Interview with Paulo Hegg, Export manager “Tirolez” company

Источник: The DairyNews
“Tirolez” is the only Brazilian natural cheese enterprise which is homologated to export to Russia. How did this company win Russian consumers hearts? What kind of chees is the most popular among Russians? What is the company’s current position on Brazilian dairy market? See the answers in the special interview for The DairyNews with Paulo Hegg, Export manager “Tirolez” company.
Interview with Paulo Hegg, Export manager “Tirolez” company

Sixth world place

DN: Paulo, why did Tirolez decide to begin export to Russia?

PH: To start I should say, that more than two hundred million people live in Brazil. And we started to get involved in exports a few years ago. “Tirolez” as a private company believes that it’s a good strategy for the future. Being abroad means that we have more information about the trends and the markets, we learn a lot by seeing our competitors, what they are doing. And if we start exporting to a foreign country we have to adjust our product in terms of labor, packing and sometimes in terms of specifications. So everything is positive to the benefit. By the way, Brazil is the sixth largest milk producing country in the world.

We’ve started to get involved in export since 2004. “Tirolez” exported to different countries in the world - to Japan, to Middle East, to African countries, to the United States, South America and now to Russia.

Russia is a good market for Brazilian products, as you are a big consumer of dairy products, mainly cheese. I would like to highlight that your market is satisfied with our quality. Tirolez gets more and more orders and we hope we could expand our business here, because of the acceptance of our quality and price competitiveness as well.

“Tirolez” producers 90 types of cheese in different packings and we have a national distribution chain. Brazil is also a very big country with difficulties of logistics but we have a very good distribution network. We are exporting to the Amazonian, to the South, to the West, to the East. We see an increase in the purchasing power of the Brazilian population. There will be more and more demand for cheese and milk related products. But Brazilian dairy cows have still low productivity.

DN: And what is the productivity on Brazilian farms?

PH: The average productivity is 6 liters per animal per day.

DN: It’s rather small quantity.

PH: Yes. It’s the average. Of course, we have certain areas where we have much higher productivity concentrated in good genetic animals. But average is like that. If you compare to Argentina or Uruguay, you would be surprised, as their productivity is between 12 and 15 liters per head. It is possible for us to achieve these figures but it will take a long time because our big-big herds are spread all over a large country.

DN: What is the quality of this milk (fat and protein)?

PH: We have all sorts of qualities. We have new areas that developed feedings but we have already very advanced pools of production with very high quality of milk. So as I said again the average is reasonable in terms of quality but our industries are concentrated in the best milk producer areas in Brazil, the most traditional. Why? Because we have to have good quality milk in order to produce good cheese with higher content of solids in the milk.

It’s very difficult to give you a complete picture precisely because of the dimensions of Brazil. Areas where we decided to build up our factories are among the best places where to get good quality milk. We have 6 factories in Brazil. Three factories are in the state called Minas-Gerais, this is the most traditional area of milk producers in Brazil with the highest production among all the Brazilian States, they are the number one in terms of output. Then we have two factories in São Paolo which are competing against agricultural crops mainly sugar cane, orange and soya bean. We have also very good quality of cows there. And then we have one factory in Santa Catarina. It is a new area where the milk production is increasing every year. It’s the southern  part of Brazil.

DN: What volume of milk does your company process per day?

PH: We are processing around 700 to 800 thousand liters per day but exclusively producing cheese., just cheese. We don’t pack milk, for instance, we don’t do yogurts, only cheese. We are considered one of leading cheese Company and one of the largest in Brazil doing such a huge range of cheeses.

DN: How many suppliers do you have in order to get such good volume of milk?

PH: We have about 1,400 suppliers. It’s quite difficult to understand, as in Argentina the number of suppliers is much less, as they have bigger producers. In Brazil we have a lot of medium size and small producers. So you can imagine the logistics of it and what we should do to keep the good quality of the milk until we receive it at the factory, having had to build up refrigeration tanks all over the production areas in order to keep the good quality of the milk refrigerated until the truck goes to collect and transport to the factories.

Hair or Moustache

DN: What is the current price for raw milk in Brazil at this moment?

PH: It’s 0.46 – 0.47 dollars per liter.

DN: Does the government somehow regulate the farmgate price?

PH: No, just market regulates itself the price. We have to follow the market prices. If multinational companies such as Nestle or others decide to buy more milk for X reasons, at certain moment and time because they might have export contract to comply with it, for instance, price increases. Our suppliers come to us and say: “Listen! I got here a demand for instead of 45 cents for 47 cents. I had to sell it for 47”. So we have to pay to cover that offer. Otherwise we lose the milk. So this is how it works in Brazil. That’s why it’s important also for the consumers and for the importers to be aware about that, i.e., from time to time we have to up to date our prices. This is the challenge for all of us.

