Dairy Enterprises' Market Participation Decisions and the Level of Value Addition: Evidence from Addis Ababa and Its Vicinity, Ethiopia

Abstract

Ethiopia has ample potential and suitable agro-ecological conditions to establish dairy enterprises, and the enterprises contribute significantly to the economic, environmental, and quality-of-life, and well-being of individuals. Rapid urbanisation, rising income, and relatively high dairy product consumption per capita in the study area contribute to the sector's latent potential. However, little is being done to enhance the value addition of the milk production chain which in turn enhances value-added output. The attributes that influence dairy enterprises' decisions to penetrate the market and the degree of milk product value addition were examined in this study. A sample of 212 dairy enterprises was drawn from the study area's target population. The stated objectives have been achieved using both descriptive statistics and the Double-Hurdle econometrics model. The number of dairy cattle was a more significant factor in deciding whether to participate in the value addition of dairy products. Findings show that variables of interest in machinery and equipment, the volume of milk in the litter, access to credit services, and skills training had a positive and significant influence on the decision and the degree of value addition in the dairy production. The study also indicated that increasing milk volume, minimising the bureaucracy of credit service provision, and fostering low-cost technology and equipment innovation are vital to the success of a dairy enterprise. The study found that dairy enterprises stimulate substantial and diverse milk value additions.