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Colombia 2015 | ECONOMY | INTERVIEW

TBY talks to Carlos Ignacio Gallego P., President of Grupo Nutresa, on the regional market, dividing business segments, and the effects of FTAs.

Carlos Ignacio Gallego P
BIOGRAPHY
Carlos Ignacio Gallego P. is a Civil Engineer with a Master’s in business administration. He was born in Medellín in 1964, and has worked with Grupo Nutresa since 1991. He has held, among others, the position of Head of Production, Industrial Vice President, and President of Servicios Nutresa prior to his current position. He studied at EAFIT University, and has a Master’s in business administration from the same institution. He has also completed various graduate programs at Harvard, Northwestern, and MIT, focused on strategic business management.

Nutresa is today the fourth largest food company in Latin America, with a total market capital of $6.7 billion. How is the group continuing to expand its Portfolio, domestically and abroad?

In 2013, international sales accounted for 39.5% of our sales, which in total amounted to around $3.4 billion with an EBITDA margin of 14% (Proforma figures). This group arose out of the development of several companies, and was founded almost 100 years ago in the 1920s. The National Chocolates Company (Compañía Nacional de Chocolates) was the result of a merger between nine or ten small chocolate companies, recently branching into other businesses as well. We have 41 manufacturing plants, and our products are sold in 72 countries on five continents. As a result of our portfolio, we do not depend on a single commodity, none of which represents more than 9% of the total cost. It allows us to have a better management of commodity risk. The main commodity today is packaging material. The business model of the Nutresa Group is based on three pillars, the first and most important being people. We have more than 38,000 employees—12,000 beyond Colombia. These are crucial for us because our company has a robust innovation model based on committed and well-trained people. The second pillar is brands, and we have a strong portfolio that reflects the respect we have for local taste and preferences. We have 16 brands that generate in excess of $50 million. We prefer to consolidate our brands to develop a stronger market status and pursue synergy in marketing investments. In Colombia, the average market share is 60.5%. During the first nine months of 2014, we have grown 8.9% in Colombia, while the finance minister is forecasting GDP growth of close to 4.7%. Over the past eight years, we have grown by 10.6%, and by 7.8% over the past five years.

With regard to the various business units, are you concentrating on any one in particular?

In Colombia, for instance, we are present in the cold cuts business; a particularly local segment and we have a company in Panama and another in Venezuela. Operations in the latter are currently limited at just 1.8% of our total sales and 0.5% of liabilities. In Colombia, we have a market share of 73% in cold cuts, and are growing. We are leveraging the currently positive dynamic of the Colombian economy for all of our businesses. Meanwhile, we are also focusing heavily on the biscuits industry in Colombia, US, and Peru, and have a 53% local market share. It is the most aggressive and competitive environment in Colombia because we have all the global players. But we are growing based on solid innovation.

How significant an effect on exports do free trade agreements (FTAs) have?

Free trade agreements such as the Pacific Alliance are positive, but bring new challenges. It all depends on how you prepare to take advantage of the possibilities that these agreements result in. Grupo Nutresa is present in Chile, Peru, Colombia, and Mexico—among other nations—at the same time we are present in Malaysia. It is not just luck, it is related to our preparation to be in the right place and use the productive platforms available. We look at free trade agreements as a two-way relationship. We will not only have access to raw materials and technology but also to markets. If we look at Mexico, it is a big country, and we believe that with innovation and a strong value offer we can increase that market and be part of their growth, and our location in Mexico has easy access to the ports so we can export from there. We can sell there and send it to other countries in the region, including the US, which is a strong neighbor, so Mexico will improve its own capabilities and experience the direct impact of US growth. This will be promoted by our new plant in Guadalajara, for which we expect to have sales in the first three months of next year, and which adds to our current facilities in Mexico. Our main goal is to duplicate the size of Grupo Nutresa by 2020 and maintain the EBITDA margin at a rate of 12-14%.