usp / fea-rp / markestrat favaneves@gmail · brazilian sugarcane sector economy 2008/2009 crop year...

An Integrated Strategic

Plan for The Sugar Cane

With a Focus on

Communication and

Education

PhD Prof. Marcos Fava Neves

USP / FEA-RP / MARKESTRAT – [email protected]

Markestrat Think Tank

International Network

UBAPurdueTexas A&MWageningen...

Brazilian Network

ESALQ/USPEAESP/FGVPOLI/USPUFSCar...

Professors PhDFounders

Senior

Researcher

Master and PhD students

Undergraduate students

3

Integrated Markestrat Think Tank Model

It is a academic group, linked

to the University and doing

Research and publications

It is also a consultancy and

projects organization, doing

Projects for public and

private sector (extension)

It has a area of education and

training, for executives and

students

25 Books

Planejamento e Gestão

Estratégica de Marketing

NEVES, M. F. São Paulo, Atlas,

2005

Marketing e Estratégia em

Agronegócios e Alimentos

NEVES, M. F. & CASTRO L. T.

(org), São Paulo: Atlas,

2003. 365 p.

Agronegócios &

Desenvolvimento Sustentável

NEVES, M. F. (org) São Paulo,

Atlas, 2007

Estratégias para a Laranja

no Brasil

NEVES, M. F.; LOPES, F. F.

(org). São Paulo: Atlas, 2005.

Estratégias para o Trigo

No Brasil

ROSSI, R. M & NEVES, M.F.

(org.) et alli. São Paulo: Atlas,

2004.

Administração de Vendas

CASTRO, L. T & NEVES, M. F.

São Paulo, Atlas 2005.

•Our contributions in

sugar cane…

New publications

Brazilian sugarcane sector economy

2008/2009 crop year

Generates: US$ 28 billion.

Represents: 1.5% of national GDP.

Job creation: 4.76 million direct and indirect.

Independent sugarcane

suppliers:70 thousand producers distributed in 1,694 municipalities.

Cultivated area: 7.8 million hectares (4.7 million ha for ethanol)

Average yield : 77.5 tons/hectares.

Milling: 569 million tons.

Production: 31 million tons of sugar.

27.51 million liters of ethanol.

Exports:19.5 million tons of sugar.

5.1 billion liters of ethanol.

Bioelectricity:

Generation of 2,017 MW.

Capacity of 4,034 MW.

3.58% of Brazil’s electric power.

Taxes: US$ 6,855.41 million.

Players:

423 operating plants.

248 mixed plants (sugar and ethanol).

159 ethanol plants.

16 sugar plants.

Sources: Elaborated by the authors based on Neves et al. (2010) and other sources.

• The Chain Plan

Method

Theoretical

Framework2 – Description,

Mapping and

Quantification

of the Chain

1 – Initiatives of

Leaders,

Government,

and Research

Institute/

Universities in

planning the

future of the

Chain

3 – Creation of

a Vertical

Trade

Association

4 – Elaboration

of the Strategic

Plan for the

Chain

5 –

Management of

Strategic

Projects and

Contracts’

Design

Figure 2 - The ChainPlan method for strategic planning and management of chains

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6 Production, Products,

Research and

Development, and

Innovation Decisions

7 Communications

Decisions

8 Distribution and

Logistic Decisions

(Including Exports)

9 Human Resources

and Qualification

Decisions

10 Institutional

Environment

Coordination and

Adequacy Decisions

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Market

Analysis with

the Chain

Approach

Analysis of

Internal

Situation and

Competitors

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Figure 3 - Summary of the ChainPlan plan (step 4)

Source: Neves (2007b).

1 2

Defensives

USD 768,44 million

Fertilizers

USD 2.259,09 million

Tractors

USD 320,87 million

INDUSTRY/DESTILLERY


Lime

USD 50,56 million

Sugar cane Production

Own:


Suppliers:


Quimical Products

USD 463,82 million

Fuel oil and lubricants USD

94,19 million

Resale and

Cooperatives

USD 477,54 milhões

com defensivos

Harvesters

USD 426,52 million

Auto-parts and

maintenance services


Attachments

USD 425,66 million

Trucks

USD 331,36 million

Bodies,

trailers and semitrailers

USD 233,36 million

Lab materials

USD 15,46 million

Bags

USD 45,42 million

PPI

USD 38,96 million

Diesel and Lubricants


Ethanol


Bioelectricity

USD 389,63 milhões

Distributor


Gas Station


Beverage industry and

cosmetics

Distributor

Free

Consumer

Special

Consumer

FINAL

CONSUMER

Before Farms

USD 9.252,42 mmFarms: Production

USD 11.509,75 mm

After Farms

Industrial Inputs: USD 6.414,39 mm Industry: USD 22.639,17 mm

Ethanol Distr.: USD 19.738,56 mm Sugar Distri.: USD 4.003,15 mm

Facilitating agents – USD million

BNDES: 3.530,79 CCT Outsourced 1: 916,32 Road Export Freight: 539,03 Exports Toll (Santos): 79,96

