Agribusiness upbeat CIC Holdings ready with ‘Plan 2020’

Achieves major breakthrough in rice farming, expands in dairy and livestock; makes key suggestions to way forward

CIC Holdings Plc, which is predominantly an agriculture focused company, has formulated what it called the ‘Plan2020’ as the Group’s blueprint for future progress in the next eight years based on key learnings and successes of its endeavours in recent years.

“One of CIC’s great strengths has always been our forward planning and clear focus on the future. We have formulated ‘Plan 2020’ (a Twenty-20 plan), which is the Group’s blueprint for its future progress up to the year 2020. Whilst much of this strategy is going through a process of research and development, we can speak on our intentions to further develop all the thrust areas,” CIC Holdings Managing Director Samantha Ranatunga told shareholders in the Company’s Annual Report for the financial year ended on 31 March 2012.

He said that there were significant achievements in FY2012 and the years ahead should see CIC playing an even greater role in the agriculture sector of Sri Lanka and an equally important role in nurturing the life of the people.

Ranatunga said “building capacity, adding value and creating a nutritional platform – our key initiatives in remaining relevant” was the thrust of CIC over the course of the year under review.

“To these thrust areas I would also add our proactive drive to re-invent ourselves at key moments in time, adapting to changes and changing needs of the market and the operating environment we find ourselves in. This really isn’t new to CIC; we’ve been doing this ever since 1991, when we took a major step to leave behind to some degree, our history in chemicals and enter the world of agriculture and food production. Bringing the concept of re-invention up to date, CIC was formerly an input supplier; we then changed tack to partner the farmer, providing him with technology that has helped increase yield and quality. Re-invention must go on if we are to stay ahead in the market and the outside environment,” the Managing Director emphasised.

Agriculture

He also said CIC as a predominantly an agriculture focused company has over the years, grown a sizeable ‘seed to shelf’ enterprise that in terms of scale and impact vis-à-vis the Sri Lankan context, allows it to claim ‘Redwood’ status in the country’s agricultural sector.

“The end of the 30 year war brought much ‘good news’ in its wake for the Nation and its people. From an agricultural perspective, one of the best pieces of news was the gradual return to full cultivation of nearly 100,000 hectares of prime agricultural land in the North and East. Their return to cultivation, saw the produce of these lands reaching consumers across Sri Lanka. As a result of this, consumers today enjoy an influx of vegetables of good quality at low prices in markets of the South, thanks to the return to cultivation of the farmers in the North and East,” Ranatunga said.

His Review in the 2012 Annual Report stated that one of the issues that prevailed during the year in review was the surplus rice production, with farmers unable to find a market for their produce.

“To our mind, finding a market should not restrict us to the local market place alone. To do this however, we need to be producing more rice varieties that are in demand in international markets. At present, local rice production by and large, has not reached internationally expected standards in terms of customer demands for variety and quality,” the CIC MD said.

According to him the company began to address this issue about three years ago by setting up a high quality milling facility where we started producing export quality rice varieties. “This business made great strides and is a profitable operation for CIC today. This success has prompted us to urge the Government to let us partner a scheme to move into the cultivation and production of rice varieties that have a ready export market,” he said adding “This is an example of how we can build capacity and produce value addition across Sri Lanka.”

Another issue that prevails is the high cost of production Ranatunga said and pointed out that even with fertiliser subsidies, Lankan rice was less competitive in the general market. “It is an issue that must be dealt with at various levels,” he stressed.

He said that CIC works with over 20,000 farmer families some of whom grow a cross section of rice varieties for export. Yet in terms of scale, CIC is an operation involving only a small percentage of the total market. Sri Lanka produces as per the current farmer estimate, a figure between 500,000 to 1,000,000 tons which could be in excess of the country’s need. “However, unless we invest into exportable varieties, the returns to the farmer could diminish in the medium term. This is a critical area that we need to address,” Ranatunga said.

Commenting on another area of importance in CIC’s portfolio - herbal agribusiness under the ‘Link’ brand, the Managing Director said Link too has a vibrant outgrower family numbering over 100 and a dedicated 20 acre farm.

“Sometimes it is easy to lose sight of the fact that the herbal industry relies on plants, often rare indigenous varieties, which grow wild; they aren’t always products of organised cultivation. Our model has sustainability at its core, which is why we grow our own requirements without indiscriminate harvesting of natural reserves,” he said.

“We draw on the synergies of our Tissue Culture Laboratory here, to come up with solutions for growing certain forest species under controlled farm conditions,” he added.

Dairy and livestock sector

CIC’s foray into the dairy sector began on a small scale in the Eastern Province two years ago with the setting up of a small manufacturing plant in Siddhapura, collecting milk in the area and producing yoghurt. At that time, no major brands were introduced in the Eastern Province and yoghurt making remained a cottage industry which was not up to regular standards.

“Our moving into this industry helped especially the school going children to gain access to high quality yoghurt and other milk products. We had a ready market and demand and acceptance rates were extremely high. We are gratified to note the fact that today, many brands have moved into the market, which augurs well for market growth and more importantly the nutritional well being of the people,” Ranatunga said.

