The document summarizes a joint project between BP and Land O'Lakes to establish small-scale dairy processing facilities in rural Azerbaijan. The project refurbished unused shipping containers to create 4 modular cheese production plants. Land O'Lakes provided training and technical assistance to local farmers' associations selected to operate the plants. The goals were to provide local farmers a market for their milk, create jobs, and produce safe dairy products to boost rural incomes. The project budget came from BP, USAID, Land O'Lakes, and contributions from local beneficiaries. By May 2003 the plants had started commercial production.

1. Joint BP-Land O’Lakes
Small-Scale Dairy Processing Project
C O N C E P T O V E R V I E W
February 19, 2003

2. Land O Lakes, Inc. 2003. Not for public disclosure 1
Executive Summary
On November 18, 2002, BP and Land O’Lakes, whose activities in Azerbaijan are funded by
the United States Agency for International Development, agreed to initiate a public-private
partnership to collaboratively assist selected agricultural communities in rural Azerbaijan.
This project was achieved through the combined expertise of various stakeholders. Through
the contributions of Land O’Lakes’ coordination and assistance, BP’s funding, and matching
investments from Azerbaijani beneficiaries, USAID funds and resources were leveraged to
maximize impact on the targeted rural communities.
The project entailed the refurbishment of eight surplus shipping containers by USAID, their
conversion into 4 modular, small-scale dairy processing units, and the award of facilities and
provision of training to community leaders who had successfully applied to receive the
facilities. These facilities are specially designed to facilitate the production of high-quality,
standardized cheese in a modular, hygienic setting. The enterprises create jobs, provide a
new market for the milk produced by local farmers’ livestock, and produce safe and nutritious
dairy products for the local market. As a result, this partnership has helped Land O’Lakes’
USAID-funded project to make a tangible lasting impact on the communities assisted.
Project Background
From October 2000 until June 3003, The Land O’Lakes Participatory Project in Azerbaijan
(PAPA), which was funded by the United States Agency for International Development,
assisted in the formation and development of regional livestock associations in Guba,
Ismailly and Zagatala. These producers associations are industry organizations involved in
addressing educational, technical training and marketing needs of their local farming
communities. Membership in the organizations has doubled over the course of the project
and individual farmers from the associations have received extensive technical assistance
from the project over the period mentioned.
On November 18, 2002, Land O’Lakes received a grant from BP to leverage activities aimed
at assisting agricultural communities in selected Azerbaijani regions. BP’s desire to support
economic and community development in rural Azerbaijan, Land O’Lakes’ presence and
experience in assisting dairy farmers’ associations in Guba and Ismailly regions, investment
from Azerbaijani beneficiaries, and the availability of free shipping containers, which were
previously used to transport relief items from USAID, served as the foundation for this
collaboration.
The joint Land O’Lakes-BP project entailed the establishment of four community-based dairy
processing plants in Guba and Ismailly regions. Land O’Lakes had previously developed
technology solutions for refurbishing and adapting containers for use as modular facilities for
value-added milk products production. Such modular plants were created by renovating
USAID-provided surplus shipping containers and converting them to cheese-making,
packaging and aging facilities capable of processing up to 800 liters of milk per day into
various cheeses. The equipment and technology provided was designed specially for use
based on local conditions, including raw material availability, domestic market demand, and
available on-site infrastructure. These facilities were produced using best production
practices to meet health and environment protection requirements.

3. Land O Lakes, Inc. 2003. Not for public disclosure 2
This activity addressed some of the most important needs of farming communities
throughout Azerbaijan: providing a market for and adding value to raw products, increasing
shelf life, facilitating safe and hygienic production of nutritious food products, and providing
sustainable employment. In these ways, the project has already achieved the overreaching
goals of supporting the viability of rural economies and communities.
Project implementation began in late November 2002, as an application process was
developed to define the terms by which applicants interested in taking ownership of the
small-scale dairy processing facilities were expected to compete. Basic training in improved
cheese-making techniques was provided to interested parties to give them a better sense of
what would be entailed by managing such a facility. Once Land O’Lakes received
applications, project staff reviewed them and then made site visits to evaluate local
conditions and appropriateness for hosting the processing facilities. Meanwhile, containers
were being renovated in order to weatherize them, paint the container exteriors, and to
install interior electrical wiring, heating and cooling, plumbing, hygienic flooring, ceilings and
walls. Work also commenced on procurement of basic cheese-making equipment, such as
batch pasteurizers, cheese vats, and milk analysis laboratory equipment.
In January 2003, beneficiaries were selected to receive the container-based processing
units. Two farmers in Guba and two farmers in Ismailly were selected as finalists. Land
O’Lakes collaborated with beneficiaries to design the foundations for the facilities and to
arrange for the delivery and installation of the containers. After delivering and installation of
the facilities, Land O’Lakes continued providing training to the future staff of these facilities
in milk purchasing, handling, milk testing, hygiene and sanitation, cheese making and aging,
and packaging. Commercial production started in May 2003. Over May and June 2003 Land
O’Lakes’ Marketing Team assisted the newly established enterprises to design marketing
strategies and establish sales links.
This activity involves the expansion of an existing project that Land O’Lakes had been
implementing with the local farmers associations to establish revolving equipment funds to
finance the purchases of dairy processing equipment for their members. The activity,
implemented by the associations with technical assistance support from Land O’Lakes staff,
as well as by regional and US consultants, has proven to be a successful vehicle for
upgrading the quality and the quantity of consumer food products produced and marketed by
the targeted communities and for increasing incomes in communities deprived from other
market opportunities for the milk produced by their livestock.

