December 27, 2008 The King

Volume 4 | Issue 4

Poised for growth, improving efficiency is key to beating the hard times for Mexican cheese producer Consorcio Algil S.A. de C.V.

Having recently completed an expansion and equipment upgrade, Mexican cheese producer Consorcio Algil is posed for growth and possible expansion into the U.S. when the cheese market emerges from a recent slump that has seen supply prices increase and halt growth. “We are going through very difficult times, not just in Mexico, as worldwide the industry is having a really hard time due to the high cost of supplies. In the last five years we have had growth of over 20 percent but in May it stopped as the price of supplies went up,” says Director General Fernando Alvarez.
Higher prices have produced higher sales values but sales volumes are not increasing, which is what the company is looking for. “Prices are going up but purchasing power is not, so we are growing in sales numbers but not production numbers, which is where we want to grow. We are getting through this and we are doing what we can to face this,” he says.

Fortunately the company recently completed an $18 million investment to upgrade and modernize its San Miguel de Allende factory in Guanajuato state through the installation of German, Swiss and American equipment such as Alma and Ulma machines. This upgrade gives it the ability to focus on optimizing efficiency to combat current market conditions. The production plant features improved milk reception, production and packaging processes.

We are already more efficient so we are producing more with the same amount of supplies. We have also managed to achieve a more standardized and efficient reception process and have a more standardized production and packaging process,” says Alvarez.

Improvements to its packaging and distribution process means that the company can guarantee product quality throughout the production and distribution chain, from the time it receives its milk supply until the product is on the store shelf. “There is not a moment that it has not been at the temperature that is required for it to be in perfect condition,” he says.

Cheese mix

Consorcio Algil produces about 160 products from its FDA-certified plant in Guanajuato including a wide variety of fresh, mature and aged cheeses and other dairy products. A smaller plant in Mexico City produces fresh cheese only. Following the plant upgrade, cheese production capacity has increased to 2,000 tons per month (tpm) but it is currently producing about 1,500 tpm, up from former levels of around 1,200 or 1,100 tpm.

Its flagship product is Panelas, a typical Mexican cheese, but its product range includes Oaxacas, double cream cheese; American-type cheese dips, and several kinds of cream cheeses and mozzarella. In addition, the company distributes cheeses such as Emmental, Edam, Gruyere, Gouda, Cheddar and Parmesan that it sources from around the region. “We used to buy from Germany and Holland, but we don’t anymore because of the high prices they have right now,” says Alvarez.

“There is no other company that has the same variety of products that we have,” he says, adding that it has brands for each segment of the market including Esmeralda, Bon Swiss, Mariposa, El Ciervo and La Campesina Holandesa. “We have over 20 brands of cheese,” says Alvarez.

In addition to cheese for the retail market, it also supplies cheese such as mozzarella to industrial customers that include PepsiCo for its Pizza Hut pizza chain. “We have the chunk contract with Pizza Hut, which is a unique contract,” he says.

While no new cheese products are currently under development, the company is focusing on different packaging alternatives for existing products as part of an overall evaluation of its products. “We are evaluating which of our products should stay and which should go, so we produce the ones that we really ought to be producing,” says Alvarez.

Distribution is a company strength that derives from its 18 warehouses located throughout Mexico that allow Consorcio Algil to control product quality and delivery times. “We are direct distributors. We do not use any other company to do the job for us as we found that this is the best way to do it. It is more personal and more efficient. We give emphasis to customer service and have made huge changes in the last 10 years in this particular area. We go to bed and wake up thinking about our clients and customers. We are really committed to them and they are the reason we work. Their satisfaction is our goal,” he says.

With the company looking to grow, it invests the lion’s share of its profits in new equipment to maintain leading industry standards for cheese production. “We have a policy to reinvest all the profits to enlarge the business and improve the quality of the product. We do not take away a singly penny, as we invest in machinery and buildings so the plant keeps growing and we get a better job done at the distribution centers,” says Alvarez.

The company believes that it is the quality of its products that help differentiate it from its competitors, which is why it continues to invest in food production technology to eliminate hand labor in all processes “to guarantee that all production will be identical in quantity,” he says.

Big Cheeses

The company is one of the three leading cheese producers in Mexico, alongside Sigma Alimentos S.A. de C.V. and Lala Quesos, a subsidiary of Grupo Lala. The company was established by Alvarez’s father in the 1940s and it remains a family business, controlled by Fernando and his three brothers. Despite the tough economic conditions that Mexico experienced in the 1980s, by the end of the decade the company had grown and spread its presence to the cities of Guadalajara, Mexico City, Monterrey and San Miguel de Allende, where its production plant is located.

The 1990s saw the company open more distribution centers throughout Mexico to improve national market coverage, with a strong focus on supplying self-service retail outlets. “There is not a self-service store in Mexico that does not have our products. If a new one opens, you will be able to find our product,” he says

Consorcio Algil is now looking to diversify its market base to reduce its dependency on the domestic market and is looking to begin exports to the U.S., and is also working to obtain FDA (Food and Drug Administration) certification of its plant. “We are studying and analyzing the possibility of exporting to the U.S., the region near the border with Mexico, to companies like Sam’s Club and Wal-Mart. They are helping us do research and with market numbers because they are really interested in buying from us to supply this area of the country,” concludes Alvarez.

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