Global network of partners

Clients all over the world buy sugar and ethanol sold by Copersucar. Among them are some of the major sugar refineries, food industries, and energy companies from dozens of countries that use the products sold by Copersucar or originated from other producers. Sugar clients are concentrated in the Middle East, North Africa, and Asia, while ethanol clients are mainly in North America, also having Japan as the final destination. (G4-8)

In Brazil, white and raw sugar clients are the main food and beverages industries in the country, both family businesses and multinationals, as well as hundreds of medium and large companies. In the ethanol market, domestic customers are the major distributors of the fuel, which buy both anhydrous ethanol (added to gasoline at a proportion of 27%, according to current regulations) and hydrated, which is for end consumers at fuel stations.

Origination is the process of purchasing products at a large-scale from non-partner production mills, without the exclusivity that characterizes Copersucar’s business model. With the implementation of Alvean, origination of sugar became a focus of operations for the new company, both on the Brazilian market and in other production centers worldwide. Copersucar maintains origination of ethanol in Brazil, directly, and the United States through its subsidiary, Eco-Energy. Learn more about the company’s business model in the About Copersucar section.

Copersucar seeks to build long-term relationships with all business partners based on commitment and trust, which involves continuous concern for creating value for the client by offering customized and flexible service. The company can offer, for example, support in the integrated logistics area that helps its business partners increase their competitiveness and overcome adverse situations in their business environment.

These long-term relationships begin with the trust in the quality of products supplied. In order to support its adherence to standards required by the market and clients, Copersucar’s products and processes comply with best practices and quality, safety, and sustainability standards. The company works in close partnership with the production mills, seeking to strengthen among them the importance of certifications for its competitiveness in Brazil and worldwide.

In the 2014-2015 and 2015-2016 crops, there were no grievances from regulatory agencies, complaints from external parties and substantiated by the organization, leaks, theft, or loss of client data, or fines for noncompliance with laws and regulations concerning the supply and use of products and services. Nor were there any complaints related to breach of client data. (G4-PR8, G4-PR9)

Copersucar
markets (G4-34)

Ethanol gains ground

Ethanol consumption has been growing in the Brazilian market over the last three years. After a sequence of seasons in a down cycle, domestic biofuel consumption, including anhydrous and hydrated ethanol, increased 14.2% in 2014 and 19.5% in 2015, according to data published by the ANP. In the past two years, consumption accumulated an increase of 36.5%, totaling 28.8 billion liters in 2015, in a reversal of the trend that exceeded the forecast of players and market analysts.

For Copersucar, this recovery meant a growth in sales volume: in crop year 2015-2016, the company sold 4.3 billion liters of ethanol in the domestic market, compared with 3.8 billion liters in the previous crop year.

This change in consumer behavior can be explained by a number of factors that helped recover the attractiveness of ethanol fuel. The price of ethanol at service stations became competitive again—a favorable parity that was stimulated by the realignment of gasoline prices in 2015, reversing the policy of holding fuel prices in order to control inflation. Beginning May 2015, the federal government resumed the Intervention Contribution in the Economic Domain (CIDE) charge on gasoline, at a rate of BRL 0.10 per liter. In many states of the federation, the ICMS (consumption tax) rates levied on fuels were reduced for ethanol and increased for fossil fuel.

Another factor encouraging ethanol consumption has been the growing perception, by the general public, of the value of clean, renewable biofuel as mitigating greenhouse gas emissions (GHG) and its contribution to curbing global warming. This awareness was also boosted by the discussions leading up to the Climate Conference (COP21) held in 2015 in Paris to discuss the global climate protection policies, and the subsequent discussions, which resulted in the Paris Agreement, a pact strengthening the countries’ commitment to dealing with the impacts of climate change.

Another measure beneficial to the environment, with favorable effect on the sugarcane industry, was the increase in the addition of anhydrous ethanol to gasoline from 25% to 27% beginning March 2015. Thus, two very distinct scenarios could be observed for the Brazilian market when comparing the 2014-2015 with the 2015-2016 crops. In the first crop year of the biennium, the unfavorable parity with gasoline resulted in depressed prices and loss of margins. In the latter, by contrast, the accelerated growth of consumer demand for ethanol leveraged a recovery of sales volumes and prices.

