Journal on Chain and Network Science 2010; 10(3): 193-206

A method for strategic planning of food and bioenergy chains (CHAINPLAN)

applied to the sugarcane chain in Brazil
Marcos Fava Neves, Vinicius Gustavo Trombin and Marco Antonio Conejero
FEARP Business School, University of São Paulo, Av. dos Bandeirantes, 3900, 14.040-900 Ribeirão Preto, SP, Brazil; [email protected]
Markestrat (Marketing & Strategic Projects and Research Center), Av. dos Bandeirantes, 3900, FEARP, Bloco C, sl 64, 14.040-900
Ribeirão Preto, SP, Brazil

Abstract

Global competition and environmental factors make it increasingly necessary in many countries to establish a strategic
plan for various national food and bioenergy chains. Neves (2007) developed a simple method (CHAINPLAN) to help
in the process of developing a strategic plan for a food chain, which has been applied to chains in various countries. The
objective of this paper is to report the results of a new application of (part of) this method: to the sugarcane chain in Brazil.
As this chain has an important trade association (UNICA – Brazilian Sugarcane Industry Association) for coordination of
collective actions, the paper focuses on two specific steps: the mapping and quantification of the chain; and the elaboration
of the strategic plan. The chain mapping and quantification procedure, which is the second step of the method, quantifies
an industry’s contribution to the country’s GDP, as well as to job creation, tax generation, and the distribution of economic
activities. In relation to the sugarcane chain in Brazil, it was found that the sugar-energy sector GDP in 2008 was US$ 28.15
billion, equivalent to 2% of the total Brazilian GDP. The estimated total value of sales of the various links that comprise
the sugarcane chain reached US$ 86.8 billion. Completion of step 2 of the CHAINPLAN method allows the chain’s agents
to conduct a macro-environmental and internal analysis of the chain to identify strategic projects (collective actions) to
improve the chain’s competitiveness. This step was also carried out on the Brazilian sugarcane chain.

Keywords: chain mapping, chain quantification, chain planning and management, sugarcane chain

1. Introduction and research problem regularity of the ethanol supply and the sustainability of
production (social, environmental, and economic).
The sugarcane sector is one of the oldest chains of the Internally, Brazil must show that using ethanol in vehicles
Brazilian economy. Since the introduction of the first plants has a number of benefits in addition to financial savings.
(seeds) in 1532, sugar has been one of the most important This would justify further support from the federal
Brazilian products. Although sugar is still important, the government; for example, the level of ethanol in gasoline
sector has undergone a deep transformation in the last 50 could be increased from the current 25% to 30%, and the
years. Besides sugar, the sugarcane mills and ethanol plants Brazilian Development Bank (BNDES) could provide long-
now also focus on ethanol production, and most recently term financing to improve the competitiveness of the sector
attention has turned to bioelectricity, bioplastics, alcohol and increase investments in co-generation of electricity.
chemistry, diesel and carbon credits marketing. All of this is To create a global market for sugar and bio-ethanol, the
in addition to the possibility of using advanced technologies players need to be more demand-driven and they need to
that increase productivity and reduce costs. This is a new develop a strategic plan for the sugarcane chain that will
level of business, in which competitiveness is keen. make it more transnational and sustainable. The elaboration
Progress in the sugarcane chain is not only related to of a process for strategic planning and management of food
technology. There is a growing commitment to social and and bioenergy chains could make this task easier.
environmental issues, like improving the workers’ quality of For this purpose, Neves (2007) developed the CHAINPLAN
life, promoting rational use of land and water, mitigating the method for strategic planning and management of food and
effects of mechanized harvesting, and preserving ecosystems. bioenergy chains, which has been applied to agribusiness
Although advances in these areas have also been substantial, systems in Brazil, Uruguay, South Africa and Argentina,
there is still much work ahead for this industry. Externally, among other countries. It consists of five stages: a review
Brazil must convince critics that the increase in Brazilian of initiatives introduced by the chains’ leaders, mapping
sugarcane production does not negatively impact forest and and quantification of the chain, formation of a vertical
food production areas, and it must also demonstrate the organization for contractual coordination, development of

ISSN 1569-1829 print, ISSN 1875-0931 online, DOI 10.3920/JCNS2010.x186 193

Marcos Fava Neves, Vinicius Gustavo Trombin and Marco Antonio Conejero

a plan of strategic projects, and implementation of the plan. 3. Theoretical background

