producing high-quality products, and expanding operations to meet growing demand, KIL is empowering rural livelihoods and promoting sustainability.

Between January and  April  this year alone, KIL recorded an inflow of 3,60,518.41 litres (L) of milk.

KIL was established on September 24, 2012, as a joint venture between Shin Nippon Biomedical Laboratories Limited of Japan and Druk Holding and Investments Limited (DHI).

The KIL started with an initial equity of Nu 50 million. Now it has negative  retained earning of Nu 38.54 million and liabilities of Nu 25.80 million.

By 2015, the company had begun operations, processing between 400 and 500 litres of milk daily, though it was designed for a daily capacity of 4,000 litres. Initially focused on producing gouda cheese, KIL launched its flagship product, Zambala Processed Cheese, in 2019. In 2020, ownership of the company was fully transferred to DHI.

Currently, KIL employs 28 staff, holds total assets worth Nu 76.38 million, and has a share capital of Nu 89.13 million. It operates on 4.23 acres of leased land for a 30-year period.

Tenzin Lungdhok, marketing manager of KIL, said the company is committed to producing affordable, high-quality dairy products from locally sourced milk, with a strong focus on sustainability and excellence.

“KIL, under its dairy value chain, is connected to 1 9  farmer groups and 1,046 micro-farms in eastern Bhutan,” he said. “With  23  milk collectors and  transporters, milk is collected from 1 6 milk collection centres.”

Although operations are currently manual, KIL is set to transition to semi-automated processing once its ongoing expansion is complete.  Currently  designed to process  4000 litres per day, the expanded facility will handle up to 6,000 litres daily, in response to increased milk inflow.

The Commercial Agriculture and Resilient Livelihoods Enhancement Programme (CARLEP) has supported KIL with an interest-free subsidiary loan of Nu 77.055 million, subject to service charges.

“Before transportation, the temperature of the milk is checked to ensure it is maintained at 4 °C,” said Tenzin Lungdhok.

Kelzang Thinley, Plant In-Charge at KIL, said some milk collection points had to be discontinued due to distance, while others stopped supplying milk. “One of the challenges is that suppliers prefer to sell milk to India due to more favourable prices,” he said.

KIL pays Nu 39.5 per litre to farmers, though the actual cost—including transportation using 13 Boleros and large milk tankers—totals Nu 46.5 per litre.

“KIL had four tanks, two of which—with a 6,000-litre capacity—were provided by CARLEP. However, considering the associated costs, KIL has opted to use single-cabin Boleros for more efficient cost management,” said Tenzin Lungdhok.

The company distributes its products through 44 wholesalers and 418 retailers. Its primary market is in eastern Bhutan, with limited distribution in Thimphu, Paro, and minimal presence in the south.

According to the marketing manager, all products—gouda, processed cheese, yogurt, unsalted butter, and Druk Zambala Cheese—are quality-tested before distribution.

“Although milk inflow declined between 2023 and 202 4 , both the quality and production improved,” he noted. “This can likely be attributed to the training programmes on clean milk production provided to member groups, quality testing initiatives, and the supply of animal feed supported by CARLEP and KIL over the years.”

The top milk-supplying dzongkhags are Trashigang, Trashiyangtse, Mongar, and Samdrupjongkhar.

Regarding the Nu 39.5 per litre price offered to farmers, Tenzin Lungdhok said KIL has initiated discussions with the Ministry of Agriculture and Livestock to implement quality-based pricing mechanisms that reward better milk quality.

Milk payment records show that KIL paid Nu 3.89 million to farmers in 2015. By 2024, this figure had risen to Nu 41.39 million. In 2025, payments have already reached Nu  14.24  million and are projected to surpass the previous year. Over the last 11 years, KIL has paid a total of Nu 2 23 . 67 million to farmers.

Despite its progress, KIL faces challenges, including the unavailability of compatible technical parts for its aging machinery. These issues are expected to be resolved with the new facility installation. Other persistent problems include distant collection centres, limited awareness of clean milk practices, inadequate chilling facilities, lack of farmer equipment, water adulteration, and infrastructure constraints.

“KIL is the only ISO-certified dairy company in the country, certified in 2017. We are currently applying for global certification to expand our market reach,” said Tenzin Lungdhok. “CARLEP and KIL conduct regular clean milk production training and annual workshops for gewog thrizins to promote quality milk production.”

Initially, 14 percent of the milk received was adulterated. Through consistent training and monitoring, this has dropped to 1 percent. KIL allows up to 5 percent adulteration, acknowledging practical field limitations.

The company also provides monthly payments to farmers, advances when needed, and supports maintenance of collection and processing facilities. “Last year alone, KIL conducted maintenance activities worth Nu 1.85 million,” said Lungdhok.

Looking ahead, and with continued support from CARLEP, KIL aims to reduce machine breakdowns through new equipment, deploy additional milk-collection Boleros, and establish dedicated production lines for gouda, cheese, and yogurt.

“The KIL seeks the involvement of the Ministry of Agriculture and Livestock in framing quality-based milk pricing guidelines to ensure fair compensation to farmers,” said Lungdhok. He added that expanding infrastructure for farmers—such as milk chillers, collection centres, animal feed supply, and hygiene-based production initiatives—remains a top priority.

Zambala Cheese has seen steady growth in both production and revenue. Last year, the company generated a revenue of Nu 115.5 3 million. In 2024, KIL’s income stood at Nu 115.53 million, with expenditures of Nu 100.54 million and a post-tax profit (PAT) of Nu 13.26 million. 

Projection for 2025 shows a production target of 222.35 metric tonnes. This year, the company has set its target to generate Nu 120.57 million in income, with expenses of Nu 109.82 million and a PAT of Nu 7.52 million.

Source : Dairynews7x7 June 17th 2025  kuenselonline - The story is supported by the Commercial Agriculture and Resilient Livelihoods Enhancement Programme (CARLEP), under the Ministry of Agriculture and Livestock (MoAL) funded by the International Fund for Agricultural Development (IFAD).