Copersucar sought to stimulate recovery of the ethanol market through actions aimed toward consumers and recognizing resellers as an important link in the sales chain. The advertising campaign “Coloca etanol, o combustível completão” (“Fuel up with ethanol, the complete fuel”) launched in late 2014 on television and in print media, and signed by UNICA—the Sugarcane Industry Union, which represents the producers of the Center-South—sought to educate consumers about the positive social and environmental externalities of ethanol.

Another relevant fact in the last two years was the expansion of Copersucar ethanol sales in Brazil’s North and Northeast. The company established a branch in the state of Maranhão and made several product shipments to the region over 2015-2016. Likewise, Copersucar conducted its first ethanol supply operation to the state of Amazonas in the last crop year. (G4-13)

On the international ethanol market, a highlight was the direct exports to China, India and Saudi Arabia. The more favorable exchange rate of the Brazilian real against the US dollar had an important role in gaining new markets for the Brazilian product, but opening foreign markets is long-term work that goes beyond taking advantage of eventual opportunities. Thus, the achievements of the last crop, when ethanol exports reached 700 million liters, represent the materialization of efforts started long before. In the previous crop of 2104-2015, foreign sales were 500 million liters, a result equivalent to half of that in 2013-2014.

The results of Eco-Energy, a company controlled by Copersucar in the United States, had a relevant impact on Copersucar’s ethanol business in foreign markets. Eco-Energy sold 8.5 billion liters of ethanol in the foreign market in 2015-2016; in the 2014-2015 crop year, the volume was 7.5 billion liters, an increase of 13.3% over the previous crop.

Sugar evolves

Copersucar sold 1.9 million tons of sugar on the Brazilian market in crop year 2015-2016, an increase of almost 12% compared with previous crops (2014-2015 and 2013-2014), when domestic sales reached 1.7 million tons of sugar for each period. The result is even more significant because it was achieved during a time of decline in demand; in addition to a nominal growth in sales volume, it represents an increase in Copersucar’s domestic market share.

The economic crisis of 2015 affected the Brazilian sugar market in more than one way. In addition to influencing demand, it led to a shift in consumption profiles in the various income groups. Among the foods that contain sugar, the most expensive, aimed toward groups A and B, experienced a stronger decline than the products aimed toward groups C and D. The soft drink market lost around 10%, and the chocolate market lost around 7% (see box “Changes in purchasing decision” in this section).

These shifts in the sugar market in Brazil, associated with the economic outlook, were combined with a change of structural nature, which has been developing over the past few years. It is a market consolidation trend, led by major global players that have been acquiring domestic brands, expanding the market ranges in which they operate and expanding their presence in the supply of processed foods. For Copersucar, a market with larger and fewer players represents an increase in the client’s bargaining power. On the other hand, since these clients are global multinational companies, with well-established global sustainability and quality policies, it also means an increase in the production standards that must be met by suppliers.

In the foreign sugar market, the initiative with the greatest impact on the biennium covered in this report was the establishment and consolidation of Alvean Sugar SL, an equal-share joint venture with Cargill which is now responsible for all the sugar export operations of the company – sugar supplied by Copersucar partner production mills as well as sugar originated from other producers. The ethanol business, the Brazilian sugar market, and logistics assets, which now deserve a new strategic focus, remain under the original Copersucar umbrella (read more in the Transport and Sales section). (G4-13)

Alvean initiated its international sugar trading operations on October 1, 2014, and soon established itself as an industry leader, sharing the combined expertise and leadership of both major global players. Copersucar contributes to the new company’s operations with sales for export as well as its structure and integrated logistics services.

The new company has established operational bases in ten countries, Brazil, Switzerland, Russia, UAE, India, China, Hong Kong, Thailand, Indonesia, and the United States. More than a commercial enterprise, the beginning of Alvean’s operations represents the reconfiguration of Copersucar’s business model, strengthening its strategic position in global markets and reinforcing the commitment to the company’s internationalization.

The redesign of the international business was reflected in the results of the biennium. As a result of the transfer of the origination of non-partner sugar mills to Alvean, sugar export volumes by Copersucar decreased compared with 2013-2014. In crop year 2014-2015, the company supplied 5.5 million tons of sugar to the foreign market—a drop of 20% compared with the previous crop year. In crop year 2015-2016, the export volumes totaled 3.6 million tons. These differences relate to the volumes that are now directly supplied by Alvean, which in turn increased the purchase of sugar, originating a total of 5 million tons in the Brazilian market.