Port Cost (Santos): 213,52 R&D: 79,15 Events: 5,32 Magazines: 3,99

payroll : 738,33 Health plans 3: 125,51 Meals4: 188,26 Aggregates tax in SAG: 6.8 billion

1- South Center region. 2- Exports by Portos de Santos e Paranaguá. 3 e 4 – Only São Paulo state.

Big Bags

USD 14,67 million

Wholesale

USD 743,89

million

Retail

USD 3.259,26

million

Food industry

and other

PPI

USD 53,80 million

SUGAR-CANE CHAIN IN BRAZILGDP in 2008: USD 28 billion; Financial Movement of the Chain in one year: US$ 86 billion

Facilitating agentsUSD 13.275,58 mm

Assembly Services and

Maintenance


Building

USD 594,75 million

Equipaments


Steam Generator: 667,13

Extraction: 568,13

Distillery: 469,13

Sugar Industry: 354,38

Energy Generator: 274,5

Assembly: 411,75

Maintenance: 655,98

Electrical Installations

USD 366,00 million

Automation/Instrumentation

USD 269,76 million

Bio plastic(non commercial scale)

Feed industry

Internal Market

Hydrous: 6.615,58

Anhydrous: 2.972,89

Mercado Externo

Hydrous : 1.179,91

Anhydrous : 1.210,20

USD million

USD million

Sugar


Internal Market

Industry: 2.037,88

Wholesale: 580,57

External market

Gross Sugar: 3.649,55

USD million

USD million

Retail: 1.663,66

Yeasts and Additives

USD 63,61 million

Internal Market

Feed Industry: 21,41

External Market

Feed Industry: 42,20

USD million

USD million

Carbon Credit

USD 3,48 million

USD milhões

Not Energy: 438,78

Source: Neves, Trombin, Consoli, 2009.

Gross Revenue

White: 1.833,41

GDP Sugar-Energy Sector


Around

2%

GDP

Product

Internal Market

(IM) USD (million)

External Market

(ME) USD (million)

Total

(MI + ME) USD (million)

With Taxes Without Taxes Tax-exempt With Taxes Without Taxes

Ethanol

Hydrous 11.114,50a 9.105,10 1.179,91 12.294,41 10.285,01

Anhydrous 2.972,89b 2.250,88 1.210,20 4.183,09 3.461,08

Not Energy 438,78c 351,57 n.d. 438,78 351,57

Sugar 5.297,14d 4.455,83 5.482,96 10.780,10 9938,79

Bioelectricity 389,63e 242,87 n.d. 389,63 242,87

Yeasts and Additives 21,41 19,43 42,20 63,61 61,63

Carbon Credit n.d n.d 3,48 3,48 3,48

Total 20.234,35 16.425,68 7.918,75 28.153,10 24.344,43a- Sales considering formal and unformal markets

b- sales industry to distribuctor formal and unformal markets

c- Sales industry to medicine (cosmetics )

d- Total sale industry to distribuctor and retail.

e- Sales to electric energy

GDP Sugar-Energy Sector USD 28.153,10 milhões

The network

Inputs Production Industry

Agro-chemicals

Fertilizers

Machines and

equipments

Parts

Services

Others

Leasing

Partnership

Traditional

Suppliers

Mill

Inputs Industry

Other

competingmills

Other

non-competingcompanies

Products + Services

$ + Information

Ethanol

Sugar

Bagasse

Others

Distributors

Industries

Traders

Gas stations **

**F

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**

**

Other companies

Traders

Food Industry

Chemical Industry

Ind. Empacotadora

Global Market

Global Market

Other Companies

Other Companies

Wholesale/Retail

Own Consumption

Energy generation Distributors

Fertilizer Industry

Yeast Food Pellets livestock...

Others

agriculture..

Distribution

PEST (Political-legal, Economical-natural, Social-cultural, Technological environments)

Facilitators agents: Logistics, Transport, Storage, Brokers, Banks, Insurance Companies, Certificators etc.

