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Farming cooperative combines technology with experience

Interview - July 23, 2012
Augusto Grob, President of Colun, a cooperative of farmers who believe strongly in the concept of cooperation and maintaining the high quality of its products, discusses what has made it the country’s premier dairy company for more than six decades

During your mandate, which guidelines have you followed to bring Colun to where it is today and how the cooperative has evolved since its beginnings?

The first thing I would like to emphasize is that our company is a cooperative, therefore its social and economic structure is different from that of a corporation. In a cooperative there is a strong rapport with the member-farmers, who are the owners of the company and, at the same time, the milk suppliers. These partners seek to develop their own production capacity in their fields, adding value to their environment and production and, thus, improving the marketability of their production.

Ultimately, from the beginnings of Colun, the motivation of all farmers, large and small, has been to improve their production efficiency. This is achieved by delivering their milk to our cooperative, which pays them the best price possible.

Linked to this is the constant support we provide our partners through the Cooperative Education Department that we have set up by legal mandate and our own convenience. This department, which has existed since our founding, seeks to develop the farmers’ skills in production and organisation, improving efficiency, and increasing our growth rates.

Today, and after 63 years our cooperative’s operation, we are months away from completing a major project: the construction of a cheese production plant, in which we estimate we will initially process 400,000 litres of milk per day, a capacity that we will double in its second year of production.

And finally I want to emphasize that one of our fundamental and transversal guidelines since the beginning has been guiding our farmers to achieve more efficient production, which is undoubtedly the origin of all our chain.

If I am not mistaken, you process over 1.5 million litres a day, with more than 770 associated producers to achieve goals worth over $325 million. You just mentioned that at the end of the year this plant would be operational increasing your productive capacity and operational management.

Yes. There is a lesson we learned from the beginning, and that is: “to make things work well, they have to be done well.” Nothing is accomplished with good ideas if we do not get the best advice to implement them. It is in our interest that the machinery we are going to acquire is the latest technology available in the market, that our farmers use the best products and processes available and, in that sense, we are willing to find them where they are, buy them and make them available to our cooperative members.
Preserving the quality is a fundamental part of the company’s philosophy. The only way to pay our farmers the best market price is to ensure that the milk meets the highest standards, because if we have inefficient processes that fail to produce the best milk, our products would not be of such high quality, which would result in not achieving the revenue needed to fund modernisation. Food production is a very serious issue, as we understand it.

We know that Chile, in all of its exports of food products, has a lot of competition in the world. Many people we have spoken to agree that Chile has a capacity for producing high quality, but needs to add value in order to be more competitive in international markets.

I absolutely agree. Aside from worrying about production and quality, we have a Department of Development, which has professionals who are constantly innovating products for internal and external markets.
We like to buy (rather than copy), since in doing so the supplier must deliver a good service and defend its position.
Thus, in this process in which we combine technology purchases and own developments, we are introducing products with phytosterols, foods for diabetics, for people intolerant to lactose, for those who need to reduce weight, etc.

Efficiency, quality, equipment, research and product development of Germany are known in the world. What does Germany mean to you in terms of potential benefits for your industry? And what potential business relationships exist today?

For us, the relationship with Germanic culture is a close and long-standing one. We feel that borders are pierced and today we are very influenced by these roots. A significant proportion of the inhabitants in our country descend from German settlers who arrived in Chile in the 19th century, built a home, started up a business, worked the fields, and brought their culture and traditions to this place so far away. And with this background, it is normal to feel close to this nation. This is why we are exploring and extending links with some German companies, which we hope will continue to grow over time.

In June of this year you entered the Marketing Hall of Fame. You have launched quite important marketing campaigns and we have seen international media promotions of Colun in foreign markets. What importance do you give as president to communicate the opportunities and the quality of the products? And to what extent are you thinking of promoting the brand beyond its borders?

Advertising is a fundamental activity. If we did not advertise, it would take a long time for our products to be known and demanded by consumers. Nowadays only the quality of products is not enough, you also have to make them known quickly, especially in the domestic market, where we have strong competition from multinational companies.
In the domestic market our campaign, which highlights the purity of southern Chile and the warmth of its people, is directed to consumers who are becoming increasingly more demanding of quality products.
In the export market, in which we are introducing our products to countries like Japan, Korea, Turkey, Afghanistan, Algeria, China and several others in South and Central America, so far we are entering with commodity products, and that is the reason why we are not are launching advertising campaigns yet like we do in the domestic market.

Where would you like to see Colun within five to 10 years? What are your strategies and your vision for the future? For example, are you planning more agreements with other countries?

A fundamental issue is that the business owners are farmers, and they have done very well because Colun pays them well for their production. For that reason, they request us to be able to receive more milk and to meet that need we built the new plant that will be inaugurated soon. This is a project that will provide short-term results, from which we expect better results in the coming years.
In technology, our projection in time is to stay at the forefront, as we do today. Equally important is to increase our marketing ability, an issue that must be structured in parallel with the increased capacity for milk reception and supply of our partners. In that sense, we are clear that building a market is a slow process, in which we should be gradually persuading the public.

When the readers of the Financial Times Deutschland read in Germany about your history, the cooperative, the expansion process and the quality of your products, what would be the message to retain in their memory?

Without doubt, we would like to convey our philosophy that is passionate and is what differentiates us: we are a company formed by farmers, who believe strongly in the concept of cooperation. Country people, who live in close contact with nature, knowing very well their strengths and weaknesses, the reason why they provide why they offer.

The second thing is that we are distinguished for meeting our commitments. For us, as important as the quality of our products, is the fulfilment of the terms agreed with customers and suppliers, which must be programmed with certainty based on the agreements we generate.

Ultimately, we would like to emphasise our commitment as farmers to the environment. We produce milk in the green pastures of southern Chile, with the magic of the south, and this is not a simple advertising slogan, is our hallmark. This is the true reason why the dream conceived by 70 producers over 60 years ago, is still alive and has made us the leading dairy company in our country.