Changes in purchasing decision

In the reporting period, changes were observed in the profiles of Brazilian consumers. Information raised by Copersucar clients—food manufacturers that have sugar as an ingredient—allow for the identification of some of these changes:

  • + Soft drink consumers who stopped buying because of the price, for example, who migrated to powdered fruit drink mixes.
  • + Another portion of consumers still buy soft drinks, but began choosing the package offering the best cost/benefit ratio, so there was an increase in market share of soft drinks sold in PET bottles, with higher volume, and the portion consumed in cans dropped, the portion that offers higher margins to bottlers. This change strengthened the competitive power of regional brands of soft drinks, generally available in PET bottles, but not always in cans.
  • + In the market for sweet foods, a decrease in chocolate consumption occurred in parallel to an increase in the share of candies and other sweets, suggesting a migration of consumers.
  • + The decline does not affect all regional markets equally; economic centers based on export of commodities, such as the agribusiness belts, lost less purchasing power than the regions supported by industries, highlighting the stimulating effect of a more competitive exchange rate on exports.
  • + A change in consumer behavior in the ethanol market was also observed. With rising fuel prices, the difference between the amounts charged for the ethanol and gasoline also increased. As a result, many consumers began to fill up with biofuel given the smaller price for a higher volume of fuel.

Sugar consumption(G4-16, G4-PR6)

Excessive consumption of sugar has been criticized by the World Health Organization (WHO) and the Pan American Health Organization (PAHO), which try to influence countries to adopt policies towards reducing the percentage of this nutrient in the population’s diet. Brazilian institutions have been discussing measures such as: terms of commitments with the food industry to reduce sugar in processed products; standards preventing the sale of products with high sugar content in schools and other educational institutions; taxation on sweet beverages, labeling products with high sugar content and other critical nutrients.

However, Copersucar has been conducting cross-industry work, through the “Campanha Doce Equilíbrio” (Sweet Balance Campaign), to educate society and the government about the role of sugar in human nutrition, disseminating scientific information on its importance for health and dispelling myths about its implications. As a social counterpart, the campaign promoted healthy living based on a less sedentary lifestyle and conscious food consumption. In addition, the company has been participating in discussion forums in other trade associations (Brazilian Association of Chocolate, Cocoa, Peanut, Candy and Byproducts—ABICAB, Brazilian Association of Soft Drink and Non-Alcoholic Beverages Industries—ABIR, Brazilian Food Industry Association – ABIA, etc.), and stimulating the formation of coalitions and discussion groups about the regulatory risks for sugar. Another action is promoting meetings with clients, with the theme “The value of balance,” in order to address this issue.

Certification or requirement Number of mills that
comply with the standard
Requirements of the Ministério da
Agricultura, Pecuária e Abastecimento (MAPA)
- Ministry of Agriculture, Livestock, and Supply
8
ISO 22000 Certification - Food
Safety Management System
10
FSSC 22000 Certification
Food Safety System Certification 22000
6
Kosher 10
Bonsucro™ 8
RFS2 (Renewable Fuel Standard)/Environmental Protection Agency (EPA) 33
METI (Japan) 25
LCFS (Low Carbon Fuel Standard)/
CARB
29
SMETA (Sedex Members Ethical Trade Audit) 8

Market
requirements

Sugar produced in Brazil must meet the requirements for safety certifications recognized worldwide as well as by government agencies. In the foreign market, quality of sugar is regulated by Codex Alimentarius, a set of international standards, codes of conduct, and guidelines for the production and safety of food established by the United Nations (UN) and the World Health Organization (WHO).

The countries of destination for Brazilian exports may also maintain specific rules and requirements. For ethanol, the Agência Nacional de Petróleo, Gás Natural e Biocombustíveis (ANP) National Agency of Petroleum, Natural Gas, and Biofuel (ANP) sets the standards required in the Brazilian market.

Copersucar and its production mills follow these standards, as well as international regulations established by the regulatory agencies of the countries to which the company exports.

