June 26, 2010 Success is Sweet

Volume 13 | Issue 3

Although Brazil’s Usina Colombo has been in the sugar cane business since the 1940s, it has hardly become set in its ways. Instead, as Micha

In its close to 70 years of existence, Usina Colombo has produced just about every item imaginable from one of Brazil’s most famously traditional cash crops – sugar cane. When Colombo first started out in the 1940s, it was as a producer of rum-like cane alcohol, known in Brazil as cachaça. The family-owned enterprise was located along the banks of the Onça (Jaguar) River in the municipality of Ariranha, São Paulo. Aside from cultivating its own cane, the company produced and bottled its cachaça on-site and sold it throughout the region under the colorful brand name of Caninha Jacaré (a jacaré is an alligator). As production increased, the family transferred its sugar mill to a larger farm in the same region where, with more room to grow, over the next couple of decades it became one of the major producers of cachaça in Brazil.

NEW PRODUCTS TO MEET NEW DEMANDS
In the early ‘70s, the oil crisis struck; years ahead of its time, Brazil’s inspired solution was to start running all vehicles on ethanol made from sugar cane. In order to help meet the sudden demand, Colombo halted all production of cachaça and began to focus exclusively on ethanol production. In fact, the company became the first autonomous distillery in Brazil to produce alcohol as a fuel.

However, by the late ‘80s, numerous other competitors had entered the business, threatening Colombo’s market share. This increased competition, coupled with rising unemployment in the region surrounding Ariranha, led the company to once again focus on a new cane-based product: this time, crystal sugar. After investing heavily in new technology and labor, in 1993 it began producing sugar under the brand name Colombo. The following year, Colombo inaugurated a new refinery that allowed it to produce a type of refined granulated sugar known as açúcar amorfo, which it began marketing – both in Brazil and overseas – under the brand name Caravelas.

“Traditionally, in Brazil, crystal sugar comprised 100 percent of sugar consumption. The popularity of granulated sugar is more recent,” explains Walter Bertoncello, Colombo’s quality director. “Because the granulated sugar industry is largely located in the Southeastern states of Rio and São Paulo, sales are much stronger there. Due to its more refined texture, it’s often used for baking. Meanwhile, crystal sugar is still preferred by Brazilians who live in Minas Gerais and the Brazilian Northeast. It’s ideal for industrial use as well as a sweetener for fruit juices or coffee.”

In terms of international business, Colombo only sells granulated sugar, which it exports in 50 kilo bags. Presently, exports constitute around 20 percent of the company’s business. Important markets include Japan and the Middle East. However, despite export success, the company’s main focus is on the vast domestic market (Brazilians have a noted fondness for sweets) where it packages its own products, most of which are sold in one, two, and five kilo bags. Sales are split fairly evenly between crystal (40 percent) and granulated (60 percent).

Although sugar currently accounts for the bulk of Colombo’s business, in keeping with its history of expanding into new markets, in recent years the company has added new cane-derived products to its portfolio. In 2001, it began producing and commercializing dry yeast made from cane. Moreover, in 2003, it began not only generating its own electricity from the burning of residual bagasse (sugar cane fibers that remain once the juice is extracted), but also selling the excess energy to a regional electricity company. Initially it sold 11 MW/h, but by 2004, it was selling 50 MW/h.

In 2004, Colombo also began producing extra-fine ethanol in addition to its regular ethanol. Today, sales of ethanol represent 40 percent of the company’s business (sugar accounts for 58 percent, while energy, yeast, and other cane bi-products constitute the remaining 2 percent). The Brazilian market consumes the majority (70 percent) of Colombo’s ethanol, while 30 percent is exported (mostly to Europe).

GROWTH STRATEGIES
Last year, Colombo grew by 14 percent, earning total revenues of R$768 million (roughly US$437 million). Currently, the company possesses three facilities located in Ariranha and neighboring Palestina and Santa Albertina, whose combined constructed area exceeds 3.6 million square feet. In terms of total daily output, together they produce 3,500 tons of sugar, 106,000 cubic feet of ethanol, and 50 MW/H of electric energy. The addition of a fourth plant in the town of Santa Clara d’Oeste, coupled with expansion of pre-existing facilities, will allow Colombo to process another 1,000 tons of sugar a day by next year.

“In terms of growth strategy, our main objective right now is to increase production and sales of sugar throughout the Brazilian market,” confesses Bertoncello. “At the moment, we’re Number 2. Our goal is to go after the market leader, União, which won’t be easy. União is the Brazilian sugar market’s equivalent of what Coca-Cola is to America’s soft drink market. They’re Brazil’s oldest brand, and they were the first to package sugar, which is why the União name itself is synonymous with sugar.”

Colombo has already scored one major coup against its rival with its success in supplying to large supermarket chains, which subsequently package the company’s sugar under their own brand names. At the moment, such sales account for 25 percent of all Colombo’s business. “We’ve done very well with this segment,” declares Bertoncello. “The three largest chains in all Brazil – Wal-Mart, Carrefour, and Pão de Açúcar – chose us to supply them over União, which represents a great advantage.” Bertoncello attributes Colombo’s winning of these contracts to the company’s having earned ISO-9001 and ISO-14001 certification and boasting an excellent logistics system featuring exceptionally fast and on-time delivery throughout Brazil. Equally important is the fact that it offered better prices.

“The fact that we are a family business allows us to run a very lean operation,” explains Bertoncello. “We’re very agile and we can also be very vigilant about costs.” Bertoncello credits family ownership for the company’s fundamental commitment to hard work, excellence, and strong relationships with both clients and its team of 4,000 employees, as well as its willingness to reinvest profits back into the expansion of the company itself, thus ensuring Colombo’s socio-economic self-sufficiency. “The principal administrators of Colombo have always been members of the Colombo family, successive generations of whom have been educated and trained to understand and operate the business from early on. Ultimately, this has been a big factor in our success so far, and it certainly bodes well for our staying power as we move into the future.”

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