Oil chemical Ind. Plastics Processors

Own

sugar cane

Elaboration.: Prof. Marcos Fava Neves

Blending Targets

Sources: UNICA, Petrobras, F.O Licht

CanadaE-5 (2010)

USA - RFS (2012)136.3 Bi liters

ColombiaE-10 (2012)

BrazilE-20 – E-25

European Directive5,75% em 201010% em 2020

ChinaE-10

10 Provinces

Australia -QueenslandE-5 (2010)

Japan3% not mandatory

UruguayE-5 (2015)

ArgentinaE-5 (2015)

Some AfricanCountries

E-5 India E-5

SUGAR CANE PRODUCTION Production System Volume

Source: Prepared by Markestrat/USP by data MAPA and UNICA.

99 81 100 115 129 151 150 168211

253

211174

192201

228231 232

260

285

316

0

100

200

300

400

500

600

199

9/0

0

200

0/0

1

200

1/0

2

200

2/0

3

200

3/0

4

200

4/0

5

200

5/0

6

200

6/0

7

200

7/0

8

200

8/0

9

To

nela

das (

milh

ões)

Própria Fornecedores

NORTH

O: 55%

S: 45% NORTHEAS

T

O: 60%

S: 40%MIDWEST

O: 67%

S: 33% SOUTHEA

ST

O: 64%

S: 36%SOUTH

O: 68%

S: 32%

O: OWN

S:SUPPLIER

UNICA Data , 2008/09 the volume

harvested 568,96 million tons.

The production of cane sugar itself, historically, remained at levels above 60% to 69% in 1996-97. However, this production system has been losing

share to the cane suppliers. In seasons 2007/08 and 2008/09, the cane itself reached 57% and 55% respectively.

To

ns

(M

illi

on

)

Own Suppliers

The Wall Street Journal

Car Sales in Brazil

Jornal O Estado de São Paulo

Jornal Valor Econômico

Results

External Analysis: Opportunities and Threats

Political – Legal Economical - Natural Social-Cultural Technological

O

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S

-New emission reduction targets

and growth of the carbon credit

markets;

- General tax incentives for biofuel

production;

- Alliance among countries to obtain

preference for imports and not to

compete with food production;

- Addition of ethanol in different

countries,

- Addition of biodiesel in different

countries;

- Addition of ethanol in engines of

trucks;

- Prohibition of burning the sugar

cane;

- Brazilian ethanol as advanced

biofuel in US;

- New institutional framework for

electricity;

- Environmental zoning in Brazil;

- New institutional framework for

distribution of fuels.

- Growth in population and increase of

wealth (China and India);

- Growth in the consumption of sugar

(products / food that use sugar);

- High prices of oil;

- Growth in flex-fuel vehicle fleets;

- Export of technologies and biofuel

facilities from actual producers’

countries to new ones;

- New and high flows of foreign direct

investments for biofuel industries;

- Loss of production in some countries

generating opportunities to others;

- Emergence of new producers

(Caribbean and Asia);

- Focus in core competence (biofuel

industry), independent supply of

feedstock with better income

distribution;

- Good Agricultural Practices like

rotation of crops - food and energy

production;

- Land availability for expansion of the

biofuel sector in developing countries;

- Positive energetic and carbon

balances for all biofuel sources;

- Value of positive externalities.

- More awareness of global

warming;

- Migration of people to

cities demanding processed

food and high volumes of

fuels.

- Image of the renewable

and clean fuel;

- Defense of sustainable

biofuel productive chains.

- Acceptance of GMO’s

- Movements of

Organics/FairTrade/

Nutraceutics/Cosmetics

- Inclusion of smallholders

- Generation of green jobs

and income

-New technologies

enhancing flex-fuel vehicle

efficiency;

- New machines for

harvest;

- Generation or expansion

of the cellulosic ethanol

use (biobutanol,

hydrolysis);

- Genetic modification of

energy crops for resistance

to dry weather and

diseases;

- Use of satellites and

precision agriculture

(GPS);

- Use of biofertilizers from

by-products;

- Integration of biodiesel

and ethanol facilities;

- Focus on energy

efficiency (hybrid cars,

reducing the weight of

cars) allowing the use of

renewable energy (ethanol,

biodiesel, biomass);

- Privatization/ Public-

Private Partnerships in

infra-structure facilities.

Source: Elaborated by the authors.

Table 3 - Summary of opportunities and threats in Sugar Cane AGS (Agribusiness System).