4. Land O Lakes, Inc. 2003. Not for public disclosure 3
Description of Activities
In Fall 2002 Land O’Lakes secured eight shipping containers from USAID to be used in
conjunction with this project. During Fall 2002 Winter and Spring 2003, Land O’Lakes
conducted the bulk of the activities on the organizational and technical side of the project, so
as of February 17, 2003 all facilities were on the respective sites and undergoing installation
which was completed by April 30, 2003.
Individual steps completed to date are outlined below:
1. November – December 2002: Association-based application process for
association members to receive a cheese-making plant through the Equipment
Revolving Fund developed and communicated;
A transparent bidding process as an extension of the already existing equipment
revolving funds, operated by the regional livestock associations, was designed and
communicated to the regional associations in Guba, Ismailly and Zagatala.
2. November 2002: Bidding process conducted for container refurbishing
vendors;
Two local vendors were located and requested to bid on a contract to refurbish the
20’ freight containers to required specifications. The lower and better offer was
selected.
3. December 2002 – January 2003: Container refurbishing contracted with
Caspian Modular Buildings Co.
4. January 2003: Bidding process for equipment purchase (cheese vats, batch
pasteurizers, heaters and small scale equipment) conducted;
A number of companies entered the bidding process. Offers were obtained from
both domestic and foreign vendors
5. January 2003: Equipment ordering and production;
All of the equipment was ordered from local vendors. Some of the equipment was
produced locally (cheese vats) and some imported (Turkey, Russia)
6. December 2002: Training seminars for interested association members
conducted;
Informational seminars on the proposed project, obligations of the successful
bidders, technological solutions and cost analysis of the proposed plant were
conducted in Guba, Ismailly and Zagatala.
7. December 2002: Competitive application process initiated and completed for
members of regional livestock associations in Guba, Ismailly and Zagatala;
8. January 2003: Finalists selected to be awarded the dairy facilities through a
transparent process according to the application criteria;
In accordance with the outlined process, and upon receiving commitments from the
applicants’ association members to support the selection, recipients were selected.
The finalists were:
- Ruslan 6 Livestock Company Ltd., Ismailly
- Temp Livestock Company Ltd., Ismailly
- Dogru Yol Livestock Company Ltd., Guba
- Elvin Livestock Company Ltd., Guba
9. January - February 2003: Installation of containers and equipment on sites;

5. Land O Lakes, Inc. 2003. Not for public disclosure 4
Installation of the cheese plants commenced and is currently in progress. Severe
weather conditions have slowed down the process of installation
10. January – February 2003: Technical assistance is offered to beneficiaries in
laying foundations and related installation issues.
11. February –April 2003: Technical assistance in new product development and
cheese plant operation. Installation completed and test production commenced
Start up of the milk-processing/cheese production plants. New product development
and product standardization as well as comprehensive and complete training to the
operational staff will be offered.
12. May – June 2003: Technical assistance in cheese sales and marketing.

6. Land O Lakes, Inc. 2003. Not for public disclosure 5
Implementation Chart
Nov.
2002
December
2002
January
2003
February
2003
March –
April
2003
18-30 1-10 11-20 21-31 1-10 11-20 21-31 1-10 11-20 21-28 1-10 11-20
Organizational Issues
Develop and communicate application procedures
Conduct training seminars for interested beneficiaries
Start and end competitive application procedure
Determine sites and beneficiaries
Assist in installation
Assist in production startup
Technical issues
Container refurbishing bid
Container refurbishing
Equipment purchasing bids
Equipment ordering and production
On-site installation of containers and equipment
Production training and marketing assistance
This Activity chart represents the activities completed to date and activities to be completed to end of project. All activities remaining are to be
conducted on the respective sites in Guba and Ismailly.

