ViveAgro Founders Felipe & Juan Pablo Arbelaez Revolutionizing Colombia’s Freshcut Supply Chain, Selected As Endeavor Entrepreneurs Of The Year
Above photo: ViveAgro Founders Juan Pablo Arbelaez & Felipe Arbelaez
During the celebration of Global Entrepreneurship Week recently, the two brothers Felipe and Juan Pablo Arbelaez, founders of Vive Agro, were selected by Endeavor Colombia as the 2014 Endeavor Entrepreneurs.
Local panelists on the selection committee noticed great potential in the venture of brothers Juan Pablo and Felipe, who shared with the panel those challenges they have faced since launching the company in 2011, when Juan Pablo Felipe and identified the need to provide traditional and fast food restaurants with quality ingredients that arrive ready to use in their recipes. Since that time, the Arbelaez brothers and their team have continuously offered their customers pre-washed and prepared produce, already disinfected, cut, packaged and ready for cooking or consumption. This innovation significantly reduces labor costs and preparation time, and increases productivity of employees, business efficiency, and allows restaurants and food service outlets to operate with less staff but no sacrifice in quality.
In just three years, Vive Agro became the leader in the Colombian market, and the company is beginning to expand internationally. Additionally, Vive Agro takes seriously its social commitment, by contributing to the strengthening of Colombian farmers.
Vive Agro is headed to the International Selection Panel that will be held in Chile in April of 2015, which will decide whether Felipe and Juan Pablo Arbelaez will be recognized as global entrepreneurs of the year.
Endeavor is a global network created 17 years ago that seeks to create sustainable economic development in the 20 countries where it operates. Endeavor provides services that include domestic and international high-level connections, access to events of entrepreneurship and investment forums, and developing strategic advice aimed at breaking down barriers to growth in business. Endeavor Colombia was founded in 2006 and currently has 47 selected entrepreneurs leading 25 companies which, according to the organization, generate 0.17% of GDP in Colombia and employ more than 8,400 workers.
Finance Colombia’s Loren Moss recently had a chance to speak with Vive Agro’s Juan Felipe Arbelaez to discuss Vive Agro’s key to success and future prospects.
Finance Colombia:Tell me about the concept of Vive Agro.
Juan Felipe: Vive Agro began four years ago. Alongside my brother, we began with an idea to connect the farming community, in other words, the agricultural industry and what is produced on farms in Colombia with the city. We decided that what had to be done was to add value to the vegetables that farmers were planting in the country to be able to pass them on to the final consumers in the cities via large fast-food chains, such as Subway, Burger King, and El Corral.
We realized there was an unattended industry where these value added vegetables, called “freshcut” in the United States, in Colombia, this sector hadn’t yet been developed. There were some initiatives, but they were very artesanal and they did not have the sufficient processing and food handling technology that our customers so we realized that there was an untapped market. We noticed that large multinational companies were coming to our country, companies like the ones I mentioned before: Subway, Burger King, Chili’s, most of these big American companies expressed major interest in entering Colombia. We looked for investors to establish a freshcut facility. This was the first facility in Colombia with the technology sufficient to meet the quality standards that the multinational companies require. So we found the investors, closed the investment deal, and today we have a first-class facility for pre-cut “freshcut” food, with HACCP certifications. These are the certifications for food processing best-practices that our clients demand from us.
That is how we basically got into this industry. My brother and I had a huge interest in developing the agricultural sector, which plays an important role in the development of our country. This sector had been neglected and the government hasn’t paid enough attention to it.
We as consumers are demanding more and more information about the product: What kind of water was used in irrigation? What fertilizers and pesticides were applied? All of this is advancing and evolving the added value produce industry. Nowadays customers are more conscious of what they are buying.
