Shared value creation in the Coffee Industry of Minas GeraisCarlos Tarrason Collado

Parallel 1.1 Common problems, common markets and shared value creation

11 November 2014

17th TCI ConferenceSession 1B: Common problems, common markets and shared value creationShared value creation in the Coffee Industry of Minas Gerais (MG), Brazil

11th November 2014Monterrey, Mexico

What is Shared Value?

Shared Value

Competitive advantage CSR

Bottom of the Pyramid

Inclusive business models

Local Economic Development Integrated and sustainable

What is Coffee?

Commodity Arabica in the NYSE

Is it really a commodity like other grains?Little value not really shared

Producer Industry Distribution

Lets see our reality…

Coffee in Minas Gerais

BRAZILProd. 50MiCons. 20Mi

MGProd. 20MiJobs 100.000

WORLD144 Mi bagsUS$ 81 bi

First steps in Minas Gerais1990s

Producer Industry Distribution

+ Quality= Premium

Evolution in Minas Gerais2000s

Producer Industry Distribution

+ QualityCertifications++ Quality= Premium

Minas Gerais today2010s

Producer

+++ Quality

Minas Gerais today2010s

Producer

Regional Brands

Minas Gerais today2014

Industry

Development

20142005 2010

Multinationals

Regional

Specialty

2000

How to help MG >400 industries to compete against

strong multinationals and the concentration of distribution channels

2014

1065%

1200

Nestlé

Smuckers

Strauss

43,5% market

1. Understand business segmentsEXPERIÊNCEPRODUCT

2nd WAVE3ª WAVE

1st WAVE

QUALITYQUANTITY

1. Understand business segmentsEXPERIÊNCEPRODUCT

2nd WAVE3ª WAVE

1st WAVE

QUALITYQUANTITY

• Fresh• Industrial• Gourmet chanel• Drink• Certifications /

Country

• Ultra fresh• Semi artesanal/ art.• Gastronomy.• Experience.• Origin (story of the producer)

• Not fresh• Economies scale• Masive distribution• Product• Brand

Which segment is better for MG cluster?

We went to see where 2nd and 3rd Wave businessmodels are expanding.

Fragmented business with micro, small a medium companies

Business dominated by multinational

companies

EXPERIENCEPRODUCT

2nd WAVE 3rd WAVE1st WAVE

Competition among

Medium and large

companies

50% comom coffee

United States of America (US$)

Seattle, Portland, São Francisco

50% specialty coffee

SpecialtyCoffee Meca

World Reference in new trends and business models

Example 2nd Wave Specialty coffee

small lots fresh grains superior quality

New generation of foodies and roasters

1966

Food Service franchised

Own coffee shops

InstitutionalDifferenciated supermarkets

Growing strategically

A new type of coffe

CA180

Fonte: www.peets.com

32

57

18

8

4

With a good number of coffee shops andgood quality

Menu today

Fresh product made in the day by order,

“small” lots, by hand

Company improving quality day to day with focus on freshness

Recognition of the quality on the price

Portland, OregonExample 3rd Wave Specialty coffee

Sell specialty coffee with >86 points to >1000 coffeeshops, restaurants and shops at the highest price of themarket!

Do they really sell coffee or someting else?

Adam Maclellan

Mainly with own coffee shops and selectedpoints of sale

Build a brand = Identity

9 owncafeteriasPortlandSeattle

Los AngelesNew York

1000 selected

cafeterias

Some highend

restaurantsNYSF

Gourmet naturalfresh

shops andsupermarkets

SEATTLE PINE 12TH

PORTLAND DIVISION BELMONT DOWNTOWN STARK THE ANNEX

NEW YORKW. 29THW. 8TH

LOS ANGELESS. SANTA FE

Identity: Show room + business

Identity: Focus on coffee

Service = Training + Maintenance

Quality = Purchase + green coffee controlquality

Roasting Quality = Equipment + People + Freshness (4 industries in the country)

+ Control Quality

Semi artisanal process

3rd Wave strategiesSpecialized

Service

Marca Branca

Identity

+

+

QualityIdentityService

Quality Identity

Service

3rd Wave = Higher value with the participation of all the value chain actors = Shared Value

Producer Industry Distribution

QualityIdentityService

QualityIdentity

Delivers the experience

First results in Minas Gerais

Firsts results in MG

Recognition to many people working for it..

Thanks to the institutions that support this work