A recent new application of this method is presented below.
This article does not use a network approach, since the unit
2. Objectives and methodological of analysis is not a network, but rather a food chain. A food
procedures chain is considered here to be limited by the boundaries of
a particular country. Its actors are input suppliers, farmers,
This paper aims to contribute to academic (and corporate) industry, distributors, and service providers. Examples of
efforts to design a planning process for food and bioenergy such country chains are the Dutch flower chain and the
chains, considering various future possibilities in the Danish pork chain.
formulation of objectives, guidelines and strategies to ensure Two traditional approaches to studying chains can be
the sustainable growth of the chains. found in the literature. The commodity system approach
The paper’s specific objectives are to: (CSA) was developed by Goldberg (1968) in the USA in
• Present a method for strategic planning and management studies of citrus, wheat, and soybean production systems.
of food and bioenergy chains (CHAINPLAN). The CSA methodology emphasizes the sequence of product
• Present the results of applying step 2 of this method, i.e. transformations in the system. Goldberg’s research had its
mapping and quantifying the sugarcane chain in Brazil, merit in changing the focus of analysis from the farm to the
showing the financial transactions generated in every whole system, which prevented researchers from considering
link of the productive chain, the jobs generated, the taxes the agricultural sector in isolation from the overall economy.
paid, and the GDP. The second approach, proposed by Morvan (1985),
• Present the results of a macro-environment analysis considers a chain (‘filière’) as linked operations for the
(STEP analysis) and an internal-environment analysis transformation of a good. The chains are influenced by
conducted in order to propose a strategic plan for the technology and have complementary interdependences,
sugarcane chain in Brazil. according to Batalha (2001). According to Morvan (1985),
the filière analysis is an important instrument to describe
The methodological procedures involved (1) a review of systems, to define the technology role in the framing of
the CHAINPLAN method (Neves, 2007), (2) a literature productive systems, to organize integration studies, and to
review related to the sugarcane agribusiness system, and analyze industrial polices, firms, and collective strategies.
(3) in-depth interviews with experts from the industry, Although not used here, there are important additional
government, and trade associations. contributive theories. The supply chain is viewed as a
In accordance with the first step of the CHAINPLAN system that integrates raw material suppliers, factories,
method, we reviewed the contributions made by many distribution services, and consumers (Stevens cited in Omta
Brazilian agribusiness organizations to sugarcane chain et al., 2001). Furthermore, there is the network concept
and these were helpful in elaborating section 4.2. below. in which organizations are directly involved in different
To save space, we have not reproduced many of the different processes that add value in the elaboration of goods and
strategic agendas here. services until the final consumer (Christopher cited in
At the same time, it was not necessary to carry out the third Omta et al., 2001). Lazzarini et al. (2001) integrate chain
step of the CHAINPLAN method, which is to create a vertical and network concepts in a study on net chains. According to
organization for coordination of collective actions. This these authors, the integration of these approaches allows the
paper is part of broader efforts by the Brazilian Sugarcane consideration of existing organizational interdependences
Industry Association (UNICA), the largest association in a network, as well as the different mechanisms of
in Brazil representing sugar, ethanol, and bioelectricity coordination (managerial plans, process standardization,
producers, to increase public knowledge about the sugar and and adjustments), and sources of value (production and
ethanol industry in the country. In particular, the association operations optimization, transaction cost reduction,
wants to effectively convey to the public the benefits of diversity, and ‘co-specialization’ of knowledge).
producing and using clean energy from renewable and Hardman et al. (2002) demonstrated the possibility of
sustainable agricultural systems. increasing the competitiveness of South African apple
Finally, the fifth step was considered dispensable because chain exportations through cooperation among producers,
implementation of the suggested strategic plan for Brazilian packers, and exporters. From the ideas of CSA and the filière,
sugarcane chain has not been done in a centralized way. it is possible to develop tools and managerial activities to
Some strategic projects have been put into practice by improve the chains’ efficiency. Thus, the concepts of Supply
different Brazilian agribusiness organizations, while others Chain Management (SCM) and the set of networks and net
have not been initiated yet. chain ideas are important theoretical concepts and empirical

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 A method for strategic planning of food and bioenergy chains (CHAINPLAN) applied to the sugarcane chain in Brazil

notions for the development of food and bioenergy chains This process was applied in the sugarcane chain in Brazil by 10
(Batalha and Silva, 2001). researchers, who collected secondary and mostly primary data
Based on a chain literature review and empirical research, over a 5–month period. This information was consolidated
Neves (2007) proposed, as a methodological contribution, in a one-page description of the food chain, showing all of
a five-step process for implementation of strategic planning the participants and the revenues of the different links of
and management in food and bioenergy production chains the productive chain in a year of analysis. This method can
(the CHAINPLAN method). This method can be used by be used not only to produce this type of financial overview,
an industry association, an institute, or even government, but also a quantification of jobs and taxes generated by the
to produce a strategic plan for a particular country chain. chain on a yearly basis.
The Dutch Tomato Association, for example, could use it to Elaboration of the chain´s strategic plan, step 4 of the
produce a strategic plan for the whole chain. The method CHAINPLAN method, was applied in the sugarcane chain
is summarized in Figure 1. in Brazil with a view to the following 5 to 10 years of
The focus of this paper is on two specific steps: the mapping development. This process can be summarized in twelve
and quantification of the chain; and the elaboration of the stages (see Figure 3).
strategic plan. Table 2 shows the guidelines and procedures for carrying out
The mapping and quantification process, step 2 of the the various stages of the strategic plan elaboration process.
CHAINPLAN method, was applied by Rossi and Neves The application of this process in the Brazilian sugarcane
(2004), Neves and Lopes (2005), and Consoli and Neves chain demanded a review of literature related to the
(2006) in research on the Brazilian wheat, orange, and milk chain, in-depth interviews with experts from the industry,
chains, respectively. It was also applied by researchers of government, and trade associations, as well as workshops for
the University of Buenos Aires in the soybean chain. This the chain agents on collective actions that could be taken.
process can be summarized in six stages (see Figure 2). Both processes described above are part of the CHAINPLAN
Table 1 shows the guidelines and procedures for carrying method, but they can be carried out separately if so desired
out the various stages of the mapping and quantification by research leaders and sponsors.
process.