Certification or requirement Number of mills that
comply with the standard
Requirements of the Ministério da
Agricultura, Pecuária e Abastecimento (MAPA)
- Ministry of Agriculture, Livestock, and Supply
8
ISO 22000 Certification - Food
Safety Management System
10
FSSC 22000 Certification
Food Safety System Certification 22000
6
Kosher 10
Bonsucro™ 8
RFS2 (Renewable Fuel Standard)/Environmental Protection Agency (EPA) 33
METI (Japan) 25
LCFS (Low Carbon Fuel Standard)/
CARB
29
SMETA (Sedex Members Ethical Trade Audit) 8
Copersucar has set the goal that by crop year 2020-2021, it will double the supply of sugar with proven international recognition for its management systems and sustainable production.

Bonsucro™ Standard(G4-15)

Bonsucro™, an organization based in London, England, sets a standard of sustainability for the production of sugarcane through principles, criteria, and indicators, whose compliance is attested by certifying agencies. Bonsucro™ has become a global reference in sustainability in the production of sugarcane and its byproducts. It is integrated by producers, traders, non-governmental organizations, and investors to establish criteria and principles for the protection of the environmental and social aspects, in addition to ensuring safe working conditions in the industry. Copersucar has been a member of the board of Bonsucro™ since 2012.(G4-16)

In the two years covered by this report, two Partner Mills—Santo Antônio and Uberaba, belonging to the Balbo Group—received the Bonsucro™ certification, thereby totaling eight Copersucar partner sugar and ethanol production units that hold the sustainability seal specifically for sugarcane. At the end of the 2015-2016 crop, 10.8 million tons of sugarcane had this certification. (G4-PR1)

In addition to the mills, Copersucar’s chain of custody is certified by Bonsucro™, as well as Alvean, a global trader of sugar resulting from the equal-share joint venture between Copersucar and Cargill. Alvean received the Bonsucro™ certification after beginning operation in February 2015.

Among the commitments related to its new Materiality Matrix (see more in the “About this Report” section), Copersucar has set the goal that by crop year 2020-2021, it will double the supply of sugar with proven international recognition for its management systems and sustainable production. To this end, the company is developing an expansion plan for certification of the production mills, among other actions.

The company also conducted a survey of clients and other market players in the 2014-2015 crop in order to identify the current and future demands regarding the sustainability of sugar production and marketing. The results of the survey will be matched against data on logistics and on the type of product offered by all mills, in order to draw up a valid map of the expansion of Bonsucro™ certification in the near future. This work will identify the priority units for receiving the certification, taking into account the initial level of adequacy of each mill to the requirements of the standard. Client satisfaction surveys were not conducted in the 2015-2016 crop. (G4-PR5)

Product Traceability1

The international markets for Brazilian ethanol have their own sustainability standards to be met. Copersucar and its Partner Mills reached a level of maturity and readiness for the market that allows them to participate, without issues, in negotiations to supply major global consumers. This is the case of the United States, regulated at federal level by the Environmental Protection Agency (EPA), and, for the California market, the California Air Resources Board (CARB). In the 2015-2016 crop, 94% of Partner Mills were prepared to meet the EPA Renewable Fuel Standard (RFS2)—the agency requires that sugarcane for ethanol production has not been cultivated in deforested areas after December 2007. (G4-15, G4-PR1)

To comply with the American standard, traceability tools are used that include evidence of land use, monitoring of sugarcane input, and geo-referencing reports. In the 2015-2016 crop, 45% of the total volume of biofuel produced by Copersucar Partner Mills met the requirements of the EPA RFS2 program, and 18% of the total exported volume exported to the United States met the EPA requirements; in the specific case of exports to California, in the 2015-2016 crop, 84% of Partner Mills were registered on CARB’s program. (G4-PR1)

In Europe, Bonsucro™ certification is one of the protocols admitted in the RED (Renewable Energy Directive)—the directive for the use of renewable energy in the European Union. Copersucar meets two of these protocols. The Bonsucro™ seal certifies the company’s chain of custody, its subsidiaries, and eight Partner Mills. In addition, Copersucar has the International Sustainability and Carbon Certification (ISCC), which allows the company to also sell ethanol in Europe.

