US investors see future in yak cheese

Inside a dimly-lit log cabin at the end of a gravel road, four young foreign investors eager to do business in China flip open their laptops on a roughly hewn wooden table. Tonight's presentation: the economics of yak cheese production.

Huddled around the table are the newly trained cheesemakers, ethnic Tibetans taking their first baby steps in China's brash market economy. Brows furrowed, they follow the flow charts and pricing data in the light of a single bare bulb.

"If you've got a good product, you will have a market. But you've got to ensure good sanitation," says Marie So, one of the investors.

Finally, the on-screen graphics fade into a group photo outside the factory. The Tibetans erupt into cheers and laughter, and rise to toast their new partners.

Such entrepreneurial visions are more realistic in rural China following a slew of initiatives from Beijing to help close the yawning gap between coastal boomtowns and interior backwaters, including rural tax relief and new infrastructure. For Langdu, a community of nomadic yak herders near Tibet, that means a resurfaced road and, since late July, cell-phone coverage. Next up is electricity from the national grid, replacing diesel generators.

Villagers say these amenities will help their cheese factory to sell its wares to the outside world and bring money into a community that relies on subsistence farming.

"In the past, the road conditions were so bad, that it was hard to transport products. The market economy hasn't arrived in Langdu," says Sang Ji Zhuo Ma, a community leader.

Turning a profit on yak milk isn't only a test for China's "Go West" policy. For the young US-educated investors bedded down in log cabins, it's a real-world exercise for their brand of socially responsible capitalism. Founded in Boston, Ventures in Development (www.venturesindevelopment.com), a nonprofit, aims to nurture market-savvy enterprises that can alleviate poverty, starting with Chinese yak herders. The goal is to help the community – and make a buck.

"We wouldn't be doing this if there was no profit. It needs to be sustainable, and it's only sustainable if the business can run and renew on its own," says Esther Hsu, chief marketing officer.

The project began in 2002 when Wong How Man, a conservationist and explorer, was invited back to the University of Wisconsin at River Falls, his alma mater, to receive an award. There he met Renee May, an associate in the food science faculty, and was inspired by her track record as an adviser to dairies in the developing world. He invited her to Yunnan, where he runs a foundation.

The challenge was how to turn yak milk into a cheese that could be sold in China, where dairy consumption is low. Cheese is seen as a exotic import, a foreign fad that many Chinese find plain distasteful. In 2003, China's cheese market was worth just $30 million. The same year, France consumed cheese valued at $7 billion.

Ms. May hit on Haloumi, a mild, semisoft variety that can be used in cooking or eaten fresh, and began training a team from Langdu with ties to Mr. Wong's foundation, China Exploration and Research Society (www.cers.org.hk). A second Italian variety is designed to be aged and stored longer.

Tibetan yaks are hardy pack animals that produce milk, wool, meat, and dung for fuel. The milk, which is higher in fat and protein than cow's milk, is normally churned into butter or cultured as a sour-milk cheese that is something of an acquired taste. By producing a cheese with a wider appeal, villagers hoped to increase the value of their milk.

But first, there were some bugs to work out – literally. May recalls that yak milk sent to the cheese workshop had some unwelcome ingredients, insects and yak hair among them. "I told them if you don't clean it up, you can't make cheese. You're going to make people sick, and that's the end of your cheese factory," she says.

New stainless-steel pails were given to herders, along with instructions on how to keep the milk clean. Today, the pails are washed and returned after morning deliveries to Langdu's cheese factory, a modest five-room bungalow completed earlier this year. Inside, the milk is heated, cooled, and cultured by two cheesemakers, before being pressed into wheels and stored.

The next step is to market the cheese at tourist destinations in Yunnan where locally made products with a Tibetan theme can fetch a premium. Zhongdian, the nearest town, was renamed in 2001 as Shangri-la after an imaginary land in a 1930s novel "Lost Horizon." The gimmick has paid off with a surge in tourist arrivals. But getting a truck there from Langdu involves a teeth-rattling 50-mile drive that takes a minimum of three hours.

The first commercial shipments begin this month. They are also encouraging the cheesemakers to install electric stoves, when the power is finally on, and double their capacity, currently 44 pounds a day.

But is it really feasible to sell cheese to the Chinese?

Carol Chyau, the organization's CFO, smiles. "We've had Chinese friends who said that, then they tried the cheese in a Chinese recipe and they liked it," she says. "It's kind of like tofu."