Figure 1. The CHAINPLAN method for strategic planning and management of food and bioenergy chains (Neves, 2007).

Figure 2. Process for mapping and quantification of the chain (Neves et al., 2004).

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Marcos Fava Neves, Vinicius Gustavo Trombin and Marco Antonio Conejero

Table 1. Guidelines for mapping and quantification of the chain (Neves et al., 2004).

Stages What has to be done

1. Agribusiness chain The first stage consists of making a preliminary description of the chain participants,
description (in focus) represented in small boxes, based on theory and the researchers’ experience. It is also necessary
to scope which segments will be studied, keeping the focus on the central axle of the chain.
2. Presentation for private- The second stage involves submitting the analysis to chain and industry specialists and
sector professionals and interviewing them with the purpose of making possible adjustments in order to arrive at
other experts to make a description that reflects the current reality of the chain. It is very common to forget
adjustments to the structure participants and agents, and this second stage helps to map all possibilities.
3. Research in associations, The third stage consists of searching for secondary data from sources that have academic and
institutions, and publications statistical credibility, a good reputation, and demonstrated integrity.
for secondary data
4. Interview with profes- After collection of the available secondary data, which in some countries and environments may
sionals for primary data be very limited, primary data are collected. In this empirical research stage, in-depth interviews
are conducted with representatives of several organizations in the chain to obtain information
about the sales of a particular segment of the chain, employment statistics, and amount of
taxes paid.
5. Quantification and Quantification involves determining the turnover of each sector in the chain, through the
strategic proposals companies’ revenues, and estimating several sub-sectors of the chain. To guarantee reliability
of the data , some secondary and primary data are compared to find any incongruities In
this process, at least two different data sources are used to check the results, and additional
interviews are conducted with similar agents as needed.
6. Workshop to verify data Finally, the data are validated in a workshop. Information is sent to participants prior to the
event, and then the numbers are discussed at the workshop. Alternatively, materials are sent to
relevant agents of all links in the chain for verification. The research is then presented to the
press and other institutional organizations.

Figure 3. Process for elaboration of the chain´s strategic plan (Neves, 2007).

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 A method for strategic planning of food and bioenergy chains (CHAINPLAN) applied to the sugarcane chain in Brazil

Table 2. Guidelines for elaboration of the strategic plan of the chain (Neves, 2007).

Stages What has to be done

Phase 1 – Introductory steps

1. Introduction and • Verify whether the chain has plans in place and study them.
understanding • Verify which teams will take part in the process.
• Study plans made for production chains in other countries, for benchmarking.
2. International market • Address threats and identify opportunities created by the so-called uncontrollable variables
and consumer analysis (possible changes in the legal/political, economic and natural, socio-cultural, and technological
with chain approach environments) in the domestic as well as the international market.
• Understand existing barriers (tariff and non-tariff) on the international market and identify
collective actions to reduce them.
• Analyze the final and intermediate (dealers’) consumer behavior and purchase decision processes.
• Describe the main national and international competitors.
3. Internal situation • Identify all the strong and weak points of the chain.
analysis and global • Describe the existing governance structures and the transactions´ characteristics.
benchmarks • Analyze the value creation, resources, and abilities of the chain.
• Analyze the critical success factors of the chain.
• Select, among the chains (which may or may not be competitors), the benchmarks (sources of good
ideas).
4. Objectives for the • Define and quantify the major chain objectives in terms of production, exports, sales to achieve
chain sustainable growth and to develop solutions for the weak points.
5. Strategies to reach • List the major strategies (actions) that will be used to reach the considered objectives in item 4 in
proposed objectives terms of positioning and value capture.

Phase 2 – Plans for Production, Communication, Distribution, Human Resources, and Coordination

6. Production, products, • Analyze productive potentials and production capacities.

R&D and innovation • Analyze products and product lines, as well as complementary product lines for expansion
projects decisions.
• Develop innovation opportunities in the chain, and in the launch of new products.
• Foster partnerships with universities and research centers.
• Make decisions related to the joint construction of brands, and labels for the system use.
• Analyze and implement the certification process for the chain´s sustainability.
7. Communication • Identify the target public for communication (messages from the production chain).
projects • Develop goals for this communication (product knowledge, product reminders, persuasion, etc.)
and try to define the unique positioning and message that will be generated by the chain.
• Define the communication tools to be used; i.e. advertising or public relations strategies to boost
sales, among other things.
• Review communication actions and results.
8. Logistics and • Analyze the product distribution channels and search for new ones.
distribution projects • Analyze the possibilities of value capture in the distribution channels.
• Define new ways to penetrate the markets (through franchising, joint ventures, and other
contractual forms, or through vertical integration).
9. Human resources and • Conduct management training for chain participants.
training projects • Conduct technical training in food and bioenergy production.
• Transmit information from technological and research centers.

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10. Coordination • Develop projects to finance the chain.

and institutional • Develop basic infrastructure-improvement projects.
environment projects • Develop projects to increase consumption in government programs.
• Push for tax incentives in the production chain.
• Strengthen export activity through export promotion agencies.
• Promote a product standardization project.
• Develop proposals for chain conflict solutions.
• Ensure coordination in the development of contracts and proposals.
11 Strategic projects • Consolidate all projects generated in steps 6 to 10 and establish priorities.
consolidation
12 CHAINPLAN budget • Calculate the budget of every project according to the total budget available.

