Milutin Đuranović, Founder of the Dairy Company “Lazine”
Despite numerous challenges facing the Montenegrin dairy sector, there are entrepreneurs who strive to improve this industry with their effort, knowledge, and dedication. One such individual is Milutin Đuranović, the founder of the dairy company “Lazine.” In an interview for the Diplomacy & Commerce Montenegro magazine, he discusses the current state of dairy production, the necessary reforms, and the steps needed to advance local production. Đuranović places special emphasis on the quality and freshness of domestic products and highlights the importance of farmer education and collaboration.
Mr. Đuranović, from the perspective of national and regional competitiveness, how do you foresee the future development of the dairy industry in Montenegro?
The defining characteristic of Montenegro’s dairy sector over the past decade is stagnation, rather than development. Montenegro is predominantly a country of trade and food imports, and only sporadically a producer of food. In 2024, food and beverage imports are projected to reach a record €1 billion, meaning over €2.7 million leaves Montenegro daily for imported goods. Dairy farming in Montenegro is a low-margin activity, and investors are reluctant to engage in businesses with low profitability rates. The primary cause of stagnation is the exceptionally high volume of dairy imports from the region, often at dumping prices. It is an undeniable fact that imported dairy products are sold on Montenegrin shelves at prices over 50% lower than in their countries of origin. These dumping prices rely on the concept of marginal cost, where only variable costs and marginal profits are covered by the export price, while fixed costs are already absorbed in the domestic market. Importing at such dumping prices is against the law; the legislation calls for the imposition of anti-dumping duties in such cases. Unfortunately, for a prolonged period, the relevant ministry has failed to respond to this issue or enforce its legal obligations.
Our market is very small, and due to objective circumstances, the costs of milk procurement are quite high. This is due to fragmented and dispersed farms located far from dairies, poor rural road infrastructure, and sometimes impassable roads during winter. As a result, domestic dairies cannot develop economies of scale or compete primarily on low price. In this context, the core competitive advantages of Montenegrin dairies are the quality and freshness of their dairy products. Quality is primarily linked to the raw milk collected, which comes from cows fed on the nutrient-rich grasses of Montenegro’s pastures, abundant in medicinal herbs. Freshness, on the other hand, is tied to the short time span between production and consumption. Fresh food is a rare privilege for the modern consumer, but for Montenegrin consumers, the freshness of domestic dairy products is commonplace. I often say that local milk was on the pasture yesterday, in the dairy today, and will be in the consumer’s glass tomorrow.
In the future, the production of naturally high-quality and fresh dairy products, supported by advanced technical, technological, and human resources, will remain the cornerstone of competitiveness for Montenegrin dairy products. With the rise in living standards and growing consumer awareness in Montenegro, it is reasonable to expect that consumers will prioritize healthy, natural, and fresh local dairy products over imported options with unnaturally long shelf lives, sometimes lasting several months. Additionally, we hope that the relevant authorities will finally begin to enforce regulations and prevent the import of dairy products at dumping prices. Stopping such imports would play a decisive role in moving the Montenegrin dairy sector from stagnation to accelerated development.
In your opinion, could forming clusters improve the competitive position of your business ecosystem? What operating model do you see as sustainable and beneficial for the wider community?
Horizontal and vertical cluster cooperation would significantly strengthen the competitive advantages of Montenegro’s dairy sector and support the development of dairy farming. Horizontal cluster collaboration involves fostering a formal and substantive unity among domestic dairies, while vertical cluster cooperation aims to establish joint activities between milk producers and processors. Of course, achieving formal and meaningful unity in the dairy sector requires overcoming mental barriers common to stakeholders in both the production and processing sectors. It also involves prioritizing collective interests as a foundation for realizing personal benefits at a higher level than currently achieved. We have been working for some time to formalize unity, with significant progress already made in informal collaboration, which has produced positive outcomes both individually and collectively. I believe that initiatives such as the NGO “I love natural – I buy local” and the “Association of dairy processors and producers of Montenegro” are on track to formalization. This formalization is expected to lead to activities aimed at strengthening the market, societal, and media position of the domestic dairy sector, thereby also supporting Montenegrin livestock farming.
