September 26, 2013 After 80 Years of Making Pasta, Why Vilma Diversify?

Volume 16 | Issue 8

Michael Sommers takes a look at how one of Brazil’s most traditional manufacturers of pasta is applying its reputed brand name – and experti

Brazil’s third largest city, Belo Horizonte is capital of Minas Gerais, the nation’s second most populous and third wealthiest state. This planned city of 2.6 million was in its early stages of growth, in 1923, when an Italian immigrant by the name of Domingos Costa arrived here with his wife, Josefina, and his family. In fact, in 1925, when Costa founded a small pasta-making business, using recipes learnt from his hometown in southern Italy, it had been less than three decades since Belo Horizonte’s own founding in 1897.

Organic Growth
Over the next few decades, the expansion of the family business paralleled that of the thriving city springing up around it. Spurred on by government investment in urbanization and industrialization, between 1930 and 1940 the population of Belo Horizonte practically doubled, from 115,000 to 214,000. For the working citizens of this mushrooming metropolis, pasta was one of the most nourishing and inexpensive foods available. In 1937, following the construction of a new site and the building of a larger factory, the business named for Domingos Costa (which to this day remains the company’s legal name) became known as Massas Vilma (massas being Portuguese for pasta), a name chosen by Josefina in homage of the Costa’s youngest daughter.

In 1942, Domingos and Josefina’s son Paschoal Costa took over the reins of the company and held onto them for the next half century. During this time, Vilma underwent many changes, one of the first – and greatest – being the company’s move to the burgoening industrial outskirts of Belo Horizonte, today known as Contagem.

In the 1970s, Paschoal Costa moved to Montes Claros, a town in northern Minas Gerais where the company opened a second plant, leaving his son, Domingos, to modernize the original Contagem facility – and the business itself. Under Domingos’ leadership, Vilma invested heavily in new machinery and products and professionalized its administration. In 1997, it was the first medium-sized company in the Brazilian food segment to implement SAP management software.

More than Mere Macaroni
Vilma began branching out from pasta as early as the 1950s when Paschoal Costa decided to construct a flour mill at its Contagem site. Inaugurated in 1955, the mill marked the company’s initial foray into diversification; the flour produced not only supplied its own needs, but was sold to retailers as well as other industries. However, with the dawning of the new millenium, Paschoal’s son Domingos resuscitated this diversification strategy in earnest, fueled by the desire that Vilma grow into a business that was about much more than mere macaroni.

“Today pasta is still our biggest business, responsible for 30 percent of our total revenues,” says Pablo Serafin, Vilma’s director of sales and marketing. “However, it is only one of five major product segments that constitute the Vilma Group.” The remaining four segments include flour (15 percent); cake mixes (25 percent); powdered fruit drinks (25 percent) and sauces and herbs (5 percent).

Serafin credits several factors with Vilma’s desire to diversify. “We already had a very sophisticated distribution channel in place in Minas,” he explains. “We also had the production capacity to take on these new products. Since we already produced our own flour – and pasta products made from that flour – it was easy to integrate products such as cakes mixes and dough for bread and pizzas into our portfolio.”

The decision to begin manufacturing powdered fruit drinks – sold at retail and to the food service industry – had an additional rationale: seasonality. “In Minas, pasta tends to be more frequently consumed in the cooler winter months while fruit drinks are more popular in the summer,” says Serafin. “We thought that producing both would balance things out and allow us to maximize our production capacity while breaking into new markets.”

Vilma’s most recent diversification, in 2008, coincided with its first acquisition – of Belo Horizonte-based Pirata, a well-known manufacturer of spices, condiments and sauces that is a leader in its market segment. Pirata joins a handful of other in-house brands such as Yara, Alvorada and Oregon under which Vilma sells various pastas and flours.

Already such diversification has borne fruit. Over the last seven years, the company has experienced average annual growth rates of 7 percent, which are superior to those of Brazil’s GDP. So far this year, the company’s growth rates have been in the double digits; a tendency that promises to continue throughout the remainder of 2013.

In Vilma’s main market of Minas Gerais – which accounts for 70 percent of total sales – the company is already a leader in terms of pasta, powdered drinks, and cakes mixes. In terms of cake mixes, it’s a national leader as well. “Along with our product diversification, we’re taking steps to diversify geographically as well,” says Serafin. “Recently, we’ve experienced a lot of growth in (the neighboring states of) Bahia and Espírito Santo, as well as Rio de Janeiro – where we have sales and distribution centers – and the Central West. This organic growth is due in large part to Vilma’s strong reputation as a high-quality supplier.

Constant Revitalization
Indeed, amidst the company’s focus on diversification, it hasn’t forsaken the Vilma brand that for decades has assured its livelihood. Recently, Vilma was treated to a major revitalization, which included a new logo as well the creation of a multitude of new products, including lines of gourmet and whole wheat pastas.

“The emphasis on health is the biggest change affecting our market,” admits Serafin. “And it’s driving a lot of our product innovation.” Apart from products made with whole wheat flour, Vilma is gearing up to launch other healthy alternatives such as pastas packed with vitamins and vegetables.

“Pasta is already present in 99 percent of Brazilian homes,” says Serafin, explaining that Vilma’s goal is not to convert consumers to the cause. “Brazilians won’t consume more pasta – but they will consume better pasta. Brazil’s new emerging middle class is becoming much more refined in its tastes and is seeking products with more added value. Increasingly, they are migrating to products such as pasta with eggs or grano duro pasta. As a result, we’re currently focused on creating more sophisticated lines for this new socio-economic segment; today, they comprise our most important customer base.”

As part of its goal to create better – not to mention safer – products, the company invested in an on-site technical center, a pioneering move within the industry. Another vanguard strategy – equally rare in the industry – has been Vilma’s commitment to controlling the origin and segregation of its wheat.

“Unlike many of our competitors who buy from co-ops – where you’re often dealing with diverse products of inconsistent quality from heterogeneous sources – we purchase directly from individual producers that we’ve carefully researched, all of whom are located in northern Paraná,” says Serafin. “Because we can follow the wheat’s cultivation from the planting of the seeds to the harvest, we are able to analyze the supplies and guarantee the tightest quality standards. This is something that nobody else at our scale of production does in Brazil.”

As a result of such strategies, Vilma has continued to solidify an already strong reputation that, in close to 90 years of existence, has allowed it to become one of the most recognized – and trusted – food brands in the country. And yet, as Serafin points out, the company’s sterling reputation is not an end in itself, but a springboard toward future growth.

“Our goal is to use our reputation to become even bigger,” he confesses. “Not in terms of size – which of course, is a consequence – but to embrace new products and new markets. Many other companies in this segment who have been around for some time fail to invest in modernization and growth. But consumers are always changing. They’re always looking for new products – and we’re always seeking to use our expertise to provide them.”

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