Time to Branch Out

What was the strategy behind acquiring Galas?

We were already closely related. Convertidora Industrial and Galas conducted considerable business together, making for a natural fit for the group. We were one of the suppliers of Galas at that time; hence, with that purchase, we installed an integrated production line. We produce everything ourselves, and manage to serve Bimbo, as well as Procter & Gamble, Unilever, Grupo Modelo, and Heineken.

Is Galas or Janel more important in terms of assets?

They are about the same size, and are integrated. All of our production lines are integrated, from plastic pallets to finished products. We have adhesive tapes for industrial purposes, and also for commercial use. On this side of the business, our largest customers are retailers Wal-Mart, Chedraui, Soriana, and Office Max, in addition to various wholesalers and local distributors nationwide. We basically divide the business into two categories: industrial and commercial. They are both managed from my office. The industrial business generates a greater revenue.

What trends have you recently observed in retailing in Mexico?

The Mexican consumer has become more sophisticated over the past decade. We are a country traditionally motivated by price. Yet today, for Christmas products for example, the level of sophistication is striking, with demand for highly realistic trees, while the decorations consumed can readily be compared to those any market in Europe or the US. Customers are becoming more aware of quality and design.

What impact will your new acquisition aimed at exporting plastic trees to the US have on your overall operations?

We are currently working to consolidate the project, which involves the acquisition of a US company, and I hope to see this in place in 2015. Production in 2013 was at around 680,000 Christmas trees; however, I believe we have improved on this in 2014, at closer to 800,000 unit. Of our 20,000 SKUs, half are Christmas and decorative articles. As a group, 18% of our revenue derives from Christmas-themed products, which is substantial. Five customers account for 7% of those sales.

What steps are you taking to make Galas-Janel a sustainable company?

We have several products in the plastic and packaging side of the business that are biodegradable. All of our packaging for Bimbo degrades over time, and we have been doing this for two years now. We were the first company in Mexico to use such packaging, despite it being a global trend. Regulations are becoming tougher, and our major clients are focusing more on the sustainability of their products in order to develop alongside their customers who are demanding more sustainable practices. Around 99% of our production in Mexico is done at the eight production facilities we have in Mexico City, Toluca, and Monterrey.

How important is innovation for your company?

In 2014, we launched around 200 new products, while our 17 graphic designers constantly devise new ones, as we understand the need to innovate regularly.

To which regions do you export your products?

Our geographical position is an absolute privilege, with easy access to Central and South America from Mexico and the US. In addition, over the past couple of years, China has becoming less competitive, leading to greater interest from the US. I would say that Central and South America make up the bulk of our exports, followed Europe, the US, and Asia.

What is the greatest challenge in selling into the US?

Pricing remains the most significant challenge we face in doing this. In entering the US market, you are setting yourself up for direct competition with Chinese firms. In our segment, China is getting more competitive in terms of quality. However, our products have always been high quality, meaning this is not too much of an issue; the problem is related to rising expenses. Shipping our products from Asia is difficult, and it is also risky as you can only sell these products for two or three weeks of the year; therefore, if something goes wrong, the risk is relatively high.

How much do you export?

We export about 15% of the total, as a group, and our biggest exports are tapes and sticky notes. For now, therefore, most of our production is geared at the domestic market, although from now on, we will be focusing on exports as the Mexican is somewhat decelerated. Industry in general throughout the country is not growing as we would like it to; over the past couple of years, growth has been between 2% and 3%, which is inadequate, and it is natural for us to look to other markets.

Where do you see the group in the next decade?

We are planning for growth in exports, and an expanded presence in other countries through acquisitions in the US and the EU. Another aspect of our strategy involves the establishment of distribution centers in Europe. Our main goal is to promote external growth and our international presence.

© The Business Year – December 2014