Finance Colombia:It seems very interesting to me. Because the Colombian market is modernizing and companies like the ones mentioned before: Subway, Burger King, they have their standards and their international norms. I saw interviews with some farm owners, where they said that they are now being held to high quality standards, not necessarily meaning that the food was bad before, but that they want uniformity in the products across international markets. Whereas french fries at a McDonalds in Colombia, will be the same as in a McDonalds in Canada, right? So it seems to me that they might ask you guys for potatoes with a specific percentage of starch or something similar and that a company as sophisticated as yours can comply with the demands of those companies that are after markets in different countries, right?
Juan Felipe: That is exactly what we do. As you correctly said: How much starch should a potato have to be placed on one of those chains, or what are the characteristics of a leaf of lettuce so that it can be put into a hamburger? All of those needs and requirements are things we communicate and transmit to the farmers and we train them so that they can produce, complying with the requirements of the customers, and not the other way around which is what happened before in Colombia. Farmers would sell their products without any guidance, would try to sell their products to the distributors or the central wholesale markets, trying to sell their products at very low prices with no standards or traceability at all, the foodservice consumer not even knowing the origin of the product. That is what we were getting practically every day on the tables in our Colombian restaurants. So what we did was to connect the farmers and producers with the needs and requirements of the urban foodservice consumers that were constantly becoming more demanding as the standards increase and as the consumer becomes more aware of what he or she is eating. We as consumers are demanding more and more information about the product: What kind of water was used in irrigation? What fertilizers and pesticides were applied? All of this is advancing and evolving the added value produce industry. Nowadays customers are more conscious of what they are buying.
Finance Colombia: We have seen it with coffee. There is a demand for fair trade coffee and it involves companies treating producers in a fair manner, and they make these sustainable products. They have good labor deals with the farmers. I also imagine that there are companies that want to understand every link of the supply chain, as they say, from the soil up to the oven. They want to know the history and provenance of the food, right?
Juan Felipe: Exactly. You explained it perfectly. That is also what we do at Vive Agro. It doesn’t only take place with the coffee industry, but with us: it also takes place with lettuce, potatoes or carrots where people demand to know what is it that they are eating, how they are eating it and who planted those products—how were they farmed, even what payments they receive, how they were treated—We can safely say that there is a consumer today, pushed in part by social media, who is demanding more from the points of purchase where they buy their food.
Finance Colombia: And how did you catch the attention of Endeavor Colombia? How did they discover you and how was it that you won their accolades?
Juan Felipe: Well, with Endeavor there is a very interesting story. Some of our main partners have been Endeavor entrepreneurs for some years. Ever since we created Vive Agro we have had Endeavor in our minds but we knew that they were a very demanding network and organization and that we had to fulfill many requirements in order to participate in their contest. We first started with contests at a local level. Emprendepais—it belongs to La Fundacion Bolivar Davivienda—had these entrepreneur incubators. We participated in the contest called Emprendepais and didn’t win, but they connected us with Endeavor and they took us and began training and guiding us so that we could participate in their national contest.In that contest, Vive Agro successfully presented to a national panel, but that was only the first step. From there, we travel to Chile in April to compete with other businesses in a global contest.
Finance Colombia: So tell me about the future of Vive Agro? Now that you guys are well established and already have a well known client list, what are the future plans, what are the future innovations with regards to the international markets, exports, new products or new processes?
Juan Felipe: Well, right now we are receiving capital from a new partner, a very large mutual fund that recently made a significant investment with us. We are beginning the construction of a larger facility with a lot more technology that will allow us to execute an expansionary plan in the entire country. Vive Agro’s objective is to become the national market leader. There is still a lot of available potential, the produce market in Colombia is calculated to be worth 900 million dollars.
That means that there is still a lot of space to grow here in Colombia, but I will tell you what we have planned for exports. We know that here in Colombia we still have a lot of untapped markets. For example, Vive Agro has no presence in supermarkets, in the retail sector. Another example is the hotel industry, which is undergoing lots of local expansion.
Let’s say there are three vehicles for growth in the company: One is to penetrate deeper with the restaurants we already have as clients. Every day we have more multinational food chains entering Colombia. Two would be entering the hotel market. We of course have a very clear vision of what we want to do in the hotel’s market here in Colombia and three, serving the catering industry: Companies like Sodexo, like Compass Group.