4. Results The agricultural inputs sold to the sugar-energy sector

amounted to about US$ 9.2 billion in 2008. From this
The Brazilian sugarcane chain mapped and quantified total, the pesticide industry earned revenues of US$ 768.4
million from this chain, 9.5% of total pesticides sales in
Brazil is the world’s largest sugarcane producer, accounting the country. The agricultural fertilizer industry earned US$
for over 30% of global production. Sugarcane is also one 2.2 billion from the sugarcane chain, 14% of total fertilizer
of the leading crops in terms of income generation in the sales in Brazil.
Brazilian agribusiness industry. The sugarcane chain’s The auto parts sector together with machinery maintenance
GDP was US$ 28.1 billion in 2008, representing 2% of the services earned revenues of about US$ 2.8 billion from the
national GDP; an amount that is almost equivalent to the sugarcane chain, including parts and labor to maintain
overall economic output produced in a country like Uruguay nearly 144,000 machines. The chain acquired 981 harvesters,
(US$ 32 billion). The chain GDP calculation was estimated 22% of the total sold in 2008, accounting for a turnover of
by adding the sales of all final goods and services offered US$ 426.5 million.
in the economy. Subtracting sales taxes, the amount is US$ The 2008/09 sugarcane harvest reached a record production
24.3 billion (Table 3). of 568.96 million tons and a planted area of about 8.5

Table 3. Estimates of the sector’s gross domestic product based on the end products (Neves et al., 2010).

Product Domestic market US$ (million) Exportation US$ Total US$ (million)
(million)

With tax Excluding tax Tax exempt With tax Excluding tax

Ethanol Hydrated 11,114.50a 9,105.10 23,78 11,138.28 9128.88

Anhydrous 2,972.89b 2,250.88 2,366.33 5,339.22 4617.21
Non-energetic uses 438.78c 351.57 n.d. 438.78 351.57
Sugar 5,297.14d 4,455.83 5,482.96 10,780.10 9938.79
Bioelectricity 389.63e 242.87 n.d. 389.63 242.87
Yeast 21.41 19.43 42.20 63.61 61.63
Carbon credits n.d n.d 3.48 3.48 3.48
Total 20,234.35 16,425.68 7,918.75 28,153.10 24,344.43

a Sales by gas stations, considering the formal and informal markets.

b Sales by ethanol plants to ethanol wholesale distributors, considering the formal and informal markets.
c Sales by ethanol plants to the beverage and cosmetics industries.
d Sales by sugar mills to the food industry added to sales by retailers to final consumers.
e Sales by the sugarcane mills and ethanol plants in energy auctions.

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 A method for strategic planning of food and bioenergy chains (CHAINPLAN) applied to the sugarcane chain in Brazil

million hectares. The São Paulo State accounted for 68.6% Sugar production grew at rates much higher than the growth
of the sugarcane crushing in the south-central region. The of Brazilian consumption, which has remained stable over
sugarcane chain was responsible for revenues of US$ 11.5 the last six years at an average of 3% per year.
billion shared among independent suppliers (44.5% of the The bioelectricity generated from sugarcane bagasse and
industry demand) and the farms owned by the mills - the sold to electricity markets increasingly stands out as an
so-called vertical integration (55.5%). important product of the industry. At the same time, about
The industry was responsible for the purchase of US$ 6.4 10% of the yeasts used in ethanol production, specifically
billion in industrial inputs. The industrial equipment and in the fermentation of sugarcane, are recovered and dried
assembly services sales were estimated by considering the to be used in the composition of animal feed. For carbon
investments made in the 29 ethanol plants and sugar mills credits, in terms of trading volume, Brazil ranks third among
that started operation in 2008. In addition to investments the selling countries, but it still accounts for only 3% of the
related to the new units’ installation, the sales of equipment market. Finally, bioplastic is one of the most promising
and services for the maintenance of industrial units, which is innovations. If planned investments are executed, in a short
performed between crushing seasons, was also considered. time this product will be a very important item in the sugar
Sales of hydrated ethanol have grown considerably in recent mills’ and ethanol plants’ portfolios.
years (compared with 2006, the increase was 87% in 2008). Figure 4 shows the major output of step 2 of the
The main reason for this growth is introduction of flex- CHAINPLAN method as applied in the sugarcane chain.
fueled-engine cars (in 2003), which in 2008 accounted The values below each link indicate its gross sales in this
for 90% of the light commercial vehicle sales in Brazil. productive chain in 2008. Total gross revenue (financial
Anhydrous ethanol is sold in Brazil primarily in a gasoline movement of a chain in a year) of the sugarcane chain was
blend, which currently contains 25% ethanol. The largest about US$ 86.8 billion. This value represents the sum of
share of sugar production is destined for foreign markets.

Figure 4. Sugarcane chain mapped and quantified (gross revenue) (Neves et al., 2010).

