"We reach 47,000 neighborhood stores today, we are almost in the livable Colombia"
Juan Felipe Montoya, president of Huevos Kikes, highlighted the intention to return to Venezuela, after being important for the company in the 1990s.
Why did Huevos Kikes start in Santander and how did it become a beloved brand across the country?
It is a family company founded by my maternal grandfather 64 years ago; I am the third generation. We started as suppliers to the poultry industry selling day-old chicks, but due to a major crisis in Venezuela in the 1990s, we integrated and became egg producers. Enrique, the second generation and company president, would put "Kike" on absolutely everything, although we were actually known as Incubadora Santander and that brand was unknown. When Enrique died in 2012, the family asked me to return to the company and I started with a great legacy. We wanted to do a deep job of commoditizing eggs. We wanted to brand them and get closer to the final consumer, so we found that "Kikes" was a spectacular brand to become explicit in what we were doing. That's how the story begins.
How has the consumption of an almost irreplaceable protein like eggs evolved in the Colombian market?
It has been a spectacular experience, it was a leap into the void. That leap into the void is: we are going to invest in many things that are not really needed; what we wanted was to produce, pack, brand, and reach directly or as close as possible to the final consumer. We have a gigantic logistics operation. Today we reach 45,000 to 47,000 neighborhood stores; we are almost literally in "livable Colombia," which is from the mountains to the west of the country. And that's where we have a presence. It has been an adventure to put a brand on it. Today we have 54% Top of Mind brand recognition in Colombia; out of 100 people, 54 remember Huevos Kikes as the real egg brand in Colombia.
How are we in terms of per capita egg consumption in Colombia?
Today in Colombia, per capita consumption is 366, meaning one egg per inhabitant per day, which is spectacular. Countries like Mexico and Japan are above Colombia, but in that, I insist with pride, we lead the way in per capita consumption.
If we compare ourselves to countries with similar incomes in the region, where do we stand in terms of per capita consumption?
In the regional context, we are only below Mexico. We are very similar to Argentina, but otherwise we have significantly higher consumption than the rest of Latin America. We have higher consumption than these other countries. Even countries with higher per capita income than Colombia, such as all of Europe, we have higher consumption here in Colombia. We are talking about the best and most affordable protein available. So for Colombia, a developing country, having a food that is easily reachable by lower-income people is favorable, and we try to expand that and have greater influence in Colombia.
Why is the price of eggs so volatile?
In the poultry industry, especially the egg subsector, we do not go with the ebb and flow of the country's economy. The economy can be doing very well and we can be doing very badly, or the economy can be doing very badly and we can be doing quite well. This happens basically because we create the crises ourselves. The price moves basically due to oversupply or lack of supply of product in the market. This also happens because it is easily accessible. With that oversupply, prices automatically go down. When everything starts to react and people see that prices are so low, it's not enough, so obviously they stop, they stop housing hens, and automatically a price regulation comes again. That's what we go through, it happens roughly every two years. We are finishing that hard and difficult cycle. A price correction comes, which does not mean we start earning a lot, but simply correcting the bad prices we had before.
What truly causes this oversupply? Is it because anyone sets up a shed as a side business when prices are good, or because you have qualified and technified production more?
It's a combination of both. Every time we become more efficient in the industry. The birds have better productivity somehow because we take better care of them; we find that if I want to eat healthily, I should start with vegetables, then protein, then carbohydrates. That way we have also been finding within the industry how to feed animals correctly, how to keep them in places that are more comfortable for them, and that generates greater productivity. But when there are better prices, people want to have and buy hens, and they adapt anything on the farm. So they make a half roof and put 1,000 or 2,000 hens, and that way they start to have an oversupply of product in Colombia that really moves the market.
How do you compensate for corn prices between national product and imported?
All the corn produced in Colombia, or the vast majority, is for human consumption. And the vast majority is also white corn, not yellow corn. The yellow corn produced in the Eastern Plains and some parts of Córdoba, little of that goes to the poultry industry. Some goes, but the vast majority is for human consumption. I would say that 98% of what is needed in Colombia for yellow corn for animals has to be imported. The origin is mainly the United States, or it can also come from the south, from Argentina or Brazil.