This is something quite particular in this sector. There is no such a thing as a contract, an irrevocable contract, a purchase contract. No. As like we say “hair or moustache”.

DN: How often do You see these fluctuations in the price per year?

PH: I don’t know. Usually when it is a dry season, the prices normally goes up. But this year during rainy season, prices again increased. So we have to adjust ourselves to the situation of the market like we are doing now. In this case I sit down with my people to do a new price list to domestic market, because with all these increases of raw material I have to find a way to knock at my customer’s door and say: “Please, could you pay me more?” This is how it works. It is quite out of control.

The situation works on the other way as well. Whenever the price decrease, we incorporate this advantages into our cost and transfer it to our customers.

Two year of recession

DN: What are Tirolez results of the previous year? How many products were sold? And what was the revenue or sales in the previous year?

PH: 2016 was a recession year for everybody in Brazil. It was not only last year but the year before also. Two years of recession.

In 2017 we measure to have good financial results. But in terms of quantity we almost keep the same level. We increase the revenues because we had to raise the price, because the raw material went up last year. But we could not increase the production which means that the local demand was not what we expect to be. Why? Because of the recession people lost their jobs they started to change their food. Instead of dinning outside they go for fast food or they stay at home.

The whole country and industries had less demand in 2016. Though we suffer less than other spheres because food we need to eat every day. Notwithstanding that, we suffer as well.

In terms of financial results, everybody has to work for profit, to have the success whenever we have a crisis. Important thing is that Tirolez remained on the market leadership, by developing and launching new lines of products. For instance, we have launched this year a new line which is a very successful line which is lactose-free products

DN: This is very interesting.

PH: Although we are in economic crisis the industry cannot stop. So our research and development department continues developing new products and present to the market new things. That’s the way found by us how to keep our company on the same level in the market.

We’ve improved our communication to the market, changing our art work and starting a promotional advertising campaign  To give you a better idea, we changed our Gorgonzola packing and that was a good move. Everybody on the market liked it very much. You should be able to see it on your supermarket shelves and for sure you will agree with us. Its red and shinning color draws the attention, attracting the consumer,  which is good for the supermarket. So we have to dance according to the music.

Consumers’ preferences

DN: What kind of cheese is more popular among Brazilian consumers?

PH: In Brazil 80% of the market is represented by 4 products: first is Mozarella, second is Prato cheese which is equivalent to Gouda, third is the cream spreadable cheese, which is very popular in Brazil, everybody eats it every day. And the fourth one is the white cheese fresh, with a very short validity ( about  one month).

Then 20% of the market is occupied by all the rest. We are also competing with foreign products, coming especially from Common Market. Therefore, we have to be always working on quality improvement. This is the case of Gorgonzola cheese already approved by Russian customers. It is considered a premium product in the Brazilian Market, although its production is still small, if compared to the whole market. There is big potential of growth on the domestic Brazilian market.

DN: Paulo, if we speak about sales could you tell what kind of percentage goes to retail, to the restaurants, cafes and some other chains in Brazil?

PH: Tirolez sells around 20-25% to the big chains. Another 30% goes to distributors. 10% goes to food service and the rest delivers to small shops and bakeries.

Bakeries in Brazil are quite important niche of the market.

DN: What do you mean by food service?

PH: Food service is for food industry. Food industry buys from us ingredients to be added to pizza, lasagna, etc. We have a very popular bread in Brazil made out of cheese, we call it “cheese bread”. All over Brazil you stop by in the middle of the day, take a cup of coffee and one unit of cheese bread. So, this is a kind of food service we provide.

HoReCa is another niche and Tirolez supplies around 10% of products to HoReCa. We don’t want to be too much dependent from the supermarkets. Because they are always pushing us about prices, promotions, advertising etc… increasing their prices more in the products which are considered of being on the preference of customers. Therefore, from time to time, we find our products costing in some of the supermarkets, too much but we cannot do anything against it..

Ideal partner

DN: What was your first export experience in Russia? Could you tell how you started collaborating with Russian consumers, by which companies?  If the veterinarian control was very strong when you penetrated on the market?

PH: Russian authorities went to Brazil and approved our industry for export. We have three industries authorized by the Brazilian Ministry of agriculture to export and the Russian authorities went there and accepted the Brazilian Ministry criterio of analyzis and approved these three industries. So immediately after that I came to Russia, to the exhibition Moscow World Food in 2014. There were a lot of interested companies looking after new source of suppliers, after the financial sanctions imposed by the western countries to Russia and commercial embargo against them imposed by the Russian Government western. We have had a series of interviews, tastings and negotiation before selecting our local importers to sign contract for distribution of  our products in the country.