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Marcos Fava Neves, Vinicius Gustavo Trombin and Marco Antonio Conejero

all estimated sales made by every link of the chain and the such as a target for production and exportation volumes.
financial transactions of the facilitating agents described. The goals must also contribute to economic sustainability
According to the Brazilian Ministry of Labor, the sugarcane (income to the main links in the productive chain), the
industry in 2008 accounted for 1.28 million formal jobs, environment (to maintain the production bases for future
with 481,662 allocated in the field of sugarcane cultivation; generations), and people, aiming to promote jobs and
561,292 in sugar mills for raw sugar production; 13,791 income. Table 6 provides some suggestions.
in sugar refining and milling; and 226,513 in ethanol Brazil must pursue a cost-leading strategy based on
production. This represents 2.15% of all Brazilian jobs, economic, environmental, and social sustainability in
highlighting the importance of the sugar-energy sector. order to supply the most broad market lines of sugar buyers.
If informal employment is also taken into account, the Brazil’s sugarcane industry should also position itself as
number of jobs in the sector increases to 1.43 million. one of the cleanest industries in the world, taking solar
Considering also that every direct job generates two indirect energy and transforming it into biomass energy to be used
jobs, a figure of 4.29 million people placed in jobs related by human beings.
to sugarcane is reached. The aggregate tax generated in the To cope with new opportunities and threats, the chain needs
sugar-energy sector was estimated at US$ 6.8 billion. to think strategically and change. Examples of strategic
projects that could be implemented in the sugarcane
A strategic plan for the sugarcane chain in Brazil chain are provided below for each of the following areas:
coordination and institutional environment, production and
In preparing this plan, it was helpful to consult agendas innovation, communication, distribution and logistics, and
already established by many important Brazilian human resources and training. These projects could be split
agribusiness organizations, such as UNICA (Sugarcane between the public and the private sectors or be implemented
Industry Association), UDOP (Union of Bioenergy jointly in some cases. They represent suggestions for strategic
Producers), ORPLANA (Sugarcane Growers Association), action that could ensure continuation of favorable conditions
CANAOESTE (Sugarcane Growers Association of Sao for the sugar-ethanol-energy sector.
Paulo State), ABAG Ribeirao Preto (Brazilian Agribusiness
Association in Ribeirao Preto City), CTC (Sugarcane Examples of projects related to production, products, R&D,
Technological Center), IEA (Agricultural Economics and innovation
Institute), and IAC (Campinas Agronomic Institute).
A macro-environmental analysis of the chain was done using • Encourage programs for vertical growth of sugarcane
the ‘PEST or STEP analysis’ tool, which is well enshrined in production (higher yield in the same area), through
the literature of strategic planning. It considers the main increased productivity, especially in genetic modification
uncontrollable factors in a production system which can of sugarcane.
create opportunities and threats. Such an analysis covers • Promote research and development (R&D) through the
the political-legal, economic, natural, socio-cultural, and formation of public-private partnerships (PPPs) and
technological dimensions of the chain (Jain, 2000; Johnson technological parks made up of agronomic institutes,
and Scholes, 1997). Table 4 categorizes the environmental intelligence centers in universities, private companies,
changes as either opportunities or threats to the sugarcane technological centers and associations, with tax incentives
chain. and funds for the development of joint research in the
This micro-environmental analysis was followed by a sector.
comparative analysis of the world’s main producers and • Integrate and diversify farming and processing activities
exporters (Australia, India, and Thailand primarily related for food and energy production. The integration of sugar
to sugar; USA and EU related to ethanol) to understand mill and ethanol distilleries with biodiesel plants will
the competitive benchmarks. An internal analysis was add additional products to the production mix of mills.
then completed to determine the Brazilian chain’s strong • Strictly control the expansion of sugarcane plantations.
and weak points. The idea is to reinforce strong points, Expansion should take place mainly in regions where
while directing projects to improve weak points in the there are degraded or underused pastures, and in
forthcoming years. accordance with the agro-environmental zoning of
The dimensions of analysis were divided into five categories, sugarcane production by the Brazilian Ministry of
in accordance with the CHAINPLAN method (see Table 5). Agriculture (MAPA).
The goals in the chain’s strategic plan must be clear and • Adapt large diesel engines for ethanol, aiming at the truck
consistent and, whenever possible, quantitative. Thus, for market for sugarcane suppliers and mills, as well as the
the sugarcane chain, size-related goals could be established, market for tractors and urban buses.

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Table 4. Summary of the opportunities and threats to the sugarcane chain.

Political-legal Economic-natural Social-cultural Technological

• New emission-reduction targets and • Growth in the consumption • More awareness of • New technologies
growth of the carbon-credit markets of sugar (products / food global warming enhancing vehicle
• General tax incentives for biofuels that use sugar) • Migration of people to efficiency (flex-fuel,
production • Instable prices of oil cities (e.g. China) hybrids)
• Development and internalization • Growth in flex-fuel vehicle • Image of renewable • New machines for cane
of biofuels market in developing fleets and clean fuel harvesting
countries, with the advancement of • Export of technologies and • Acceptance of GMOs • Generation or expansion
new projects (biofuels and feedstock biofuels facilities from • Social movements of cellulosic ethanol use
production) on degraded areas actual producers’ countries related to organic (biobutanol, hydrolysis)
Opportunities