Additionally we want to be in the retail market in supermarkets such as Exito, Carulla, Olimpica, these are the main competitors in the supermarket industry. Further ahead there are clients like Burger King and Taco Bell who are asking us to export to countries that don’t have a supply of value added produce, we are talking about countries like Panama or the Caribbean Islands and us by having a certified facility for Taco Bell for example, we could be providing them with product. So Vive Agro is not only focusing on the national market but it also has a vision to export.
And let’s say, it’s not only about vegetable products but also meat products or other agricultural products in Colombia. Since we already have the supply chain, we would only be adding products to those channels.
Finance Colombia: Between you and me, what frustrates me when I am in Colombia is looking for high quality cheeses. This is my personal opinion, but it is something I miss when I am in Colombia. Finding some good international cheeses, but maybe that’s only one consumer’s demand.
Juan Felipe: But it is true. Here we lack a culture of ripened cheese, we consume fresh cheese but the demand for ripened cheese is very small. Even thought there are some stores that sell these products, the average Colombian consumer is still very basic in his or her knowledge about cheese.
Loren:I am optimistic because I remember ten years ago on my first trip to Colombia there was no wine variety. Gato Negro, Concha y Toro, Casillero del Diablo, and that was it! But this June I visited Expovino and wow! I went there with the Sommelier of El Cielo Restaurant and I can see how everything has changed.
So, what is the investment environment for a company like yours? How do Banks treat you? In a more traditional industry like food distribution is it hard to catch the attention of investors or venture capitalists?
Juan Felipe: Well, it hasn’t been easy to find investors. I think they come to us because we belong to a network like Endeavor which connects you with the funders or the people who can be potential investors for your company. I think that Colombia is still very behind in accessibility for entrepreneurs to investment, especially start-up phase businesses. We at Vive Agro had some startup capital but I know that for some startups it is very hard to find those initial funds. When you have a good idea, Colombian investors tend to wait until you prove your idea can be profitable before they support the idea and invest. If you compare that to the US, we are still very far behind when it comes to having angel investors who support and invest in ideas when these ideas are still only on paper.
I do believe that the right environment is being created so that our country moves forward. I understand that the Colombian economy is driven mainly by small and medium sized companies, and these companies need more help and financial support, and above all, they need managerial help to put them on a growth trajectory.
However, I see that in the last four years this has improved a lot. There is a new dynamic. For example, Fundación Bolivar has been betting on projects like Emprendepais to help the companies that make sense to get started. This builds a network of potential investors and banks that will make the sector grow. So even though I see that we are still very far behind, I also see that Colombia is on a good path. The government has some good initiatives. Innpulsa is an initiative by the government that is worth mentioning. With this initiative, they offer grants to entrepreneurs who start a business. So I do believe that the right environment is being created so that our country moves forward. I understand that the Colombian economy is driven mainly by small and medium sized companies, and these companies need more help and financial support, and above all, they need managerial help to put them on a growth trajectory.
Finance Colombia: True, and the government has some agricultural programs to promote development, or what your company is doing with the agricultural sector?
Juan Felipe: Yes, yes. There are a couple of things, For example, we now have the financing of Finagro, which is a state owned entity that helps farmers, especially with crop finance. However, there still is the need for a stronger presence from the government in our financial institutions as well as in the agricultural sector. It is not easy for the banks and the government to open up completely to the agricultural sector, so although there are good initiatives, there are also many restrictions as to the capability of a farmer to find financial support and loans. As I said, I think we are on the right track, but we are still far behind. Colombia has a true agricultural potential. Here we have the right weather conditions, we have the water, we have the mountains, we have the valleys, and then we ask ourselves: How is it that Peru and Ecuador are ahead of us? What have they done differently than us? Aside from the fact that they don’t have a military conflict like we do; they have surpassed us in agricultural technology and in the importance that their governments have given to their agricultural sectors.