It took some time for us to understand particularities of the Russian market. And then we had to negotiate with each company to find out which would be the ideal partner for us. We are now working   with two companies very professional, very marketing-oriented people, who are also very cooperative,  flexible and mutually tolerant to overcome some cultural differences as we didn’t know each other very well.

There were some issues that we have to correct as soon as the goods arrived here and they have showed good will and ability to deal with this. So we are happy with them.

DN: What is the name of the company?

PH: One of them is GEK. By coincidence they have very new boots here. It’s under the name of TEK. The other one is Optitrade. So we talked to them to see how we can improve the relationship and we have been approached by the several other people recently as well. So we are talking to them to see how we can accommodate interests of everybody.

So that’s why I have to come to Russian exhibitions to know where we are, how our products are looked by the local consumers, is there any problems with logistics and etc. Maybe there is a need to adjust our products in one or two details, i.e. our importers ask to change packaging by adding some Russian words.

It’s very important to come and be closer to the customers.

DN: What kind of products are more popular among the Russian consumers?

PH: Gorgonzola.

DN: What volume of cheese do you export to Russia?

PH: Now we started to have more regularity. I think our target for this year is 3 containers per month which is about 70 tons to 100 tons. This is our target for this year. We ship a little bit less than that. Sometimes two, sometimes one container, one and a half, so we are sure that we could increase. But this is not only our responsibility.

We didn’t have enough products. For instance, Parmesan is the second product the Russian market likes to import. We didn’t have availability and we could not ship. Now we have increased the production so we have some more availability of Parmesan. And there is one more type of spreadable cheese - cream which we trust could become another good product for Russian retailer and food market,  introduced this year to the market.

Cheese kebab

DN: What countries are the main importers of your products?

PH: Japan, the United States, Angola, Ghana, Chile, Venezuela, Lebanon and now we are going to start Dubai and Saudi Arabia.

I must tell you that there is one product we have presented on ProdExpo. I call it, joking, cheese kebab. Because it is like that. It comes with a wooden stick and ready to be put on the grill. In 3 minutes you have it ready. Grilled and Delicious. This is very popular in Brazil, all over Brazil mainly eaten on the beaches.

We have also a very popular barbecue restaurants in Brazil, who are buying them without wooden sticks and in a larger portion. The Restaurants introduce a metal stick on a unit of  cheese kebab before grilling it.  They are expanding to Middle East, having started to build up 40 restaurants in Saudi Arabia like they did in the United States.

So this is a product that could be also interesting for the Russian market.

DN: It is very interesting because I have never tasted something like that.

PH: Fresh milk taste.

DN: Where may I buy it?

PH: One of the importers delivers it. I saw yesterday there is a site that sells.  So you can buy it on the site- Utkonos.

Umami taste

DN: Japan is a rather interesting market. How did you penetrate on this market? What kind of products are more popular? What volume do you export to Japan?

PH: We’ve exported the best cheese to Japan equivalent to Gauda type but in big volumes of 8 kg. You know why? Because they found that our Gauda has the Umami taste. Umami taste has been discovered by a Japanese guy who discovered the 6th taste. Nobody knew it existed, this 6th taste. But this guy found it and our cheese brings this Umami taste. So that’s why we export there. Then we stopped to export because we lost our competitiveness at that time. Now we are negotiating to resume our exports there. It was very complicated to adjust our product to the Japanese regulations. They ask hundreds of questions of each individual ingredient and we have to send analyses to confirm our information. But now everything is settled. We are going to start at any time, hopefully.

DN: The last question to you. How did you come to dairy industry? Why dairy?

PH: My brothers started the business while I was living in London in 1979.

During a weekend, at the beach, after drinking some “caipirinhas” which is a local alcoholic drink made of sugar cane,  a friend of them said: “Cheese industry is a very good business, it’s profitable”. They said to each other: “OK, why not? Let’s start”. And they started to look after a small factory during few months until they found a very small industry in Minas Gerais. That industry was almost bankrupt. They said: “OK. Let’s buy it”. They bought a very small one. At that time that industry was processing 1 thousand 500 liters per day. They started like that as a kind of entrepreneurs more or less, not crazy but without any proper marketing study. Of course we have experienced all sorts of crisis during this long time. But then, little by little, they decided to concentrate in production of cheese and started to look for specialties, to up grade its quality and develop specialties. And that was what made us different from the rest. So we started to improve the quality, the market started to recognize quality, demanding more and more of our products. So that was a question of luck or craziness followed by hard work, tenacity, seriousness and determination to produce the flavors of the best cheese!!!!

30.01.2024
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