Do you think the government adequately supports the preservation of agriculture as a foundation for sustainable development? What recommendations would you give to state institutions to improve agricultural production?
No country in the world has developed its agriculture without state support. Interestingly, around 43% of the EU’s common budget is allocated to supporting agricultural production, whereas direct budget support for agriculture in Montenegro is about 1% (compared to 5% in Serbia). Numbers often speak louder than words, and this discrepancy is a clear illustration. While budgetary support for agriculture is increasing, it is happening very slowly, which in turn slows the sector’s development. I believe that agricultural development will correlate directly with the growth of the agro-budget, and with it, the development of the processing sector that buys and processes local agricultural products. In addition to financial (budgetary) support, there is also non-financial assistance. Non-financial support for the domestic agri-food sector primarily involves enhancing its market and media presence. Financial assistance will significantly boost the production of agricultural goods, while non-financial support should help ensure that these goods reach end consumers. It is absurd that, in some cases, domestic agricultural products go to waste while the same products are being imported. Equally absurd is the scenario where primary agricultural products are exported due to an inability to sell them domestically, only to be imported later as finished goods. We should follow the example of Croatia and Slovenia, where the state has effectively promoted long-standing campaigns like “Buy local,” which have successfully raised consumer awareness and encouraged the purchase of domestic products. As mentioned in the first question, preventing the import of food at dumping prices is essential. This includes enforcing all protective measures stipulated by the Law on Foreign Trade. Non-financial support also refers to changes in legal regulations that can be barriers to the development of agricultural production, such as regulations related to the import of seeds and the process of cattle insemination. More intensive and comprehensive control of the health safety of imported food can ensure a larger market space for domestic food products – I am not aware if an analysis of imported milk, or other food regarding GMO origin, has ever been done in Montenegro.
Do you believe that your company and others in your market niche can contribute to agricultural development by investing in farmer education? Do you have plans to implement similar initiatives?
Running and organizing a farm should be approached like any other business. Owning a farm only makes sense if it is economically sustainable. Agriculture is a low-margin activity, so its economic viability heavily depends on two factors: farmers’ knowledge and dedication on one side, and budgetary support on the other. Montenegrin farms are generally small and fragmented, making it difficult to achieve economies of scale. This makes budgetary support even more critical for ensuring farms’ economic sustainability. Continuous farmer education can significantly reduce costs, increase yields, and enhance the financial viability of farms. However, even with highly knowledgeable farmers, price competitiveness for domestic agricultural products cannot be achieved if foreign budgetary support heavily subsidizes imported goods. In any case, continuous education of farmers is necessary if financial sustainability of the farm is to be ensured. Several EU and U.S.-funded projects over the past two decades have contributed greatly to raising the knowledge level of Montenegrin farmers. Programs like IPARD and MIDAS provide both direct financial support and indirect educational benefits for agriculture. Investing in the knowledge of domestic farmers is another form of non-financial support that the government should consider, as mentioned earlier. Our company’s efforts in farmer education have been limited to individual initiatives and lacked a systematic approach. What we have observed is that one-on-one, on-farm training is much more effective than group training, as farmer attendance in group sessions tends to be very low.
How adequate and supportive is the banking sector as a business development partner in Montenegro, particularly for family-owned companies such as yours?
As I have mentioned multiple times, agriculture, especially livestock farming, is a low-margin business with capital returns at a rate of just a few percent. In such a scenario, using loans is highly risky, as interest rates can consume the profits of companies in the processing industry. For this reason, we have not used bank loans. However, this approach has resulted in slower, yet very stable development. I firmly believe that only a family-run dairy, with a high level of dedication and rational (household-style) management, relying exclusively on its own capital or minimal borrowing, offers a sustainable path for the dairy business in Montenegro. This is a shared characteristic of successful Montenegrin dairies.