• Addition of ethanol in different to new ones production/fair • Genetic modification

countries, replacement of MTBE used • New and high flows of trade/nutraceutics/ of energy crops for
in gasoline to meet environmental foreign direct investments cosmetics resistance to dry
agenda in biofuel industries • Inclusion of small weather and diseases
• Brazilian ethanol qualified as • Good agricultural practices producers • Use of biofertilizers
advanced biofuel in US like rotation of crops (food • Generation of green from by-products
• Prohibition of burning sugarcane and energy), causing an jobs and income • Integration of biodiesel
in Brazil, which benefits crush and increase of food production and ethanol facilities
ethanol facilities in the areas of renewable • Privatization/public-
• New institutional framework for energy crops private partnerships in
electricity in Brazil • Positive energy and carbon infrastructure facilities
• Agro-environmental zoning in Brazil balances for all biofuels and R&D initiatives
sources
• Social-environmental barriers to • Growth in the hybrid • Image of jobs related • Sweeteners and other
biofuel imports vehicle fleets (gasoline and to the harvest energy sources
• Lack of international standards for electricity) (sugarcane, palm) • New technologies
biofuels • Lack of machines and • Image of land generating more
• Lobbying of oil companies and local equipment for expansion of occupation competitive energy
producers against imported ethanol industrial capacities generating (hydrogen)
• Lack of regulatory stocks of biofuels High fluctuation of competition with • Deficient infrastructure
in countries (which facilitates agricultural commodity food for distribution of
fluctuation of commodity prices) (feedstock) prices • Image of the agricultural production
Threats

• Tax inequality through value chain • More powerful diseases and ‘monoculture’ from new frontiers
and states of Brazil pests • Mechanization vs. (internal logistics)
• Conflict of ‘pre-salt’ petroleum • Climate change bringing unemployment in • Low investments in R&D
investments vs. bioenergy economy reduction in the available agriculture in developing countries
in Brazil land • NGOs against the
• Gasoline price control in Brazil and • Lack of agricultural inputs growth of biofuels
Petrobras monopoly (fertilizers mainly) • Strict requirements
• Lack of credit/funding for social-
lines with easy access environmental
certification

• Develop new products from ethanol and sugar in • Strengthen electric power production, to seize existing
addition to those that have already been developed, such potential in the sector, giving priority to this form of
as biodegradable plastic and diesel. renewable energy through financing.

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Table 5. Summary of the strengths and weaknesses in the sugarcane chain.

Innovation / R&D / Communication Distribution and Human resources and Coordination and
production logistics training institutional environment

• Sugarcane has lower biofuel • Image of • Vertical • Good training • Consecana model
cost (than corn, beet, green fuel, integration of capacity (sugarcane payment
rapeseed) jobs generator, ethanol facilities (universities and formula)
• Capacity of the mature and environmentally to distribution of research institutes) • Agricultural partnerships
large industry in Brazil correct, fuels in Brazil for sugarcane production
• Strong metal-mechanical exporter, • Trading and • UDOP (Union of • Associations and
industry dedicated to regional oil companies’ Bionergy Producers) cooperatives
ethanol facilities development control of the corporative • Voluntary agreement to
Strengths

• Capacity of expansion to promoter, and sector university for eliminate the practice of
new land in Brazil renewable fuel • Bioelectri- executives and burning sugarcane
• Sugarcane varieties more • ‘Free’ city’s facilities technical workforce
resistant to climate change advertising concentration
• Strong agronomic • UNICA close to high
and biotechnological (Sugarcane demand of
intelligence centers in Industry electricity and
Brazil Association) complementary
• Total use of by-products communication to
and residues in the field actions in Brazil, hydroelectricity
• Flex-fuel technology USA and EU sources
• Low profitability of the • Image of labor • Bad export • Low coordination • 80 to 90% of the
sugarcane independent conditions logistics in between production cost of
suppliers during the developing organizations ethanol comes from
• High investments in harvest in countries that offer training sugarcane
cellulosic ethanol research developing • Delay of ethanol (research institutes • High vertical integration
by the developed countries countries pipeline infra- and universities) of biofuel facilities for
Weaknesses

• High investments in hybrid • Concentration structure • Lack of executive agricultural production

car technology by the of land and • Ethanol internal and technical • Non-payment of
developed countries farmers price fluctuation workforce sugarcane by fiber
• High investments • Poor corporate • Lack of fuel stock • Reallocation of content
in improved ethanol governance capacity in Brazil former sugarcane • Lack of long-term
(biobutanol) by the practices by the • Difficulty of cutters contracts for distribution
developed countries sugar mill sector connection to • Lack of pattern contracts
electrical grid by for ethanol exports
sugar mills

• Strengthen the capability of the sugar and ethanol Examples of projects related to communication
mills to include small producers through sustainable
remuneration and long-term contracts. • Strengthen the work of UNICA (Sugarcane Industry
• Facilitate innovations related to other products (second- Association) and APEX (Governmental Agency for
and third-generation ethanol) that could be processed Brazilian Exports’ Promotion) with the ‘Agora’ project to
at the mills. promote the image of Brazilian ethanol as a sustainable
fuel that reduces countries’ dependence on imported
and scarce oil; encourages the adoption of clean
technologies (flex fuel, gasohol, local production in
a sustainable manner, expansion of distribution net);

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Table 6. Examples of strategic objectives (goals) for 2020.

