Rijksdienst voor Ondernemend Nederland Mooooi Dairy Opportunities for Colombia-Dutch collaboration Fact finding study developed and authored by Business Bridge 1 Date 28th of February 2015 Contact Details Juliana Niño Partner Business Bridge [email protected] +31(0) 624676179 Diana Alarcón Partner Business Bridge [email protected] +31(0) 614391868 Developed and authored by: 2 TABLE OF CONTENTS TABLE OF CONTENTS ................................................................................................................. 3 List of Abbreviations .................................................................................................................. 6 1. Introduction to the study .................................................................................................. 8 2. Overview of the Colombian dairy sector .............................................................................. 9 MILK PRODUCTION REGIONS ............................................................................................... 9 3. The Colombian Dairy Value Chain ..................................................................................... 12 3.1 Inputs and services for milk production ......................................................................... 13 3.2. Milk Production ........................................................................................................ 14 NATIONAL MILK PRODUCTION ............................................................................................ 14 LEVEL OF ORGANIZATION OF MILK PRODUCERS ................................................................... 15 PRODUCTION CYCLES VS. PREPARATION AND PLANNING OF FARMERS ................................... 16 MILK PRODUCTION SYSTEMS ............................................................................................. 16 COMPARATIVE ANALYSIS ................................................................................................... 18 BOVINE LIVESTOCK IN THE COUNTRY ................................................................................. 18 MILK QUALITY PER REGION AND PER PRODUCTION SYSTEM .................................................. 19 THE INFORMAL MARKET ..................................................................................................... 20 PRICE SYSTEM .................................................................................................................. 22 TURNOVER OF THE MILK PRODUCTION BUSINESS IN COLOMBIA ............................................ 22 FARMS SIZE ..................................................................................................................... 23 FARMS SEGMENTATION ..................................................................................................... 24 INTERESTING MILK PRODUCERS ......................................................................................... 26 FOCUS MILKSHEDS SELECTED DURING THE STUDY .............................................................. 26 3.3. Collection and Transportation .................................................................................... 29 3.4. Processing & Packaging ............................................................................................ 30 PROCESSING COMPANIES SEGMENTATION .......................................................................... 30 TOP TEN SME PROCESSING COMPANIES .............................................................................. 32 3.5. Distribution & Commercialization ............................................................................... 34 3.6. Consumption ........................................................................................................... 35 LOCAL CONSUMPTION OF MILK .......................................................................................... 35 LOCAL CONSUMPTION OF OTHER DAIRY PRODUCTS ............................................................. 36 EXPORTS OF MILK AND OTHER DAIRY PRODUCTS ................................................................. 38 THE IMPLEMENTATION OF FREE TRADE AGREEMENTS (FTA) .................................................. 39 IMPORTS AND MAIN IMPORTERS ........................................................................................ 40 3.7. Challenges in Colombia and opportunities for the Netherlands ....................................... 42 4. Stakeholders along the Colombian dairy value chain ........................................................... 44 STAKEHOLDER ANALYSIS .................................................................................................. 46 3 FINANCIAL STAKEHOLDERS ............................................................................................... 46 5. Government policy and dilemmas..................................................................................... 47 5.1. CONPES 3675: National Competitiveness and Productivity Policy of the Dairy Sector ........ 47 5.2. CNL Dairy Chain Competitiveness Agreement .............................................................. 48 5.3. The Agriculture Pact ( Pacto Agrario ) ........................................................................... 48 6. Investment and Cooperation programs on the sector .......................................................... 49 COOPERATION PROGRAMMES ............................................................................................. 49 GOVERNMENT INVESTMENT ............................................................................................... 49 INCENTIVES FOR PRIVATE INVESTMENT .............................................................................. 50 DUTCH DAIRY-RELATED COMPANIES ACTIVE IN COLOMBIA ................................................... 50 7 From opportunities to realization: what the Netherlands has to offer ....................................... 51 7.1 The Dutch Dairy sector: leader in the world ....................................................................... 51 7.2 The SWOT for the Dutch Dairy sector ............................................................................... 52 7.3 The Netherlands as advisor of other countries’ dairy sectors ................................................ 53 7.4 Constraints, challenges and needs for the Dutch sector in Colombia ..................................... 54 Business climate ............................................................................................................... 55 Local business culture, communication styles and network ..................................................... 56 8. CSR aspects .................................................................................................................. 57 ENVIRONMENTAL .............................................................................................................. 57 LABOR RIGHTS & FAIR OPERATING PRACTICES .................................................................... 57 LAND USE ........................................................................................................................ 58 CORRUPTION .................................................................................................................... 58 POTENTIAL FOR IMPROVEMENT IN THE DESCRIBED SITUATIONS ........................................... 58 9. Concrete Leads for the Dutch dairy sector in Colombia ........................................................ 58 9.1. RESEARCH AND INNOVATION ......................................................................................... 59 9.1.1. Support to processing SMEs on New Product Development processes. ...................... 59 9.1.2. Accompany reconversion to other productive activities that are suitable for that land. 59 9.1.3. Inclusive innovations .......................................................................................... 60 9.2. INSTITUTIONAL DEVELOPMENT ................................................................................. 60 9.2.1. Public Policy Support .......................................................................................... 60 9.2.2. Training for Trainers ........................................................................................... 61 9.2.3. Financial consultancy and capacity development collaboration ................................. 61 9.3. KNOWLEDGE TRANSFER ........................................................................................... 61 9.3.1. Professionalization of the dairy sector. .................................................................. 62 9.3.2. Good Production Practices ................................................................................... 62 9.3.3. Turn milk production into a profitable business for dairy farmers ............................. 63 9.3.4. Local dairy clusters development. ........................................................................ 63 9.3.5. Dairy Community Cooling Chain Centers. .............................................................. 63 4 9.3.6. Water management & irrigation systems .............................................................. 64 9.3.7. Soil & water preservation .................................................................................... 64 9.3.8. Renewable Energy ............................................................................................. 64 9.4. THE UNIQUE INTEGRATED CONCEPT: THE COLOMBO-DUTCH ECOSYSTEM for DAIRY INNOVATION (EDI)