Results

External Analysis: Opportunities and Threats

T

H

R

E

A

T

S

- Social-environmental barriers to

biofuel imports;

- Lack of international law to biofuel

standardization for export (in the

world market);

- Stricter work and environmental

laws for biofuel production;

- The oil companies, the local

producers and the ethanol lobbies

against imported ethanol;

- Slow and tendentious legal

environment (contractual hold-up

problems, delays in justice,

bureaucracy, etc.);

- Lack of regulatory stocks of

biofuels in countries (to avoid

fluctuation of commodity prices);

- Discontinuity of the tax incentive

programs in the long term (breaks);

- Tax inequality through value chain

and states of Brazil;

- Conflict "pre-salt" investments vs.

bioenergy economy in Brazil;

- Gasoline price control in Brazil

and Petrobras Monopoly.

- Growth in the hybrid vehicle fleets;

- Lack of machines and equipment for

expansion of industrial capacities;

- High agricultural commodity

(feedstock) prices’ fluctuation;

- More powerful diseases or pests;

- Climate change bringing reduction in

the available lands;

- Lack of agro inputs (fertilizers

mainly);

- Concentration of the biofuel sales in a

few major markets (US, EU) or

companies (eg. BP, Exxon, Chevron,

Shell, Petrobras);

- Inflation process in food prices;

- Competition of biofuel industries with

alternative distribution channels by the

right of by-products (agricultural

residues).

- Lack of credit/funding lines with easy

access.

- Small environmental services

markets in Brazil.

-Image of jobs generated by

the energetic crops

employed in the harvest in

developing countries (sugar

cane, palm);

-Image of land occupation

generating competition with

food;

- Image of the

"monoculture";

- Growth of NGOs, with

destructive purposes

(bioterrorism);

- Hard requirement of

social-environmental

certification;

- High cost of certification;

- Mechanization vs.

unemployment in

agriculture dilemma;

- Number of different seals.

- Sweeteners and other

bioenergy sources;

- New technologies

generating more

competitive energy

(hydrogen);

- Growth in the fleet of

natural gas or hybrid

vehicles;

- Deficient infrastructure

for distribution of

agricultural production

from new frontiers (internal

logistics).

- Low investments on R&D

in developing coutries.


Table 3 - Summary of opportunities and threats in Sugar Cane AGS (Agribusiness System).

Satelite of New Investors in Cane

Fonte: Livro “Estratégia para a Cana no

Brasil” (Neves e Conejero, 2009).

NewInvestments

AgribusinessGroups

Tradings

OilCompanies

ChemicalIndustries

EnergyDistributors

Banks

TechCompanies

Construtors

TraditionalCane Group

InvestmentFunds

JV Cosan e Shell – International Investments

Fonte: Cosan e Shell

Results

Internal Analysis: Strong and Weak Points

Innovation/ Research/

ProductionCommunication

Distribution and

Logistics

Training and

Capabilities

Coordination and

Institutional

Environment

S

T

R

E

N

G

H

T

S

- Sugar cane has lower biofuel

cost (corn, beet, rapeseed);

- Capacity of the mature and

large industry in Brazil;

- Strong metal-mechanical

industry dedicated to ethanol

facilities;

- Capacity of expansion to new

lands in Brazil;

- Sugar cane varieties more

resistant to climate change;

- Strong agronomic and

biotechnological intelligence

centers in Brazil;

- "Genoma Project" - mapping

sugar cane genetic sequence

- Total use of by-products and

residues in the field;

- Flex-fuel technology.

- Image of green fuel,

jobs generator,

environmentally

correct, exporter,

regional development

promoter and

renewable fuel

associated;

- "Free" advertising.

- UNICA (Sugarcane

Industry Association)

Communication’

actions in Brazil, US

and EU.

- Vertical integration

of ethanol facilities

to distribution of

fuels

- Trading and oil

companies control of

the sector

- Bioelectricity’s

facilities

concentration close

to high demand of

electricity and

complementary to

hydroelectricity

sources.

-Good training capacity

(university and research

institutes) in Brazil;

- UDOP (Union of

Bionergy Producers)

corporative university for

executives and technical

workforce.

- SENAI (The National

Industrial Training Servic

e) courses to formation

of technical workforce.

