The state-run Dairy Farming Promotion Organisation (DPO), the manufacturer of Thai-Danish dairy products, is setting up a new dairy factory in a joint investment with private operators and dairy farmers.
DPO Director General Narongrit Wongsuwan aims to meet growing milk demand.
The development marks the launch of a new business model aimed at building sustainable growth.
DPO director Narongrit Wongsuwan said it plans to set up its new dairy factory on a 100 rai plot of land in Hang Chat, a district in Lampang province.
The new factory, valued between 700 million and 1 billion baht, will be built under a new business model in which farmers will be stakeholders.
The format is unlike the DPO's six dairy plants, where the state agency makes its own investments and purchases raw milk from farmers at agreed prices.
He said that the new plant, which is expected to start operations in the next 2-3 years, will not only increase operational efficiency, but help farmers in the North reduce milk transportation costs.
Dairy farmers in the upper North provinces, especially those from Lampang, will have the opportunity to become partners under the new scheme.
If this new business model proves successful, it will be applicable to future factories, said Mr Narongrit.
Having farmers become stakeholders is a way stabilise the occupation of dairy farming occupation, which he says is on the decline, due to unattractive returns.
Mr Narongrit projects that the new factory in Lampang will buy about 120-150 tonnes of raw milk from local farmers every day to produce dairy products to supply the domestic market.
He said that demand for milk consumption in Thailand is on the rise thanks to the government's policy to boost milk consumption among Thais to 20 litres per person per year in the next 3-5 years, from only 14 litres at present.
Sales of the Thai-Danish milk brand for this fiscal year ending next month (Sept 30) are expected to enjoy 7% growth to 8.6 billion baht, of which 7.7 billion baht comes from the domestic market and the remaining 900 million baht from exports, mainly to neighbouring countries.
He is positive that next year's sales growth will keep the same pace or see a 7% rise to 9.2 billion baht, with income from exports contributing about 1.2 billion baht.
To achieve its sales target abroad, the company has already appointed two trading companies in Myanmar to distribute Thai-Danish dairy products in the country, starting next month.
One of the trading companies to carry out the distribution is a unit under a Thai umbrella, Bec Tero Group.
DPO projects sales of Thai-Danish dairy products in Myanmar to reach 10 million baht per month.
Apart from Myanmar, DPO is in talks with Malaysian companies to distribute Thai-Danish products there. It also has plans to expand into the south of China and Taiwan.