CIC has been able to give a significant impetus to this sector this year, with an investment of Rs. 650 million to expand and upgrade the scope of its enterprise to encompass value added milk products.

“Our milk collection capacity has gone up to 5,000 litres a day and we expect to double that in the next year and a half. We are looking at a collection capacity of 15,000 litres a day in years to come,” the CIC MD said.

After initially working in collaboration with United States Agency for International Development (USAID), CIC began setting up its own milk collecting societies and today it has 50 such societies as well as chilling centres bringing the milk to the plant at Siddhapura, where value addition process takes place.

Ranatunga said CIC has interests in the dairy livestock sector, which increases the availability of nutritionally rich fare for the public. “It is also a good example of our capacity building efforts. CIC’s livestock breeding program produces high yielding strains of cattle for purposes of obtaining produce for our own consumption as well as to distribute the young animals to farmers in the East. We have a herd of nearly 1800 buffalos now. Since we operate predominantly in the dry zone, buffalo in comparison to cattle are much more drought tolerant and produce milk with a high fat content; actually they have double the fat yield of a normal cow,” he added.

Commenting on another aspect of CIC business – egg and poultry, lying firmly within the ‘nutritional platform’ Ranatunga said currently, in terms of egg production, CIC is a dominant force in this field; however, the Company is looking to double our output in the coming year.

“As a ‘nutrient force’ eggs have few equals; yet due to a variety of factors the consumption of eggs particularly by the youth has been lacking in rural Sri Lanka. This is a trend we wish to play a part in reversing,” he pointed out.

As regards to poultry, it is one of the cheapest sources of protein in Sri Lanka today. CIC is on a rapid expansion program again on the meat processing as well as the day-old chicks and hatchery aspects. Crucial to any poultry enterprise is, good quality day-old chicks and adequate hatchery facilities of good quality and capacity.

The Managing Director also said that one of the key pillars of CIC’s business enterprise is value addition.

“Our approach has always been to ‘straddle’ the complete chain, from raw material input through processing and production to end products of great variety and quality. In the poultry sector, we produce all the chicken ourselves. We do not buy any chicken reared by outgrowers. This is the reason that we have a very unique identity; we can certify with complete assurance that our poultry is hormone and additive free. CIC controls the entire process, which is guaranteed by us. This is one of the main reasons that, CIC has been able to produce consistently high quality products which we retail to stringently quality controlled buyers such as SriLankan Airlines and Nestlé to name just two,” Ranatunga disclosed in the 2012 Annual Report.

According to him initiatives are also being taken on fruit and vegetables where CIC has the value addition component, apart from having a cold storage facility in Kilinochchi area where collection of vegetables and fruits are made before bringing them down to the markets in Dambulla and other Southern areas.

“One of the other key outcomes of our enterprise is that, we are creating access to market for the farmer. We have strengthened ourselves in the Northern Province by acquiring a farm in Vellankulam near Mannar, in proximity to the ‘Northern Rice Bowl’. Here too, we are working with farmers and facilitating the transfer of technology, which will improve their livelihood significantly,” the Managing Director said.

As a value addition to the fruit and vegetable segment of CIC’s business, it operates a ‘Supermarket Model’ selling fresh fruit and fruit juices and other farm fresh products grown in our farms.

Branding and Kotler

In order to gain reputation as a reputable manufacturer, CIC has converted the former KVC brand to the new identity of the CIC brand and Managing Director said this was another area where CIC has worked extensively to bring farm fresh produce to the urban area and add to the nutritional improvement effort in the country.

He told CIC shareholders that FY2012 has been one of the substantial expansion during which the Company strategically homed in on a few key areas and gave them greater focus.

“Also embracing our new identity and pay off line ‘Nurturing Life,’ we have tried to find common ground between our companies and to leverage the synergies that exist thereby generating more cohesion and collective action amongst the various Strategic Business Units (SBUs). We have cultivated a much greater group focus. One example of many, of Group synergies at work is the manner in which our agri businesses grow and manufacture products for our seeds business. All such cohesive activities have been streamlined and the linkages strengthened at every given opportunity,” Ranatunga said.

During the year, CIC has also been privileged to meet the renowned marketing guru Philip Kotler and acquaint him with the Company. Prof. Kotler was impressed with what he saw and spent quality time at CIC’s Dambulla complex extolling the virtues of what is termed the 360 degree marketing model he saw in operation.

“He (Kotler) saw how the farmers visit the complex to purchase vital inputs and obtain advice and guidance on agricultural issues whilst in the same complex we have finished produce such as jams, cordial, yoghurt, fresh fruit juice and rice among others, for sale. Prof. Kotler also admired the manner in which he said CIC had made itself relevant to the farmer, imparting knowledge and other inputs and buying back quality end produce,” Ranatunga said.

“Prof. Kotler used CIC as a case study subject at forums both in Colombo and in Bangladesh where he commented that CIC remains relevant to the customer at all times, is focussed and has the ability to change with the customer and the operating environment,” the Managing Director added.rating environment,” the Managing Director added.