Land O’Lakes' Jon Halverson: Sri Lanka milking its way to peace

Land O’Lakes, the U.S.-based cooperative that markets everything from chocolate pudding to horse feed, has been working with USAID to promote reconciliation in Sri Lanka through dairy cooperatives. Devex Impact talks with Land O’Lakes’ Jon Halverson.

Earlier this month, Land O’Lakes International Development – the development arm of the Minnesota-based company Land O’Lakes – sponsored the only official Nobel Peace Prize event outside Norway.

The Nobel Peace Prize Forum, which took place in Minneapolis, brought together Cargill President and COO David McLennan, Elanco President Jeff Simmons and Land O’Lakes President and CEO Chris Policinski to discuss how food security contributes to peace around the world.

Land O’Lakes, the only Fortune 250 company to have its own international development division, showcased its work with dairy cooperatives in Sri Lanka and Kenya, among other food-security related projects.

Devex Impact talked with Jon Halverson, vice president for international development at Land O’Lakes, about the connection between dairy development and community reconciliation in Sri Lanka, and how Land O’Lakes integrates its international development activities into its core business strategy.

What messages came through in the forum?

A key message was making sure we start wrapping our arms around the facts. World population is set to reach 9.2 billion by 2050, and we need a tremendous amount of innovation and productivity increases in the lesser developed countries, which have huge amount of undeveloped arable land. To meet the growing need in front of us, some experts estimate that up to 70 percent more food will need to be produced. The work we’ve done in Land O’Lakes International Development for the last 30 years is moving us toward meeting this growing demand.

We have been addressing food security head on, through improved production practices, innovative technology, and by helping cooperatives become high performing entities with good governance and business planning. All those elements are critical to growing markets we can eventually participate in as a company. Beyond that, it’s the right thing to do. Our work in this is not just about Land O’Lakes’ sense of corporate social responsibility, it’s about creating shared value for the company between development and commercial investment.

It’s unfortunate that often development gets put into one camp, and commercial activity is put in another. Because Land O’Lakes International Development division is under the corporate umbrella, we can bring to bear the best of our corporate capability, in terms of crop inputs, animal nutrition and dairy cooperatives. That experience influences how we think about development. We want to issue a call to action to our peers in the industry to let them know that this model works.

How does Land O’Lakes as a company benefit from engaging in international development work?

We are very active in international development in sub-Saharan Africa and poor regions of South Asia in particular. Those areas happen to contain a number of high-growth markets, where there is a significant emerging middle class. All three of Land O’Lakes’ main business units — crop inputs, dairy and animal nutrition — are very applicable to the growing market demands in Africa and South Asia. We envision blending development work with seeding commercial opportunities. It is important that all our development work have an exit strategy and a sustainable model that encompasses the private sector from the beginning.

The developing world is changing, but I want to be careful when we talk about the emerging middle class. Some say there are as many as 200 to 250 million people in Africa who are now getting to the point where they buy their own transportation, and more convenience food, who can look ahead more than six months and save money – all the markers of being in the middle class. But there are still 250 to 450 million people in Africa who are extremely poor, and most of them are in agriculture – they are smallholder farmers.

One thing Land O’Lakes does well as a company, and as the second-biggest cooperative in the U.S., is to work with livestock and dairy farmers. Those are fantastic crops in Asia and Africa that can provide a constant source of income and nutrition through the year – milk is both a consumed crop and a cash crop. When you set up a milk collection center and a chilling center, you add value at the local level. Land O’Lakes views development work as setting the table for serving its own consumers better. We have many global customers in these regions, and we can be a strategic supplier.

How did your work with dairy cooperatives in Sri Lanka end up focusing on peace and reconciliation?

USAID and USDA both are keenly interested in development work that has a peace and reconciliation component. The underlying belief is that in a post-conflict area, or even in a current conflict area, providing economic opportunity is important in generating stability, peace and reconciliation.