How many eggs do you produce and how many million eggs does the entire poultry industry put on the market each day?
We produce 5.5 million eggs per day. The industry as a whole, total egg production in Colombia, is about 53 million eggs per day. That's the production, to somehow give one egg daily to each Colombian, considering we are about 53 million Colombians.
Does that 53 million daily include industrial use?
Yes, it turns out that eggs were on the blacklist and we all still somehow remember that the industry was associated with cholesterol. And that high consumption of eggs was associated with cholesterol; they have removed us from that blacklist, by the American Heart Association. In Europe, they remove us from the blacklist. And what they also say is, "hold on a moment, there is good cholesterol and bad cholesterol." It is now scientifically proven that whole eggs are better, and that has driven usage in the industry. The use of eggs in different types of products is increasing.
Which cities or regions are the biggest consumers of eggs on the Huevos Kikes map?
That map starts for us with Bogotá. More than 8 million inhabitants in Bogotá, yes or yes, it is the king of consumption. We have Barranquilla, Medellín, Cali. And we go almost in order of number of inhabitants in each city. There is Bucaramanga, Cartagena, as very important cities, the Coffee Axis, very important. We have a presence in Villavicencio, Santa Marta, Valledupar, Montería. Each of those cities with its typical dishes, but it makes it practically the same average that is used and that we make of the daily egg in each Colombian.
In other countries, it is common to use egg powder or egg flour for the food industry. Will we get to that massively in Colombia, or do consumers still prefer to crack fresh eggs?
More than reaching the shelves and the consumer buying it to use at home, it is to make handling and storage of this type of product much easier. In Colombia, we are producing it; this egg powder is being sold; it gives longer shelf life, makes storage much easier. And that way it will not cease to exist. I think it should grow a bit more. Even including neighborhood bakeries. Informality is something that affects the industry in a significant way. All that has to be corrected little by little.
How have you modernized your distribution logistics to deal with road conditions and constant blockades?
To do this efficiently, we do it with our own fleet. That fleet has specialized equipment, the vehicle also has special suspension; we mount them in a special way. The state of the roads is very important to us, allowing us to transit. And it is something that we are starting and living in a sad way. To see how anyone goes out on the road, throws a stick in the middle, and there is already a blockade and they cannot do anything against this blockade, nobody, and they have to wait for authorities to unblock.
With the normalization of relations with Venezuela, are you going back to that cross-border market? Do you see an opportunity for growth there?
Venezuela was our main market. In the mid-1990s, even 98% of Colombia's poultry exports were held by Incubadora Santander at that time. For us, it is a land we know, we manage, going back there would not be strange, and I think we will resume taking products to Venezuela without a doubt. We believe there is a very interesting opportunity in Venezuela, and surely we will be there.
Are you currently exporting eggs to Venezuela?
No, we are not exporting eggs at this time; we are preparing, because the United States has just arrived in Venezuela, and this will be a process, I hope short, but we already have a foot in Venezuela looking for channels and opening opportunities.
Do you have integrated businesses?
All of the product that we label as Kikes, we produce ourselves with our entire chain. The birds are ours, the feed we import, we produce it with our formulas for our birds, the sheds are mostly ours. There is a small portion, about 15% of production, where we have people who are integrated, with a spectacular program we have in the company, and they are people who have infrastructure, labor, and the rest is Kikes. So the hen is Kikes, the feed is Kikes, the technical assistance is Kikes; picking up the product is ours. So we can somehow certify and guarantee that all the eggs our customers are consuming are produced by us. The entire chain, Fernando.
If someone has the facilities and labor, can they become a supplier to you under certain conditions?
More than suppliers, we give them absolutely everything: feed, birds, we give them the hens, technical assistance, and what they put in is that operation to carry out production and finally deliver the finished product to us. By being united with Kikes, they begin to have very large and good opportunities. I speak specifically of going to a bank, having a line of credit, growing, expanding their facilities, having more people, and they start making a small company, creating and generating formal employment.
