The Business Year

Carlos E. Piedrahita

COLOMBIA - Economy

In Every Field

President, Grupo Nutresa

Bio

Carlos E. Piedrahita has been the President and CEO of Grupo Nutresa since 2000. Previously, he was President and CEO of Corfinsura, CFOof Suramericana de Seguros, Retail Vice-President of Bancolombia, and GM of Suleasing. He is currently on the Board of Directors of Grupo Suramericana, Grupo Argos and Bancolombia and also serves on the Board of Directors of Fedesarrollo, Proantioquia, the Private Competitive Council, as well as the Science and Technology Council of Colciencias.

"After our home market, the next biggest is the US, which represents about 10% of our sales."

What has been Nutresa’s contribution to the agriculture sector?

Nutresa produces and distributes its products all across Colombia. We are not involved with agricultural production; however, we have many links within the agricultural sector. For example, we have an experimental farm in Santander that produces the best cocoa beans in Colombia. Our factory produces clones of these cocoa bean trees as well as performs R&D. We have a program that supports agricultural producers, so we sell our cloned trees at a nominal rate to farmers and show them how to plant, care for, and harvest these trees. Afterward, we buy these products back from them. They can sell the beans on the market, but we compete for the output of those crops. Our link to the agricultural sector is by supplying advanced and adapted varieties of plants to Colombian farmers. We have Fairtrade certification for coffee, which implies that consumers pay a premium. The premium does not go to the production or distribution chains, but directly to the actual farmers. We have another program, called Bird Friendly, which ensures that the way coffee is harvested is not harmful to birds. Bird Friendly coffee is another one of many certifications we have. In meat products, we also have experimental farms where we develop purebreds through genetic farming and sell them to the farmers who then raise the pigs and sell them on the market.

Which of Nutresa’s 44 companies earns the highest revenues, and which has the most potential for growth?

The snack division—ice cream, chocolate, biscuits, cookies, and the like—has the highest growth rate all over the world. That trend is also true in Colombia; however, processed meat is another sector that has been growing consistently for many years. As the middle class in Colombia has grown, people from the countryside have moved into urban areas and switched to eating packaged goods. These people, who used to get their meat from farmers, now want branded foods because they feel they are safer to eat. Formal consumption has grown in Colombia as purchasing power increased.

“After our home market, the next biggest is the US, which represents about 10% of our sales.”

From your 74 export destinations, which one represents the largest market?

After our home market, the next biggest is the US, which represents about 10% of our sales. Cookies and coffee are our most popular products in the US. Our third biggest market is Central America as a bloc. As a company, we have been in Japan for many years, but we are trying to expand into the rest of Asia as well. We have identified other strong opportunities and Nutresa is expanding aggressively in Asia and Africa. The company has operations in the EU; however, they are not as significant, representing less than 1% of our sales.

How has the 2010 acquisition of Fehr Holdings impacted operations, and what was your strategy there?

The reaction has been very positive. Our operations have grown significantly since buying the company. Even though the US economy is growing slowly, there are always opportunities. Nutresa had been selling in the US, particularly to Hispanic consumers, for a long time and it wanted to have a more widespread presence there. Fehr Holdings with its local manufacturing plant, good brand, and excellent distribution was ideal for reaching mainstream US consumers. It was also strategic to have a manufacturing plant in the US because of its wheat production, which we used to import to Colombia for our cookies that we would sell to the US anyway.

How will the Free Trade Agreement (FTA) with the US, and in the near future with South Korea, impact operations?

There is always both a threat and an opportunity with FTAs, but this is a positive move. The benefits will be greater than the threat. Nutresa has supported the different governments throughout the negotiations. The US FTA will have biggest potential impact, and it is already producing very positive results. It will enable Colombian companies to be more competitive in international terms since they can source from international suppliers. There will also be competition from the outside coming in; however, this will be a good thing since the competition will remain healthy. The worst thing that can happen is for a company to feel too comfortable or dependent on protection and not be competitive. The threat of competition is healthy and we should be open to that.

What is your outlook for the coffee and chocolate sectors?

The consumption of coffee in Colombia has only grown at 2% or 3% in volume terms. The problem is that the Colombian crop has decreased in size. We have entered a deficit regarding local coffee producers and we are forced to import coffee from other countries. The Peruvian bean is the closest to Colombian tastes, so we import most of our coffee from Peru. It is a high-quality Arabica coffee, very similar to Colombian. In a blend, it keeps the same profile as Colombian coffee. Even other Colombian producers are importing from different countries. This is disappointing because Colombia used to produce nearly 13 million bags, and now we are down to 7 million. There are many commitments to export coffee, and this has created a shortfall from the producers. This was caused by the weather and a program launched by the coffee federation trying to reorganize the crops. It wanted producers to cut down old crops and plant new ones, but it was during a rainy season caused by La Niña, as well as at a time when oil prices were high; this was related to the increase in the cost of fertilizers and therefore the reduction in the fertilization of trees and the consequent reduction in output. Those effects combined halved the production of Colombian coffee. Cocoa prices were high in 2010 and 2011 because of political problems in Cí´te d’Ivoire, which produces more than half of the world’s cocoa. Its ports were closed following the election controversy and cocoa prices increased dramatically. However, this was solved and there was not a big impact on the consumer; chocolate consumption is still growing worldwide.

What is the potential for investment in Colombia, particularly in Antioquia?

Antioquia, especially Medellí­n, is attracting foreign investment in multiple sectors because of good local management and excellent labor. There are white- and blue-collar workers who are hardworking and well educated. There are also great universities and a good quality of life. All of these aspects are attracting large amounts of foreign investment.

How much does Nutresa plan to invest in R&D in 2012, and what innovations are going to be launched in the short term?

Innovation is a high priority for us, and the company has been working on creating an innovative culture amongst its employees. We have our own innovation model, “Imagix,” which is how we stimulate innovation and develop products. We have 200 employees working in our R&D centers and another 200 innovation sponsors who facilitate research processes throughout the company. We invest approximately 0.8% of our total sales in R&D and in 2013 we hope to invest closer to 1%. Nutresa hopes to have over $3 billion in sales in 2013, an increase from nearly $2.8 billion in 2011. It depends on the exchange rate, but 2012 should produce roughly $3 billion in sales.

How do you see Nutresa evolving over the next decade?

If I look 10 years in the past, Nutresa was much more domestic and had a small footprint in other countries. In the last decade we have expanded a lot, and I expect we will continue to expand in other parts of the world over the next decade as well. Our international sales are close to 30% of our total sales at the moment, and we hope to increase this number to around 50%. We are also committed to sustainable development. Nutresa is one of the nine food producers in the Dow Jones Sustainability Index, and its vision includes geographic expansion with a balance between the social and environmental dimensions. We will be a global company, but a sustainable one, and hopefully one with a carbon-neutral footprint.

© The Business Year – November 2012

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