Overview of the Kenya dairy industry. The main contents are as follows:

• Industry size and growth: Covers milk production volume, market revenue, and growth trends.

• Key players and structure: Describes major processors, cooperative models, and production systems.

• Production and processing: Details cattle population, production trends, and processing capacities.

• Market dynamics and demand: Explores consumption patterns, formal vs. informal markets, and export ambitions.

• Challenges and opportunities: Addresses climate vulnerability, feed constraints, and infrastructure gaps.

• Government policies and initiatives: Highlights regulatory bodies, export promotion, and technology adoption.

• Future outlook and projections: Summarizes growth trajectories, market diversification, and modernization efforts.

1 Industry Size and Growth Trajectory

Kenya’s dairy industry represents a cornerstone of the nation’s agricultural sector, demonstrating remarkable growth and economic significance. According to recent data from the Kenya Dairy Board (KDB), the industry achieved a historic milestone in the first quarter of 2025, with formal processors receiving 250.6 million litres of milk—marking a substantial 56% year-on-year increase compared to the same period in 2024 . This exceptional performance has set the stage for potential annual intake exceeding one billion litres for the first time in Kenya’s history, reflecting the industry’s robust expansion and growing formalization.

The growth trajectory of Kenya’s dairy sector becomes even more impressive when viewed through a longer-term lens. Over the past 24 years (2001-2024), Kenya’s formal sector milk intake has grown at a compound annual growth rate (CAGR) of approximately 7.3%, rising from just 270 million litres in 2001 to 908 million in 2024 . This sustained growth underscores the industry’s increasing importance to the Kenyan economy and its potential for future development. The revenue generated from Kenya’s milk market is projected to reach US$1.71 billion in 2025, with an expected annual growth rate of 7.83% (CAGR 2025-2030) 2. When considering the broader agricultural value, the gross production value in the milk market is projected to amount to US$4.07 billion in 2025, with an annual growth rate of 1.95% expected (CAGR 2025-2029) .

2 Key Players and Industry Structure

The Kenyan dairy industry features a diverse ecosystem of stakeholders ranging from smallholder farmers to large processing companies. Small-scale producers form the backbone of the industry, accounting for approximately 80% of Kenya’s milk production . These farmers typically own between one to five dairy cows and rely heavily on cooperative systems for collection, marketing, and value addition. The industry is characterized by a dual structure with both formal and informal market channels, though recent years have seen increased efforts to formalize the sector through improved regulation and quality standards.

Several major processors dominate the formal segment of Kenya’s dairy industry. Brookside Dairy Limited stands as one of the largest dairy processors in Kenya, producing a comprehensive range of dairy products including milk, cheese, and yogurt. The New Kenya Cooperative Creameries (New KCC) represents another key player, offering products like fresh milk, UHT milk, and powdered milk while maintaining strong connections with cooperative societies across the country . The Githunguri Dairy Farmers Cooperative has gained significant recognition for its ‘Fresha’ brand and plays a pivotal role in the local dairy industry, particularly in Central Kenya . These organizations work alongside numerous smaller processors and cooperative societies that collectively contribute to the industry’s output and market diversity.

Table: Major Dairy Processors in Kenya and Their Specializations

3 Production and Processing Capabilities

3.1 Cattle Population and Production Trends

Kenya’s dairy production relies on a substantial animal population comprising approximately 3.4 million dairy cattle and an additional 1.8 million dairy goats that contribute to the overall milk output. The country’s total milk production has been on a consistent upward trajectory, reaching an estimated 5.76 billion litres in 2024 according to Kenya Dairy Board reports . This positions Kenya as one of Africa’s leading dairy producers, with production systems ranging from extensive grazing to intensive zero-grazing models that have gained popularity among smallholders with limited land resources.

The geographical distribution of dairy farming in Kenya is predominantly concentrated in the central highlands and Rift Valley regions, where climatic conditions favor dairy farming. Counties such as Kiambu, Nyandarua, Nakuru, Uasin Gishu, Meru, and Nyeri have emerged as key production hubs . Kiambu County in particular has become a focal point for dairy farming, attracting farmers due to its favorable conditions for dairy cattle breeding . These regions benefit from adequate rainfall, moderate temperatures, and established infrastructure that supports dairy production and collection.

3.2 Processing Capacity and Value Addition

Kenya’s milk processing capacity currently stands at approximately 1.5 billion litres annually, indicating significant potential for expansion given the total production of over 5.7 billion litres . This processing gap means that a substantial portion of milk (4.8 billion litres in 2024) is sold unprocessed through informal channels . However, there is growing investment in value-added products as evidenced by production of approximately 25,000 metric tons of cheese annually and an estimated 10,000 metric tons of milk powder and whey per year .

Recent infrastructure developments are enhancing Kenya’s processing capabilities. The 2025 launch of a Sh1.2 billion (approximately US$9.3 million) milk processing plant in Nandi County, developed in partnership with the World Bank, features ultra-high temperature (UHT) milk processing lines that extend shelf life and reduce post-harvest losses. Such investments are crucial for improving the sector’s capacity to handle increased production and meet growing market demands for diversified dairy products.

