Could you please tell us some difficulties that FCV has faced when carrying out the Dairy Development Programme?
We always have difficulties and they vary. We see challenges in our efforts to create a community shared value. I first of all want to talk about "value." Creating shared value means that a company works with farmers. Creating value is difficult while the cost for creating such a value is high. The challenge to FCV is how to help farmers reduce the cost and increase the value.
With respect to State management, we find that policies on agriculture in general and dairy industry in particular lack proper attention and investment, ranging from long -term planning, land-use rights certification, land-lease certification and infrastructure development to rigid procedures in application of provisions on taxes and charges, credit and environmental protection, etc.
Socially, the speed of urbanisation is a challenge to the countryside and agriculture. The average age of agricultural workers gets higher, meaning that young rural workers prefer working in urban factories to “tending cows” in the home town.
For farmers, it is very difficult to change their cow-tending behaviours but it is much more difficult to change their thinking from short-term gains to long-term benefits and sustainability.
Hence, when a company performs inclusive business, low-income people will face subjective difficulty and even doubt the mission and strategy of the company as well as the commitment of the company leaders, from tenure to tenure, to those long-term values.
FCV is seen as one of multi-national companies which take the lead in inclusive business in Vietnam. So, would you be kind enough to share FCV’s experience in this matter?
To achieve sustainable development, the inclusive business model must generate high economic efficiency for both farmers and buyers. Smallholding, fragmented husbandry cause price disadvantages and difficult access to services regarding feeds, veterinary and quality management, thus resulting in higher costs and lower incomes. Meanwhile, buyers meet with disadvantages in vehicle investment, personnel and transport freights. Shifting from smallholding fragmented and individual farming to large-scaled centralised farming is a golden law of agriculture.
The effect of right and scientific ways of doing together with partner’s fair and mutually beneficial attitude helps FCV gain the trust of farmers; hence, every action plan of FCV is responded and supported by all stakeholders. The confidence of farmers also helps us win the trust of local governments.
In the past 17 years, from the first date of receiving 190 kg of milk from 10 farmers, FCV today purchases 240 tonnes of fresh milk daily all over the country. Apart from increased quantity, the quality of fresh milk from farmers supplied to Dutch Lady is also the highest. If Vietnamese standard (TCVN) on bacterial concentration in fresh milk is 1,000,000 cfu/ml, the milk supplied to Dutch Lady is 200,000 - 300,000 cfu/ml. Over 4,000 individual farming households are gathered into residential inter-groups and land inter-groups. In each group, we invest to build and install a refrigerating station. This equipment is connected to the company’s information system and is automatically entered into the system. With on-site quality control equipment, the milk quality of every cow herd is examined before being poured into the general tank. The software system immediately processes the information and notifies farmers of the amount of money earned from that milk sale via SMS messages. Each household is fully responsible for their milk quality and substandard milk is rejected. We pay for milk quality as we believe that this will motivate farmers to invest money and effort to apply Good Dairy Farming Practices (GDFP) recommendations and Hazard Analysis and Critical Control Points (HACCP) on food safety.
At the same time, the company also connects groups of dairy farmers with providers of husbandry technical services and veterinary services and with feed dealers to make group purchases for lower prices. This is the precondition for agricultural cooperation to head for large-scale production to on a voluntary basis and on a sole criterion, that is, effect.
.jpg)
What are FCV’s competitive advantages against other competitors and what are the main factors to create the trust and loyalty of customers to FCV’s products, especially Dutch Lady milk?
Currently, Dutch Lady milk accounts for over 50 percent of FCV's revenue. Believing in the "Creating shared value" philosophy, FCV is persistent with the dairy development model with smallholding farmers. The objective of this model is to help farmers to develop dairy industry into a sustainable agricultural economy.
* Economically: Each farm must have at least 30 milk cows, each of which has an average output of 15 kg a day. As such, daily income of farmers is enough to offset livestock production costs and ensure daily needs for their families and accumulate surplus to reinvest, expand cow herds and upgrade to professional livestock husbandry.
* Regarding food safety: Fresh milk must guarantee protein and fat contents, must be free of antibiotic residues and must have as low bacterial concentration as possible. The higher milk quality is, the higher milk price is and farmers' incomes thus increase. Milk cows must be free of disease and sick cows must be strictly separated.
* Regarding environmental protection: Cow wastes are used to generate biogas to provide heat and light for farmers, composts and fertilisers for pastures and maize fields. Protected environment helps reduce production costs, prevent disease and further enhance economic efficiency.
* Socially: High dairy farming income together with the scientific and technological application in farming practices will make farming an attractive career for young rural workers, thus reducing pressures on urbanisation and motivating new countryside development.
As known, FCV has proposed solutions to build "Sustainable dairy farming zones" to produce high-quality fresh milk with highest productivity. How will FCV carry out this issue in the Vietnam dairy development strategy?
We are working hard to develop the company's shared value generation towards public-private partnership (PPP). Farmers need land and they need to be met with sustainable development requirements in terms of economy, society, environment and disease. These requirements are out of reach of businesses and farmers but they require the involvement of central and local governments. Public-private partnership requires three parties, namely businesses, government and community. All stakeholders must contribute their capital in shared economic projects and they need appropriate and transparent legal regulations to sustain this relationship in economic life.
The sample model is the ongoing centralised dairy farming zone in Moc Bac commune, Duy Tien district, Ha Nam province. The Provincial People’s Committee of Ha Nam funded infrastructure construction (roads, power grids, bridges, culverts and ground levelling) and granted land-use rights certificates concerning 66 ha. The Dutch Ministry of Foreign Affairs sponsored 5 million euro for dairy consulting, planning, technical support and equipment supply. Dutch Lady contributed capital to design and plan the entire zone, build sample farms and technical equipment for quality control and milk collection. De Heus invested in building feed processing plants. Farmers contributed cows and stables.
In the next five years, we will expand this model to be at least three concentrated dairy farming areas in three different ecological zones. Each zone will have 50 farms and each farm covers 6-7 ha and has 80 breeding cows. Concentrated dairy farming zones will make a strong push to change the face of agriculture in beneficiary localities across the country.
FCV receiving the Second-grade Labour Order in 2011 and FrieslandCampina Ha Nam receiving the Third-grade Labour Order in 2012 are considered the recognition of the Government for FCV's contribution to Vietnam. But, this is certainly not all, do you still wish to continue to develop FCV and raise the image of Dutch Lady milk?
Source: Vietnam Business Forum Magazine
