Fonterra and Nestlé believe Sri Lankan dairy production needs to be modernised to meet domestic demand.

"Sri Lanka's annual demand for milk is around 1bn litres yet the domestic industry supplies just 200m litres," Stuart Young, managing director of Nestlé Lanka, told just-food.

Young said the shortfall was the result of the country's farming dynamics, which could benefit from modern techniques.

Fonterra Brands Limited (FBL) said it remained undaunted by low milk production when it revealed plans to invest US$11m to double yoghurt production in Sri Lanka by 2011.

Fonterra expects to be provided with 52,000 litres of milk daily, from 3000 local farmers.

"We are confident we will be able to meet the increase in capacity by increasing local supply of raw milk," FBL MD Achyut Reddy told just-food.

"We have long-term plans in place to increase supply through working closely with local farmers to provide technical assistance on increasing production, pasture management, and breeding. Additionally, we are investing in infrastructure, in the form of new raw milk collection centers to assist in transporting and storing milk," Reddy said.