4 Market Dynamics and Consumption Patterns

4.1 Domestic Consumption and Preferences

Kenyan consumers demonstrate strong demand for dairy products, with per capita revenue in the milk market projected to reach US$29.70 in 2025 2. The average volume per person in the milk market is expected to amount to 16.5kg in 2025, reflecting the cultural significance and nutritional importance of dairy in the Kenyan diet . Consumer preferences are evolving toward health-conscious choices, with growing interest in organic and locally sourced milk products driven by increasing awareness of sustainable and healthy food options .

The market is also witnessing emerging demand for specialized products catering to specific dietary needs. Leading companies like Juhayna Food Industries have responded to these shifting preferences by introducing lactose-free milk in Egypt, a trend that may gain traction in Kenya as well . Similarly, there is growing experimentation with plant-based alternatives, though traditional fresh dairy products remain dominant in the market. These evolving consumption patterns present both challenges and opportunities for processors seeking to diversify their product offerings and capture value-added market segments.

4.2 Formal vs. Informal Markets

Kenya’s dairy sector is characterized by a dual market structure with significant interplay between formal and informal channels. The informal market traditionally dominates, handling an estimated 80-85% of total milk sales through direct farmer-to-consumer transactions or local vendors . This dominance stems from several factors including consumer preferences for fresh milk, price sensitivity, and limited access to formal collection infrastructure in remote areas.

However, the formal market has been growing steadily, driven by urbanization, increasing quality consciousness, and strategic investments in collection and processing infrastructure. The impressive 56% year-on-year increase in formal milk intake recorded in Q1 2025 signals this gradual shift toward formalization . The government and industry stakeholders are actively promoting this transition through quality standardization, improved testing protocols, and transparent payment systems that incentivize farmers to supply formal processors .

4.3 Export Ambitions and Performance

Kenya has set ambitious export targets to strengthen its position in the global dairy market. The country aims to boost its dairy exports to nine billion Kenyan shillings (approximately US$69.5 million) by the end of 2025, a significant increase from the 7.3 billion Kenyan shillings recorded in 2023 . Primary target markets include the Middle East, South Sudan, and Somalia, with aspirations to access European Union markets through international certification.

Currently, Kenya exports approximately US$50 million worth of dairy products annually, primarily to neighboring East African countries, while importing around US$15 million per year mainly comprising specialized dairy products not widely available locally . The African Continental Free Trade Area (AfCFTA) agreement presents a significant opportunity for market expansion, particularly to countries like the Democratic Republic of the Congo which rely heavily on dairy imports . Achieving these export goals will require substantial improvements in quality management, processing efficiency, and compliance with international standards.

Table: Kenya’s Dairy Export Targets and Strategic Markets

5 Challenges and Opportunities

5.1 Climate Vulnerability and Environmental Pressures

The Kenyan dairy sector faces significant climate-related challenges that threaten production stability and growth. Climate variability manifests through more frequent droughts and erratic rainfall patterns linked to changing El Niño/La Niña cycles, which reduce pasture availability and water access for dairy cattle . These environmental pressures are particularly acute in arid and semi-arid lands (ASALs), but even traditionally high-output counties are experiencing increased production variability due to climatic shocks.

Heat stress represents another climate-related challenge, potentially reducing daily milk yields by 10-25% during periods of extreme temperature . Farmers are implementing adaptive strategies such as providing shade structures, ensuring access to cool clean water, and adjusting feeding schedules to include higher-energy rations during cooler evening hours to mitigate these effects. These climate adaptation measures are becoming increasingly essential for maintaining production levels amid changing environmental conditions.

5.2 Feed Constraints and Nutritional Gaps

Animal nutrition remains a critical challenge for Kenya’s dairy sector, with poor feed quality and seasonal shortages substantially limiting productivity. According to Food and Agriculture Organization (FAO) statistics, inadequate animal nutrition contributes to a milk supply deficit of 4.42 billion litres annually in Kenya, translating to approximately Sh169 billion (US$1.30 billion) in unrealized dairy sector revenue . This staggering gap highlights the tremendous opportunity for improvement through better feeding practices and forage development.

Initiatives like the Nourishing Prosperity Alliance: Forage for Animal Growth in East Africa (NPA-Forage) are addressing these challenges by building a commercial marketplace for nutrient-dense, climate-adapted forage accessible to small-scale dairy farmers 8. Since its launch in 2020, NPA Forage has trained 5,500 commercially oriented small-scale dairy farmers on forage production and optimized rationing, with 91% of participants reporting increased awareness of forage nutritional value and 87% experiencing increased milk production 8. These efforts demonstrate the significant potential for improving productivity through enhanced animal nutrition.

5.3 Infrastructure Gaps and Value Chain Inefficiencies

Infrastructure limitations present substantial obstacles to dairy sector development across Kenya. Insufficient rural roads, unreliable electricity, and limited refrigerated transport undermine milk collection and processing, leading to significant post-harvest losses. On hot days, weak cooling chains can waste 10-20% of produced milk through spoilage, reducing farmer incomes and limiting market supply . These inefficiencies are particularly pronounced in remote production areas where collection infrastructure is sparse.