7. Land O Lakes, Inc. 2003. Not for public disclosure 6
Project Goals and Deliverables
The goals of the project are the following:
1. Establish four community-based milk processing plants in the rural areas of northern Azerbaijan to
serve as a market outlet for the locally produced milk;
2. Launch on-farm, value-added production and utilize competitive marketing positioning of regionally
branded cheeses;
3. Offer direct, permanent employment through the processing facilities to at least 16 individuals in
milk collection, milk processing and product marketing;
4. Establish a sustainable milk market outlet for at least 220 rural households in Guba and Ismailly
regions;
5. Develop at least 8 new standardized dairy products to increase demand, diversify product lines
and increase sustainability of dairy farming by increasing milk productivity on the community level;
6. Increase year-round rural household income by at least $700 per year in the target communities;
7. Strengthen visibility and capacity of the regional livestock producers’ associations as industry
associations providing services to members;
8. The cheese plants will have total capacity of processing 3,000 kg milk per day, operated in two
shifts. This accounts for production of 500 kg white soft and other cheeses (Feta, Quark, Cottage)
from pasteurized milk or 330 kg semi-hard cheeses (such as Cheddar, Gouda, Edam, Kashkaval,
and Kashar);
The technology solutions applied offer flexibility and the opportunity for increasing processing
capacity by at least 50% with minimal modifications. The capability is also provided for processing
other agriculture commodities, such as vegetables and fruits.

8. Land O Lakes, Inc. 2003. Not for public disclosure 7
Project Budget
This budget illustrates spending to date on this activity.
Item Unit Quantity Price per
piece
Donor Total to date
expenditure
1. Salaries
Project management Months 1 2,600 Land O’Lakes - USAID 2,600
Local salary Months 3 720 Land O’Lakes - USAID 3,160
Subtotal 5,760
2. Local Travel and Per Diem
Local staff Days 45 10 Land O’Lakes - USAID 450
Regional volunteer Days 20 50 Land O’Lakes - USAID 1,000
Subtotal 1,450
3. Communications transportation and support
Accounting and
communication costs
Months 3 300 Land O’Lakes - USAID 900
Transportation –
containers
Amount 1 308 Land O’Lakes - USAID 308
Container handling Units 8 15 Caspian Modular
Buildings
120
Subtotal 1,328
4. Equipment and supplies
Freight containers Units 8 700 USAID 5,600
Refurbishing of
containers
Units 8 2,540 BP 20,320
Heaters (70%) Units 4 1125 BP 4,500
Cheese vats Units 4 628 Land O’Lakes - USAID 2,512*
Batch Pasteurizers Units 4 1,393 BP 5,572
Installation Per site 4 477 BP 1,908
Plaques Units 4 25 BP 100
Laboratories Units 4 100 Land O’Lakes - USAID 400
Discount on container
refurbishing
Units 8 200 Caspian Modular
Buildings
1,600
Improvements on site Per site 4 4,500 Beneficiaries 18,000
Subtotal 60,512
TOTAL 69,050
* - The amount of $2,512 is to be reimbursed by the beneficiaries to the given association’s equipment
revolving fund and to be reused for an ongoing revolving, no-interest credit line for association members
desiring to purchase additional processing equipment.
The cost sharing arrangement is presented in the table below:
Participant Type of Contribution Contribution Value Percentage contribution
BP – Azerbaijan Financial 32,400 46.9%
Land O’Lakes –
USAID
Technical Assistance
and Financial
10,930
15.8%
USAID In kind 5,600 8,1%
Other Private In kind 2,120 3.1%
Beneficiaries Financial and In kind 18,000 26.1%
TOTAL 69,050 100%

9. Land O Lakes, Inc. 2003. Not for public disclosure 8
Photo Gallery
20 freight container-based modular cheese
production facility jointly developed by IRC and
Land O Lakes in Azerbaijan
Initial design of the 2X20 transportation
container-based cheese-making facility
developed for the BP-supported project
Discussing project implementation with the
Guba Livestock Producers Association
Training in cheese production in Ismailly
Refurbishing 20 containers (initial phase) Refurbishing 20 freight containers ( initial
phase)
Refurbished container - exterior Refurbished 20 container - interior

10. Land O Lakes, Inc. 2003. Not for public disclosure 9
Discussing site selection with Ismailly applicant Four sets of containers prepared for
transportation
Loading of container aboard a truck Transporting containers
Installing the containers in Bergov village in
Quba region
Installing the containers in Tallish village in
Ismailly region
Installing the containers in Amsarpalasa village
in Quba region
Technical application of the container-based,
modular cheese facility
Cheese
Production
Unit
Cheese Aging
Unit

11. Land O Lakes, Inc. 2003. Not for public disclosure 10
Installed containers in Bergov village in Guba
region
Installed container in Bergov village in the Guba
region with a detail of the boiler
Installed containers in Tallish village in Ismailly
region
Installed containers in Amsarpalasa village in
Guba region
Installed containers in Garameyrem village in
Ismilly region
Interior of the milk processing room in
Amsarpalasa village in Guba region
Finished product Bieno cheese in
Amsarpalasa village ii Guba region
Finished product White Soft Cheese from
pasteurized milk in Bergov village in Guba
region