In the last decade, Produquímica has become Brazil's leading manufacturer of micro-minerals and micronutrients. Michael Sommers discovers how innovation and bold expansion have transformed the once modest company into a driving force in the industry.
There are companies that focus primarily on expanding horizontally. Others expand vertically and even geographically. Produquímica, a major Brazilian manufacturer of microminerals and specialized chemical products, has become a market leader by expanding every which way at once. Presently, the group boasts nine separate plants (one each in the states of Alagoas, Pernambuco, and Minas Gerais along with six in São Paulo state), whose total surface area measures more than 3.7 million square feet. Its roster of clients is impressive as is the vast portfolio of products it manufactures, ranging from acids, aluminum, and ammonium to zinc. And having conquered the domestic market, it is now gearing up to branch out globally.
Produquímica has certainly come a long way since 1965 when Geraldo Schultz founded a small plant in the town of Suzano, São Paulo with the intention of manufacturing copper sulfate for animal feed and plant and crop fertilizers. For the next three decades, the small business remained local in stature and modest in its ambitions, sticking to the markets and products it knew best. Then in 1997, a major change occurred that shook up the company and gave it a bold new lease on life. Geraldo’s son, Gerhard, became president of Produquímica and, shortly after, acquired 99 percent of the company’s shares from the rest of the family.
According to Commercial Director Franco Borsari, the combination of Gerhard’s acquisition of the company and his taking over of the reigns was a watershed moment for Produquímica. “It represented a great leap forward for the group,” recalls Borsari. “Gerhard wasn’t just the owner’s son. He was a trained chemical engineer who had studied in Brazil and Japan, where he specialized in catalyzers. He worked his way up through the company, beginning in the manufacturing sector, and then moving into purchasing and marketing before becoming president. Once he was in command, he injected a lot of dynamism into the group from a commercial point of view. He aggressively went after new markets by investing heavily in science and technology and developing new products. The results speak for themselves. When Gerhard purchased the company, annual revenues were less than 30 million reais (US$15 million based on current exchange rates). He ramped up our rhythm of growth so that we began experiencing increases of 30 percent a year. In fact, this year, we’re expecting revenues to exceed 700 million reais (US$350 million).”
In large part, this impressive growth has been spurred on by a series of major acquisitions, which began in 1997 with the purchase of Engeclor, Brazil’s largest manufacturer of ammonium chloride (widely used in the production of leather). In 2001, the group snatched up Reluz, a producer of copper sulfate, and Fermavi Eletroquímica, Brazil’s largest manufacturer of manganese derivatives as well as ferrous and zinc sulfate and other raw materials used in the agribusiness and feed industries, among others. Then, last year, the company branched out into completely new markets with a trio of acquisitions that have allowed it to penetrate industry segments with great growth potential. Acritec is a manufacturer of polymers used by water treatment plants as well as in paint while Cia-Agroindustrial Igarassu is a chlor-alkali facility that services water treatment plants located throughout the Brazilian Northeast. Its third purchase in 2007 was Adesol, a well-known brand name for processing technology used in the production of ethanol. Meanwhile, earlier this year, the group took care to consolidate its domination of Brazil’s booming agro-industrial sector by purchasing MixMicro, the nation’s third largest maker of micronutrient-based soil fertilizers.
Gerhard’s offensive strategies quickly set it apart from its competitors. “At this point, we have an enormous range of products and we’re always launching new ones,” declares Borsari. “Moreover, in the last few years, we’ve expanded our facilities and made investments in equipment in order to ensure production capacities on an increasingly large scale. Last year, for example we produced 450,000 tons of chemical products. And not only are our plants completely integrated, but our business is entirely verticalized as well. Most important is that we produce in-house, which allows us to diminish costs significantly and pass these savings on to our clients.”
Clients have reacted favorably. Currently, the bulk of Produquímica’s business – 75 percent – revolves around the agro-industrial sector, namely the production of microminerals for animal feed and plant fertilizers. In terms of this sector, Produquímica is the market leader, having captured 45 percent of the micronutrient segment and 40 percent of the animal feed segment. The remaining 25 percent of its business is split between the water treatment segment (15 percent) and chemical products used in industrial processes (10 percent). Key to the company’s conquest of the domestic market has been the strong ties it has forged with both customers and suppliers. “We’ve always had very strong partnerships with both,” emphasized Borsari, before reeling off an impressive list of the companies it buys from (including Brazilian giants Votarantim and Vale do Rio Doce as well as Chile’s Codelco, the biggest producer of copper in the world) and sells to (including Dow Chemical, Base, and major Brazilian manufacturers of industrial fertilizers as well as large rural cooperatives).
Having saturated much of the Brazilian market, the group is now preparing to go global by expanding into Europe, Asia, and the United States while consolidating its presence in South America. While exports currently represent 5 percent of business, Petroquímica’s goal is to triple its international sales by 2010. “As a Brazilian company we have a competitive advantage on the global market because, in recent times, so many Brazilian agro-industrial products, including fertilizers and animal feed, are sold overseas and they’ve come to be reputed for their outstanding quality,” says Borsari. “Moreover, the famous ‘jeito brasileiro’ (Brazilian way) of business management gives us an edge internationally. Culturally, Brazilians are a very flexible people. In business, this translates into being able to adapt quickly and easily to new and different situations. From a geographical standpoint, we’re also a country that is very open to the world.”
In Produquímica’s case, this national propensity for flexibility and willingness to adopt new ideas can be seen in the company’s espousal of innovation as a key tenet of its corporate strategy. “What really distinguishes us is our commitment to research,” declares Borsari, “both in terms of production processes as well as the products themselves.” Indeed, 3 percent of the group’s revenues are reinvested in research and development. Over the years, Produquímica’s team of engineers has invented 50 technological patents for industrial processes and applications. “Unlike other competitors in the field, we develop a lot of our own technology,” points out Borsari. “The results have an impact on everything from metal alloys to fertilizers.”
The group also makes an effort to stay at the forefront of global marketplace trends. Tapping into consumers’ increasing preoccupation with additives, Produquímica strives to tailor its products to address public concerns about health and hygiene. Sustainability is another important issue. Recently, the group inaugurated a plant for recycling and treatment of water and other effluents as part of a series of ongoing investments to become a greener company.
When asked about the group’s prospects for the future, Borsari doesn’t hesitate; the plan is to keep expanding in a manner that has become a hallmark of Produquímica’s identity. Although he can’t offer any specifics, Borsari does admit that the group is preparing to make yet another acquisition. It is also looking to enter new marketplaces. Having already proved its mettle as a major manufacturer, Produquímaca also wants to flex its commercial muscles by venturing into the trading sector. However, first and foremost, it intends to keep on launching innovative new products. “Ultimately, we have built our reputation as an innovative business that is constantly developing new products,” says Borsari. “So while our focus is on constant growth and reduction of costs, our bottom line is investing in processes that keep us in the vanguard.”