Value chain modernization through decentralized cooling hubs with solar-powered chillers, route optimization for collection vehicles, and digital collection systems represents promising approaches to addressing these infrastructure constraints. Investments such as Holland Dairy’s $4 million cold storage and wastewater facility in Ethiopia demonstrate the type of infrastructure development needed to enhance dairy production and address environmental concerns . Similar investments in Kenya could significantly reduce post-harvest losses and improve product quality throughout the value chain.

6 Government Policies and Initiatives

6.1 Regulatory Framework and Quality Standards

The Kenya Dairy Board (KDB) serves as the primary regulatory body overseeing the dairy industry, responsible for policy formulation, quality assurance, and market development . The Board is actively working to enhance international certification standards to enable Kenyan dairy products to access premium markets such as the European Union . This focus on quality standardization and enforcement is crucial for improving consumer confidence and expanding export opportunities.

Despite these efforts, policy and institutional gaps continue to challenge the sector. Fragmented extension services, weak enforcement of quality standards, and inconsistent policy incentives undermine coordinated sector development . There is a recognized need for greater harmonization of standards across counties for milk quality testing and enforcement, as well as improved coordination between county and national bodies to synchronize support services with seasonal production calendars.

6.2 Export Promotion and Market Development

The Kenyan government has established ambitious export targets and is implementing strategies to achieve them. The target of US$69.5 million in dairy exports by 2025 represents a central component of the government’s plan to strengthen Kenya’s position in the global dairy market 46. Key to this strategy is processing more milk into value-added products like butter, cheese, ghee, and yogurt, which command higher prices in international markets .

The government is also leveraging regional trade agreements to expand market access. The African Continental Free Trade Area (AfCFTA) is viewed as a particularly promising avenue for reaching countries that are net importers of dairy products, such as the Democratic Republic of the Congo . These export promotion efforts are complemented by initiatives to improve production efficiency and quality control throughout the value chain, ensuring that Kenyan dairy products can compete effectively in regional and international markets.

6.3 Technology Adoption and Innovation

The Kenyan government is actively promoting technological innovation to enhance dairy productivity and efficiency. One notable initiative is the exploration of advanced semen sexing technology to increase milk production by boosting the probability of dairy cows giving birth to heifers by over 90% 1. This technology, developed in partnership with ABS Global (an American breeding company specializing in bovine genetics), has the potential to significantly accelerate herd expansion and genetic improvement.

Digital technologies are also receiving increased attention as tools for improving sector efficiency and youth engagement. Mobile-based credit, digital advisory services, and e-learning platforms are being deployed to support farmers and make dairy farming more attractive to younger generations. These technologies can help address longstanding challenges related to information access, financial inclusion, and knowledge transfer that have constrained sector development in the past.

7 Future Outlook and Projections

The future of Kenya’s dairy industry appears promising yet challenging, with continued growth anticipated alongside ongoing structural transformation. The Nourishing Prosperity Alliance projects that Kenya’s annual milk production will reach 3.4 billion litres by 2028 through targeted interventions, representing a 53% growth from current levels that would involve 500,000 smallholder farmers with a herd of 2 million cattle 8. This growth trajectory is expected to generate approximately Sh156 billion (US$1.16 billion) in increased revenue for the sector .

Several key trends are likely to shape the industry’s evolution in the coming years. The formalization of milk collection and processing is expected to continue, driven by quality requirements and consumer preferences for standardized products 3. Value addition through products like cheese, yogurt, and specialty milks will increasingly complement liquid milk sales as processors seek to capture higher margins 4. Climate adaptation and feed improvement initiatives will remain critical for sustaining production growth amid environmental challenges.

The industry’s development will also be influenced by demographic factors and changing consumption patterns. Urbanization and rising incomes are expected to drive increased demand for processed and packaged dairy products, creating opportunities for brands with strong distribution networks and marketing capabilities . Meanwhile, youth engagement initiatives will be crucial for addressing the sector’s aging farmer population and ensuring long-term sustainability . If these challenges can be effectively addressed and opportunities captured, Kenya’s dairy industry is well-positioned to maintain its status as a leading African dairy producer while expanding its presence in regional and international markets.

8 Conclusion

Kenya’s dairy industry stands at a pivotal juncture, balancing between traditional practices and modernization, between domestic focus and export ambition, between small-scale informality and growing formalization. The sector has demonstrated impressive resilience and growth, achieving record collection levels in early 2025 and positioning itself to exceed one billion litres in formal intake annually. This performance is particularly remarkable given the climate vulnerabilities, infrastructure constraints, and market inefficiencies that continue to challenge the industry.

The path forward will require coordinated efforts across multiple fronts: addressing feed deficiencies through improved forage systems; enhancing value chain efficiency through infrastructure investment and digital innovation; strengthening policy implementation and quality enforcement; and expanding market opportunities through product diversification and export development. Success in these areas will enable Kenya to not only meet growing domestic demand for nutritious dairy products but also establish a more prominent presence in regional and international markets, ultimately contributing to economic growth, employment generation, and improved livelihoods for the millions of Kenyans who depend on the dairy sector for their sustenance and prosperity.