Type of Goal Description

Sugarcane production Produce X tons on a target cost of R$ x and on a target price of R$ y.

Ethanol production Produce X billions of liters, being responsible for 80% of Brazil’s fuel
consumption on a target cost of R$ x on a target price of R$ y.
Energy production Produce X MGW, being responsible for 15% of Brazil’s needs on a target cost of
R$ x on a target price of R$ y.
Sugar export Export X tons to Y countries, being responsible for 60% of world exports, on a
target price of R$ x.
Ethanol export Export X tons to Y countries, being responsible for 60% of world exports, on a
target price of R$ x.
Volumes of production units Operating units.
Profit margins in different links Expected margins.
Job volume Expected jobs.
Production of other products from sugarcane Produce X liters of diesel and Y tons of plastic, among other products.
Indirect GHG emissions (land use change) 80% of sugarcane plantation expansion should be on degraded or underused
pastures.
Average agricultural yield should be increased to 100 tons/ hectare through
GMO varieties.
Energy balance Energy balance of sugarcane chain should be increased to 10:1 through more
efficient boilers, B2B biofuel consumption and multi-modal logistics.

ensures a sustainable production system, with a high articles, books, and videos. One must remember that this
energy balance (reduces emissions of greenhouse gases); is the ‘new media’ generation, and therefore information
allows the co-generation of clean energy (with the use of should be offered to people in new ways.
sugarcane bagasse); and generates carbon credits.
• In partnership with municipalities and businesses, test Examples of projects related to distribution and logistics
the use of ethanol by city buses on a much larger scale.
These buses could be painted and decorated with pictures • Implement mechanisms to encourage the compilation of
about the chain, and through them people could gain strategic stocks of ethanol. This will avoid ethanol price
knowledge and information. fluctuations, which harm the image of the product in
• Petrobras could export gasoline ready for use, with the eyes of the consumer. Ensuring the safety of supply
anhydrous ethanol added to it, to neighboring countries. in domestic and international markets by maintaining
There is a clear possibility for Petrobras to become the regulator stocks in Brazil and the main consumer markets
first green oil company in the world. Petrobras has a for Brazilian ethanol can improve the sector’s image in
very important role to play in promoting the image of Brazil and around the world.
ethanol, and ethanol (as well as biodiesel) has a very • The mills in associative organizational forms, like
important role in establishing Petrobras’ image. franchising or joint-ventures, could have their own
• Work on the development of African countries to jointly gas stations in cities. These concept stations (‘factory
build an image of ethanol as a renewable, peaceful fuel. outlets’ called ‘green’ or ‘eco’ stations) would serve two
• Use gas stations as a communication tool for ethanol: basic functions: to establish retail prices of ethanol
‘green’ stations offer an opportunity for the supply chain (hindered by the action of urban cartels or the power of
to communicate with the final consumer. The sector has oil distributors), and image communication to the final
neglected this opportunity for decades. consumer, as stated above.
• Make use of knowledge portals for sugarcane (the • Speed up already-announced investments in ethanol
UNICA web site or other sources), which offer everything pipelines, as well as in port facilities for ethanol export
that researchers and consumers need to know about at the lowest possible cost.
sugarcane, with databases of theses and dissertations,

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Marcos Fava Neves, Vinicius Gustavo Trombin and Marco Antonio Conejero

• Streamline the public-private partnerships (PPPs) and Examples of projects related to coordination and institutional
strengthen a broad privatization program of highways, environment
railways, and ports.
• Ensure general adoption of the standard contract • Federal and state governments need to focus on tax
for ethanol developed by IETHA (Association for equality. The ethanol VAT rate could be reduced to 12%
International Trade of Ethanol). Technicians from Brazil, in all of the Brazilian states and federal taxes could be
the EU and USA should first work to standardize the fuel slightly reduced This reduction in revenues would be
and transform it into a commodity. offset in part by increases in demand and production.
• Companies should consider collective actions to This does not consider the environmental benefits and
strengthen the logistics of transportation, port storage, internalization development.
and distribution of sugar and ethanol, aiming to have • Governments should also give greater tax benefits to
very competitive costs. ‘flex-fuel’ vehicles as opposed to gasoline-fueled ones.
• Ensure easy access for mills to transmission lines American, French, and Japanese manufacturers have
(electrical power grids) of the SIN (National proven that these flex engines are fully feasible. Brazilian
Interconnected System), to enable them to strengthen manufactures could, like the French manufacturers,
the energy supply. export these cars and engines, spawning this technology
and consumption to other markets.
Examples of projects related to human resources and training • Study whether the addition of anhydrous ethanol to
gasoline could be expanded from the current 20–25%
• Map specific needs and coordinate the efforts of to nearly 30%. Many people with gasoline-fueled cars
existing organizations in the training of technicians and have already made this transition on their own.
executives for the sugarcane production chain. The Union • In the Consecana (sugarcane payment formula by sugar
of Bioenergy Producers (UDOP) has done excellent work content) review, which is usually performed every five
in this area. years, greater importance could be given to sugarcane
• Map the essential technical and undergraduate courses bagasse (payment per fiber content in the sugarcane).
for the sugarcane agribusiness and its spatial distribution. • Adjust the certification process of Brazilian ethanol from
Plan, along with many different organizations and the sugarcane, coordinated by UNICA, to fit the industry
Ministry of Education, the granting of scholarships and standards for quality demanded by developed countries,
incentives for research. mainly on the issue of sustainability.
• Implement training programs for workers who have lost • Utilize the sector’s idle capacity to provide electricity
their jobs after mechanization of harvesting (former by establishing a clear institutional framework and
sugarcane cutters). UNICA has been doing this through purchasing warrants, and by giving preferential treatment
the ‘Renovacao’ project. to this type of energy.
• Promote training of public employees related to • Create a list of priority countries for trade agreements
agribusiness, in order to improve performance in the (FTAs and tariff reductions) related to sugar and ethanol,
management of food quality, sustainability, certification, and strengthen work in these countries. For example,
and traceability. Brazil has conditions to export not only sugar and
• Provide sustainability training for mill and farm ethanol, but also plant technology (facilities) for Africa
employees. and Latin America.
• Establish a digital platform for training, aimed at
popularizing existing knowledge. These are only some ideas generated through the authors’
• Create a ‘Sustainable Regional Development’ program to work in more than 10 projects in the sugarcane chain.
stimulate sugar and ethanol mills to start thinking about These ideas have been proposed in various contexts,
the inclusion of local communities. Propose corporate and some have already been implemented, either by
social-responsibility projects to add local companies existing organizations or by governments. The authors
and/or small producers to the sugar/ethanol mill supply recommend that coordination of this planning effort
chain. SEBRAE (Brazilian Service of Support for Micro in Brazil be centralized and aimed at making the sector
and Small Companies) could coordinate this kind of more sustainable, thereby increasingly Brazil’s competitive
activity. advantage as a supplier of energy to the world. In a period
with water, food, and energy crises, sugarcane is, without
a doubt, Brazil’s best resource to help meet these needs.

