A recent study by the International Food Policy Research Institute (IFPRI), the Research Foundation Flanders (FWO), and the University of Leuven suggests that multinational corporations operating in developing countries may sometimes improve local agricultural markets and, consequently, the livelihoods of local communities.
The study examines Nestle’s—one of the largest dairy multinational corporations—impact on India Punjab’s local dairy market by comparing the impact that the formal dairy sector (local dairy cooperatives and dairy multinationals) and the informal dairy sector have on local small milk suppliers. The results indicate that farmers can benefit more from selling their dairy products through either dairy multinationals or local dairy cooperatives (the formal sector), than from selling their products in the informal dairy sector.
A recent Agrocharts report on India’s dairy sector reveals that diary cooperatives in the country currently sell about 16 percent of the dairy that is produced for sale, while the informal dairy sector sells about 70 percent. The U.N. Food and Agricultural Organization reports that 78 percent of milk producers in India are small farmers—who contribute to about 68 percent of the country’s milk production. Many small dairy farmers subsist on the sale of surplus dairy, which comprises a significant portion of their household income.
Dairy cooperatives have gained prominence in India in recent decades because they allow dairy farmers to overcome some of the restrictions of the informal dairy market. Dairy farmers who rely on the informal sector for the sale of their products face a number of challenges—including complying with perpetually changing trade regulations and the use of less modern production technologies—that decrease their potential profits.
However, the study suggests that a developing country’s local markets can collaborate with multinational corporations to improve their country’s agricultural development. Although multinational corporations in developing countries have been criticized for exploiting lenient labor and environmental regulations, dairy multinationals in India may benefit the communities in which they are based by bringing innovation and technology to the local dairy sector.