Through our Dairy Enhancement in Eastern Province initiative in Sri Lanka, completed in May 2012, Land O’Lakes development work spanned across farmers from different ethnicities including Tamils, Sinhalese and Muslims. There are many stories of how they came together across ethnic and religious lines through the project in the spirit of cooperation and around an economic incentive. Many of the farmers had been displaced due to years of conflict, and some were in an utterly desperate situation. These farmers were looking for the opportunity to get badly needed income and create value for themselves and their families. This program provided that opportunity through dairy cooperative development.

There were challenges, to be sure. But we saw first hand that creating economic opportunity did bring increased stability and improved livelihoods. We saw annual income for these farmers jump 75 percent as a result of this program. The critical part was linking up the cooperatives with a Sri Lankan agribusiness called CIC Agribusiness. The company saw the strategic benefits of adding these milk collection centers to their supply chain. A business like CIC needs volume, and that’s what the milk collection centers can provide. When you are adding business value, you can forge a real partnership.

How do you measure impact in the area of peace and conflict resolution?

There’s no science to define that. We do measure impact on a number of levels and we look at the performance of the business in particular.

We ask questions like: Are the cooperatives with Muslim, Tamil and Sinhalese farmers performing well and making money? Do they have a good governance system in place? When people across conflict lines are in a high-performing cooperative, that says there is cooperation, a functional governance structure, and a business model that makes sense.

We also do livelihood measurement at the household level, looking at indicators like whether kids are in school. We also look at women’s rights. We ask: Are women increasingly empowered to run the home dairy farm? When the program first started, it was not that common to have women run dairy farms, but by the end of the program, 40 percent of the smallholder farmers’ dairy component were run by women. We view that as a tremendous breakthrough.

What will happen to these cooperatives now that the partnership is closed out?

Fifty-six producer groups were an outcome of this program. A key component for their ongoing success was linking them to the private sector. Not only is CIC purchasing milk from the farmers for yogurt marketed in Sri Lanka, but Nestlé also is supplied raw milk (for local market consumption). That’s critical to everything we do in development work at Land O’Lakes: having a market-driven approach from the beginning.

And of course the milk isn’t just sold to agribusiness and consumer-branded product companies in bulk through milk collection centers. It’s also sold through kiosks at the local level, providing badly needed protein and nutrition.

A multinational, a local business, a major donor, a collection of cooperatives – What was the secret to making this public-private partnership succeed on a day-to-day level?

You have got to have good, open communication up and down the value chain. You also need to have good relational skills. When we launched this program, we looked for a Chief of Party who was capable of not only understanding the dynamics at the village level but also sitting in the board room, doing product planning with customers.

One person can’t play that bridge-building role on their own. The customers became connected to the collection-center leaders, and that’s the idea. The local leaders grew increasingly independent from the program and built relationships with the customers, especially with the production and supply-chain managers at the large dairy customers. Forging those relationships is key to making a partnership work.

It’s 10 times better when that vision is shared openly from the beginning. These farmers know they are not likely to get follow-up grants and that it’s up to them to seize the business opportunity. Developing that awareness was critical, because in Sri Lanka [after the 2004 tsunami and during and after the conflict], there was a lot of relief and reconstruction work and aid that flowed in the form of hand outs. When this program was initiated, we saw there were many community leaders, fledgling co-ops and livestock owners – a real opportunity.

We said [to them]: You’ll be held accountable for yield increases and profit-and-loss. Some of the local leaders pushed back and said: ‘No, give us things.’ In that situation, the best way forward was to find the first movers, and then the whole thing gained momentum. If you don’t have a business model that works profitably at the farmer level, you will lose. There is nothing that gives dignity better than creating profits with your own hands.

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    Andrea Useem

    As Associate Editor and Content Director for Devex Impact, Andrea creates and manages cutting-edge content on the intersection of business and international development. An experienced multimedia journalist, Andrea served as leadership editor at the Washington Post and spent three years as a foreign correspondent in Eastern Africa reporting for publications including the Boston Globe, Dallas Morning News, and San Francisco Chronicle.