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 A method for strategic planning of food and bioenergy chains (CHAINPLAN) applied to the sugarcane chain in Brazil

5. Conclusions: the future The efficiency of ethanol makes it economically beneficial

for consumers. Most mills produce ethanol at a cost of about
Several factors have motivated governments to establish US$ 0.40/liter, and the average retail price is US$ 0.80/
mandatory blending targets for biofuels, including increasing liter (55-60% of the price of gasoline). At gas stations in
oil prices, energy dependence and global warming. The basic Brazil, consumers can choose between E100 (100% hydrated
idea behind biofuels is that when they are added to fossil ethanol) and normal gasoline, which for more than 10 years
fuels in in cars' engines, part of the money flow moves from has contained 25% anhydrous ethanol, without causing any
the oil business towards the agro-business. If someone in damage to gasoline engines.
New York fills up his or her car tank with fuel consisting Companies have started extracting several other products
of 10% ethanol (E10), around 10% of the money spent by from sugarcane, the most promising of which are probably
the car owner will not go to the oil business chain, but to bio-plastic and diesel. Coca Cola recently launched its ‘plant-
the corn business chain. And this revolution is happening based plastic bottle’, 30% of whose plastic comes from cane.
in several parts of the world, empowering agriculture and Diesel derived directly from sugar is already in production
land owners. The future opportunities are great, since in Brazil, using an engineered yeast-based technology
biofuels today account for only around 2-3% of total fuel developed by a company called Amyris in the USA. This
consumption globally and there are plenty of areas available cane diesel has been approved by Mercedes Benz for use in
on the planet to support this development. normal diesel engines. Important new developments related
This article demonstrates how Brazil has been successful in to sugarcane are expected in the near future. The first GMOs
adopting sugarcane policies – the Proalcool program in the are expected by 2014, and could increase the sugar content
1970s and 1980s, deregulation and free trade in the 1990s , by 40%. Hydrolysis has the potential to allow production
the consolidation of mandatory blending targets (E25) and to go from 8,000 liters of ethanol per hectare to 12-15,000.
the launch of FFVs (Flex Fuel Vehicles) in the last decade Maintenance of the sugarcane chain’s competitiveness will
– taking advantage of this plant’s unparalleled capacity to depend on the operationalization of important strategic
transform solar energy into economic benefits. projects, in which responsible agents, deadlines, and
In 2010, the sugarcane chain in Brazil was responsible for budgets are clearly defined. More than ever, planning is
a GDP of US$ 30 billion, a financial movement of US$ 90 necessary in this sector in order to take advantage of all the
billion, and the generation of almost 4.5 million (direct opportunities and to resolve weaknesses as the industry
and indirect) jobs. The chain was also responsible for US$ 7 looks for equilibrium and sustainability. Because of this,
billion in tax generation for federal and state governments; we offer our proposal for this chain.
and its major products, sugar and ethanol, were responsible A suggestion for future research would be to apply the
for US$ 12 billion in exports. CHAINPLAN method to other sugarcane chains in other
Brazil is self sufficient in the supply of sugar to internal countries. This would allow researchers, policy makers
markets and it holds a 53% share of world sugar exports. and practitioners to compare results, support each other
Sugarcane generates not only sugar, but ethanol and in strategic planning, and look for benchmarks for
bioelectricity. Of the total fuel consumed in the country, improvements.
ethanol already accounts for 52%, and gasoline accounts
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