Another country that strictly regulates origination and quality of imported biofuels is Japan. in the 2015-2016 crop, 73% of Copersucar Partner Mills met the environmental standards of the Japanese Ministry of Economy, Trade, and Industry (METI) for ethanol sold on the local market. Japan prohibits biofuel imports produced in deforested areas or areas recently used as pasture (after April 2012). To prove compliance with environmental standards, product traceability is verified. Beginning April 2014, Copersucar adopted an automated management system for traceability of certified products, designed to meet any type of standard or requirement applied to selling the company’s products in regulated markets. (G4-15, G4-PR1)

1 In the 2014-2015 crop, 36 mills met EPA requirements. in the 2015-2016 crop, this number was 34. Between one crop and another, 5 mills no longer met EPA requirements, since they left the Cooperative, and another 3 began to comply with the regulations of the agency. In the 2014-2015crop 30 mills met the environmental standards to supply their products in Japan. This number dropped to 27 in the 2015-2016 crop, since 5 mills were no longer part of the Cooperative and therefore no longer met these standards. On the other hand, two other mills have begun to meet the Japanese standards. Regarding Bonsucro™, 7 mills had this certification in the 2014-2015 crop, and 8 in the following crop.

Monitored quality (G4-14)

To meet the growing demands of clients and national and international regulators, Copersucar has been investing in the improvement of quality control at all stages of the supply chain under its responsibility. The quality of technical specifications, as well as compliance with quality assurance standards (ex. standards ISO 22000, NBR 17025, NBR 17505, and FSSC2200) are defined according to the needs and demands of each product and market. In addition, all terminals used by Copersucar are subjected to rigorous hygiene and cleanliness inspections, and systems are implemented, such as pest control, before being authorized to receive products.

Sugar export undergoes quality control at its own and third-party transshipment terminals, as well as at the Copersucar Sugar Terminal (TAC), at Port of Santos (SP), where it is received and monitored by an independent supervisory company responsible for collecting samples, monitoring unloading, and analyzing the product to verify compliance with the specifications.

In the 2014-2015 and 2015-2016 crops, the company received complaints from the domestic market for products that were not in accordance with regulations and voluntary codes concerning the health and safety of end consumers. These occurrences represent 0.3% of the total sales volume. In the foreign market, there were two complaints in the 2015-2016 crop about products that did not meet health and safety regulations. These complaints are not significant compared with the total volume sold by Copersucar. (G4-PR2)

A new process for managing and following up client quality complaints related to sugar and ethanol began to be developed in 2015, and implementation started in the beginning of 2016. This process defines standards that already adopted by the company and brings the advantages of defining concepts and standardizing quality practices, a clear definition of roles and responsibilities, more assertive controls, traceability, effective communication, ease of management, visibility and transparency in the process, and performance indicators. Thus, communication to all areas involved and solution of these occurrences gain more consistency and agility. (G4-PR2)

Safe specification
for the product (G4-PR1)

The port terminals installed at the Port of Santos in the state of São Paulo published a statement in December 2014, completed in January 2015, reporting on the new specification parameters for loads of sugar. These parameters were applied to all Copersucar mills and terminals, in 100% of the operations. The adoption of these measures aimed at improving product handling conditions and reducing emissions of particulate matter. Thus, if the terminals identify the presence of products that do not meet these parameters, the flow may be interrupted and cargo may be returned. The statistics began to be raised in June 2015, and indicate 274 notifications with 42 refusals, totaling 1,806 tons of sugar returned to their origins, representing 0.001% of the volume handled in the terminals.

The main actions of the mills to minimize generation of fines in the process were related to revisions in the automation of cookers (operating load and granulation); in the seeding and crystallization processes; and in the automation of the molasses dilutor, eliminating the loss of crystals in the A mass centrifuges. The volume of water in the molasses diluter also increased, monitoring the purity of the diluted molasses, the reduction in the temperature of the water for washing the sugar, reduction in the centrifuge cycle, and reduction in the temperature and flow of drying air and temperature of the water for washing the sugar, reducing the centrifuge cycle.

The Copersucar Quality team conducted a concept alignment workshop where an overview of cases of non-compliance with the parameter was presented in order to raise awareness about the impact and the need for corrective action. Training was conducted by an outsourced company, hired by Copersucar, and the training modules were Method of Analysis and Problem Solving (MASP), and Statistical Process Control (CEP), useful tools for minimizing the occurrences in the units.

The Copersucar Ethanol Terminal (TCE) meets all safety and operational standards related to multimodal ethanol terminals and has quality controls to ensure full compliance with Brazilian legislation (ANP).