- Consecana model

(sugarcane payment

formula)

- Agricultural

Partnerships

- Associations and

Cooperatives

- Voluntary agreement

to eliminate the practice

of burning sugar cane;


Table 4 - Summary of the strengths and weaknesses according to strategic areas in the Sugar Cane AGS

(Agribusiness System)

Results

Internal Analysis: Strong and Weak Points


Table 4 - Summary of the strengths and weaknesses according to strategic areas in the Sugar Cane AGS

(Agribusiness System)

W

E

A

K

N

E

S

S

E

S

- Manual harvest and human

aspects in some sugarcane;

- Practice of burning (sugar

cane);

- Profitability of the

sugarcane independent

suppliers;

- High investments in the

cellulosic ethanol research

by the developed countries.

- High investments in the

hybrid cars’ technology by

the developed countries.

- Low capability to

anticipate problems

and coordinate the

response;

- Image of labor

condition in the

harvest in

developing

countries;

- Concentration of

lands and farmers;

- Low Corporate

Governance

Practices by the

Sugar mills’ sector.

- Export logistics in

developing

countries;

- Delay of ethanol

pipeline infra-

structure;

- Distribution cost;

- Ethanol internal

price fluctuation

- High

concentration of

fuels' distributors

- Lack of fuels’

stock capacity in

Brazil;

- Difficulty of

connection to

electrical-grid by

sugar mills.

- Low coordination

between organizations

that offer training

(research institutes and

universities);

- Lack of executive and

technical workforce;

- Reallocation of

formers sugarcane

cutters.

- Reputation /

relational contract;

- 80 to 90% of the

production cost of

ethanol comes from

sugarcane

- High vertical

integration of biofuel

facilities for

agricultural

production.

- Non-payment of

sugarcane by fiber

content

- Lack of long-run

contracts for

distribution

- Lack of pattern

contracts for ethanol

exports.

Results - Main Strategies

• Brazil must pursuit the cost leading strategy with

economic, environmental and social sustainability.

• To place itself as one of the cleanest industries in the

world, taking and transforming solar energy into energy

to be used by human beings.

Theoretical

Framework2 – Description,

Mapping and

Quantification

of the Chain

1 – Initiatives of

Leaders,

Government,

and Research

Institute/

Universities in

planning the

future of the

Chain

3 – Creation of

a Vertical

Trade

Association

4 – Elaboration

of the Strategic

Plan for the

Chain

5 –

Management of

Strategic

Projects and

Contracts’

Design

Figure 2 - The ChainPlan method for strategic planning and management of chains

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6 Production, Products,

Research and

Development, and

Innovation Decisions

7 Communications

Decisions

8 Distribution and

Logistic Decisions

(Including Exports)

9 Human Resources

and Qualification

Decisions

10 Institutional

Environment

Coordination and

Adequacy Decisions

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Market

Analysis with

the Chain

Approach

Analysis of

Internal

Situation and

Competitors

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Figure 3 - Summary of the ChainPlan plan (step 4)

Source: Neves (2007b).

1 2

Projects and Decisions on Communication

Image of Brazil as a global supplier of renewable energy and

environmental solutions.

Petrobras as global exporter

of gasoline added with

ethanol

A list of priority countries for

trade agreements

(eg. Africa and LA)

‘Green”’ Gas Stations as

‘factory store’ concept

Website portal for sugarcane

knowledge

City buses fuelled on ethanol as

promotion tool

RFA – Renewable Fuels Association

Fonte: http://www.ethanolrfa.org/

“Using More

Brazilian Ethanol

Would RAISE

Gasoline Prices for

D.C. Drivers — With

or Without the

Tariff”

Projects and Decisions - Training and Education

Training programs for

sugarcane cutters

Map the necessity of

technical and executive courses

Training programs for

mills and farms’ employees

about sustainabilty and

regional development

E-learning website for

distance training

Training program for

public employees related to sugarcane

agribusiness

Conclusions and Implications

• Many agribusiness systems in Brazil receive the international attention, but the sugar cane

sector is different.

• Because of its history, the benefits it generates to Brazil and the World, its global

leadership, the internalization of development to distant regions, it gains new defenders

and policy-makers in the last years.

• But, at the same time, so many worries appeared, especially related to the sustainability of

the production process.

• The competitiveness of the Brazilian ethanol is well recognized around the World.

• Its maintenance, however, depends on the operationalization of important strategic

projects, with definition of responsible agents, deadline and budget to actions.

• Most of these projects should deal with communication and education/training

• More than ever, planning is necessary in this sector in order to reach all the opportunities

and to improve the weakness looking for equilibrium and sustainability.

Thank you!

Material, artigos, slides: www.favaneves.org

email: [email protected]

Twitter: @favanevesTambém no Facebook e LinkedIn

usp / fea-rp / markestrat favaneves@gmail · brazilian sugarcane sector economy 2008/2009 crop year...

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