May 15, 2014
Buenos Aires, the harbor city situated on the enormous delta of the Rio de Plata, has a population of around 3 million. The area around the city is roughly 13 million of Argentina’s 40 million. Thus, it gave us a wider look at life in Buenos Aires when we went about an hour out of the city to visit a factory. It was an easy hour on an expressway, until we got to an industrial district for our visit.
The company smelled good—Saporiti manufactures flavors and colors for food manufacturers. Today, chocolate was one of the flavors being produced, and as a chocoholic, I was ecstatic. Founded in 1927, Saporiti’s current CEO is 3rd generation, who left a profession as an MD to take over the family business, and discussed some of the carryover between the two types of jobs. With 130 employees, $70 million in sales, and branches in a number of Latin American countries from Mexico to here, the owner discussed his plans for expansion, which included a look at the substantial Hispanic market in the United States. He did note, however, that as a mid-sized company, he was limited in his ability to supply a vendor like Coca-Cola, which demands similar taste around the world. He stated that he was able to supply some niche products to big brands (I thought he mentioned a yellow cola, Inca Cola, in Peru). The most interesting thing I learned from this manufacturer (surprisingly, manufacturing employs just over 20 per cent of the workforce, while agriculture, a big exporter, employs 5%) was that one of his efforts to create business, if not competitive advantage, is moving downstream. He will work with a manufacturer to create a new flavor, and (for a fee?) not sell it to others in the same product category, providing research and development assistance to the small and medium sized companies he serves. In addition, he will provide his expertise to his clients to purchase the right machinery. Forecasting has got to be a great challenge since he has no “captive” audience; it’s difficult to get new business, but he said if the manufacturer is satisfied, he seldom changes a supplier—too much risk of a “different” taste. Some of his ingredients take 2 or 3 months enroute (cocoa comes from Africa) further muddying his ability to manage supply and demand. As he pointed out, he has a large warehouse to anticipate demand.
The second business was a service business that exemplified the flat world. It was an advertising agency that stressed its ability to deliver creative services globally. One ad they showed us found a market in Canada, the United States, and Thailand, for example, proving, as one CEO I met in India in 2001 pointed out, the right business can be headquartered anywhere. The two entrepreneurs who integrated their production company forward, adding an advertising agency, were passionate in their presentation about their creative abilities, and some of the spots they showed us certainly demonstrated that they’d taken a lot of film-making skills and added them to the world of marketing. My favorite was a coffee ad with a hand coming out of the coffee cup slapping someone awake. I did not need it for their presentation!
It really hit me as we drove through their neighborhood looking at wonderfully solid homes of the rich (their office was a converted one-family many-room mansion that still had some elegant touches) that we were in the southern hemisphere. As I looked up the street, I saw a beautiful sugar maple that was orange and red, rather like the one outside my home in Bloomington—in late October. Here, 31 degrees south of the equator, it is climatologically mid-November. If you love fall (and I do) you might consider moving to the southern hemisphere when it’s spring up North—if that’s not too confusing!