March 26, 2012 Milking the Situation

Volume 15 | Issue 1

Batavo Cooperativa Agroindustrial is one of Brazil’s oldest and most successful agricultural cooperatives. Company President Renato João de

Batavo Cooperativa Agroindustrial, one of Brazil’s largest agribusiness cooperatives, experienced a breakthrough year in 2011. The company increased membership by eight percent, witnessed annual revenues soar by 23 percent (compared with 2010), and even created a new brand, Frísia, that accompanied its foray into milk product and commercialization for wholesalers.

The breakthroughs may surprise: Batavo isn’t an upstart. It’s one of its country’s oldest agricultural livestock cooperatives. But it proves that an old enterprise can learn new tricks.

HISTORIC BRAND
Batavo is no stranger to the dairy market. Throughout Brazil, consumers recognize and trust the company’s familiar blue-and-white logo (that depicts a Dutch milk maid) that’s emblazoned upon products ranging from milk, cheese, and yogurt, as well as chicken and cold cuts.

Familiar as they may be with products, few Brazilian consumers know that the brand dates back to the beginning of the 20th century, when Dutch immigrants began arriving in the southern Brazilian state of Paraná. At the time, the Brazil Railway Company was eager to populate the interior of Paraná and, as an incentive, it offered each settler a plot of land (and 10 years in which to pay for it) along with a house, plow, seed, fertilizer, two bulls and six dairy cows.

Soon, the newcomers began producing in earnest. In 1925, to better serve the demands of growing towns such as Ponta Grossa and Castro – as well as the capital of Curitiba and São Paulo – seven producers in the region of Carambeí banded together to form the Sociedade Cooperativa Hollandeza de Lacticínios. The partnership fostered commercialization of the artisan-produced dairy products such as milk, cheese and butter. By 1928, the products were sold under the Batavo brand – a name inspired from a southern Netherlands region, from which the first Dutch immigrants came.

In ensuing decades, other immigrants arrived from the northern Dutch province of Frísia, bringing with them Holstein-Frisian cattle and new production techniques. By the 1950s, the original cooperative had expanded considerably to embrace an increasingly wide diversity of livestock activities, which were now being carried out using mechanized production methods. Subsequently, to organize production, industrialization and commercialization on a larger scale, the cooperative increased the scope of its activities, procuring and commercializing feed, seed, fertilizer, farm equipment and veterinary supplies. In addition, it offered financial and technical assistance to its members, who continued selling products under the Batavo name.

In the 1970s, Batavo added meat to its mix, specifically pork and chicken. This move consolidated Batavo as a major foodsegment player. Further investments in the 1980s transformed the cooperative into a cutting-edge company that became a reference point throughout the state of Paraná and Brazil.

In 1998, the cooperative partnered with Parmalat to create the Indústria de Alimentos Batávia. Four years later, Brazilian frozen food giant Perdigão purchased Parmalat’s majority shares in Batávia. By 2007, Perdigão took full control of Batavo’s meat and dairy product portfolio. Following the takeover, the cooperative left behind the retail segment, changed its name to Batavo Cooperativa Agroindustrial and set out to fulfill its legacy as one of its country’s model cooperatives.

STAYING COMPETITIVE
Today, the cooperative is made up of 534 employees and 581 member farms whose activities center around the production of five major commodities: soy, corn, wheat, milk and livestock (pigs and sheep). Currently, cereals and grains account for twothirds of Batavo’s revenues – which in 2011 reached R$860 million reais. Livestock and dairy make up the remaining third. However, according to Renato João de Castro Greidanus, the cooperative’s president, the tendency is that these figures will balance out.

“This year, part of the reason we experienced growth rates of almost 25 percent was due to the high price of grains as a commodity,” he points out. “However, this scenario is beginning to change. Ideally, we’d like each segment to represent around 50 percent of our total business. We think this will happen because, among other reasons, the south of Brazil is very small in territory, which leaves farmers with very little space to physically expand.”

Indeed, to stay competitive, many of the co-op’s producers are migrating into livestock farming. “Diversifying the number of activities on their property allows farmers to increase their revenues,” explains Greidanus. “We’re stimulating such initiatives by providing loans and resources as well as technical assistance and motivational workshops. Our producers are a very entrepreneurial group. As they grow, so do we.”

Cooperativa Batavo doesn’t have any direct competitors. Still, it has a major trump card that sets it apart from players that want to get into the game (particularly big industrial corporations): cutting-edge technology, focused on producers’ activities and developed on the rural properties. Such research is carried out by the Fundação ABC, a research and development institution created by Batavo in conjunction with two other regional cooperatives. Its myriad studies focus on topics as varied and essential as soil fertility, cultivation, and the regional climate. Results foster development of new technology that increases productivity.

Development of the direct seeding using straw was among the most noteworthy innovations. The technique originated in theUnited States, but the Paraná co-ops were the first to adapt it and apply it to tropical soil conditions in a way that enriches the soil and increases productivity while preserving the ecosystem by avoiding silting of rivers. The method, which was subsequently adopted throughout Brazil and in other tropical countries, reflects the cooperative’s concern with both environmental and social sustainability. “This is one of the great strengths of our co-op and of Paraná’s co-ops, in general,” declares Greidanus. “And it has made us a reference in all of Brazil.”

Another key strength of Cooperativa Batavo is its commitment to safety, which is particularly crucial in the food industry. “A big advantage of the cooperative system is our ability to adapt to new requirements,” says Greidanus. “Because we dominate the entire production process – from the supply of feed and fertilizers, passing through storage and transportation, to the creation of final products such as milk – we have an extremely organized chain that allows for rigid quality control at every step. This enables us to meet all standards set out by the Ministry of Agriculture and demanded by our clients.”

MEETING GROWING FOOD DEMAND
It also allows the cooperative to branch out into new activities with the assurance that clients will trust in an organization whose reputation has been honed over 90 years of operation. Indeed, both innovation and quality control were top concerns when Cooperativa Batavo decided to return to the industrialization of milk for the first time after Perdigão’s acquisition of the Batavo brand. Equipped with the latest milk processing systems, the Frísia plant in Ponta Grossa involved an investment of more than R$60 million (US$32 million) and has a production capacity of one million liters a day. Instead of supplying to retailers, Frísia’s milk products are being sold to other manufacturers, one of the most important of which is Nestlé. It’s the first step in a long-term plan to return to the industrialization of a large portion of what the cooperative produces.

“Brazil has an enormous potential as a producer of food,” says Greidanus. “Despite certain problems – such as a lack of investment in infrastructure, high taxes, and lots of bureaucracy – we’re extremely competitive in terms of the international market. Demand for food is growing globally and to be a company linked to its production ensures that we’ll always have opportunities. That said, to take advantage of opportunities, we have to remain at the vanguard, constantly seeking ways of adjusting our production costs to remain competitive.”

The best means of ensuring competitiveness, he adds, is by adhering to the traditional structure of the co-op, especially as it exists in the Brazilian South. “The co-op system is a very important and positive tool for the rural producer,” he points out. “Alone, a farmer is beholden to large corporations and traders, but when producers unite they can obtain better prices and more favorable deals.”

They also have more volume. An important point: This enables them to guarantee a constant supply of goods at the lowest market prices to large-scale clients and to enter into medium- and long-term contracts more advantageous for both parties.

“In the end, our mission is to grow in an organized and cohesive manner so that we can compete with large corporations,” says Greidanus. “None of us is as good alone as we are together. That’s our guiding philosophy.”

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