What is the current snapshot of the company?
We have about 40% of production in Santander, where the company was born 64 years ago. As a result of benefits from the government's Ley Páez, we went and started in the late 1990s; we went to northern Cauca, in Caloto, Cauca. There we started producing. Today, 60% of the company's revenue is generated in the southwestern part of the country. There are about 1,500 people there, but we are everywhere in Colombia. We have distribution centers, our trucks that go directly to the stores. And that distribution network we do ourselves. But production as such, Santander and Cauca.
What is your management secret to administering such a geographically dispersed operation?
Today it seems spectacular to me, but we don't even require people to live in Bucaramanga to work with us at Kikes. There are some jobs that obviously require it. So if we talk about operations and a person who is in a shed, they physically have to be there. But the team as such, speaking of management and directors, can be anywhere in Colombia. All the technology tools make the situation much easier. We live traveling. Unfortunately, we don't have very good connectivity in Bucaramanga with Colombia, only with Bogotá, and from there we have to start moving. But it's part of what one ends up getting used to.
Doing business today requires inclusion, sustainability, and social responsibility. How are you doing with these elements to be more efficient?
I'm going to split it into two topics. One on the social side. In this social part, when we arrived in Caloto, Cauca, in the 1990s, we found the real Colombia, the one that we fortunately and unfortunately are very far from that reality, of people lacking opportunities, because there are no companies, no sufficient education. Little by little we began to recruit these people to work with us. Contrary to what normal company policies say, "we don't want to have family members, only one," we want to have hopefully the whole family working with us. And on the other hand, on the sustainability side, the green of Kikes is not just a pretty color that we thought was cool, but it really is in our DNA. And today, on this sustainability issue with poultry manure, six years ago we set up a biodigester and have been generating biogas to produce electricity. We have been self-consumers of electricity for six years in Caloto, Cauca, and we decided to take an additional step last year, which is to generate methane gas, which is no different from biogas, but the gas consumed in homes, the gas that is starting to become scarce in Colombia. What we are going to do is inject this gas into the country's gas network and we will have a very significant amount of gas that could supply two Buenaventuras in size with this gas.
How do we dimension this energy generation?
In the southwestern part of the country, on these two farms, we produce 480 tons per day of poultry manure. We set up a biodigester, which is basically an enclosed space in the absence of oxygen where microorganisms consume all the organic matter. Once the organic matter is consumed, what is generated is a biogas, and on the other side remains the liquid fraction, which is water and the minerals that microorganisms cannot consume. In biogas, the main composition is methane and CO2. In the specific case of hens, about 70% methane and 29% to 28% approximately can be CO2. It comes out together as a single gas and goes to a special plant where we separate these gases; on one side goes the methane alone, and on the other side the other gases remain. And that methane alone must come out to a purity of 99.9% to be injected into Colombia's natural gas network. And that natural gas will end up reaching many homes in the southwestern part of the country, and that will start happening from next year.
How do you ride against five horsemen that affect businesses in Colombia: extortion, blockades, taxes, labor shortages, and informality?
It's not easy. If we didn't have a good team, we wouldn't be able to navigate the blockades. There are problems on main roads, and we have to find how to get to our farms to bring feed. We have to take a dirt road and make the trucks pass from one side to another and unload feed at one site to transfer to another waiting truck further ahead. Things like that would not be achieved without a good team. As for informality, the more productive we are, that is how we can counteract that phenomenon.
Are you optimistic about Colombia's outlook?
I am very optimistic about the country. Apart from anything else, I firmly believe in Colombia. We believe in what is coming, we believe in the future of the country, and I think we are waking up and we are ceasing to be sleepwalkers of the beautiful era that was painted at some point, where things are easy, everything comes for free and can be put on the table very simply. We are absolutely believers in Colombia, that things will change, will improve. And I don't say it for the company, I say it for everyone because this is not a position of making oneself richer. It's not about the wealth of a company, but about general wealth. The fact that I have a formal job, that enriches a person. And I know that these things come with a major change, and we will take a very good course for the country as it should be.
