Ajegroup started out selling with the humblest of business models: homemade cola drink, sold door to door. Today the company touches three continents and several countries. And that after only 16 years in business. Peter Krupa reports.
Perhaps competing with Coca-Cola and PepsiCo doesn’t strike most people as a particularly fun or promising thing to do. The common knowledge suggests that one would get squashed like a bug. However, common knowledge is often wrong, and it certainly is in this case. All it took was a family with vision, willing to play hardball with prices and looking to create a beverage company designed to take off like a rocket.
Enter Ajegroup. This Peru-based company is a child in terms of age – it’s only been around since 1991. Yet it is a quickly growing giant in terms of its size and ambition. A multi-national bottled drink company with a strong presence in Central and South America and a growing presence in Asia, Ajegroup has been gobbling up world market share almost as fast as it appears by undercutting competitors’ prices by an average of 40 to 45 percent.
In 16 short years, the company has grown to 22 bottling plants and numerous distribution centers that bring 2.5 billion liters of product to market annually. During this decade alone, Ajegroup’s sales have more than doubled every two years with brands like Big Cola and new products like value-added waters. New facilities are opening every year, and Asia beckons.
Big trees start with little seeds, and little seeds often have a rough time of it before they finally sprout. So it was with Ajegroup. Back in the late 1980s and early 1990s, Ajegroup’s founding family – the Añañoses – were living in Ayacucho, Peru, which at the time was at the center of the conflict between the Shining Path terrorist group and Peru’s often brutal military.
At the time, the Añañoses had been running a small business concerned with food and agricultural products. As it happened, Shining Path guerillas decided to take possession of the family’s property, and the Añañoses were forced to take shelter with family members elsewhere. But they refused to quit doing business.
It was in the back part of the house where they had taken refuge that the Añaños developed Kola Real, using typical kitchen equipment – pots and pans and whatever else they could find to make the brew. They bottled the drink in old beer bottles and went around town selling it, practically door to door.
It was from those humble beginnings that the company started to grow. Brewing and bottling the drink was still practically an artesian process, so the company expanded slowly, step by step, from region to region. In 1997, the company made its push into the Lima market, and met with success. Then in 2000, the internationalization of the company began in earnest when it started to leap-frog not just to new regions, but new countries.
First came Venezuela. Then Ecuador, Mexico, and Central America. The latest market the company entered was Thailand, and this year it opens a bottling plant in Colombia. “These last seven years have been intense,” said Communications Director Dr. Alfredo Paredes. Indeed, in the last five years alone, the company posted an average annual sales growth of 70 percent. “It’s a distinct development model focused particularly on being a leader in terms of cost,” Paredes said.
As a company, Ajegroup’s infrastructure is literally spread out across the world. The major growth market these days is in Mexico, where the company does a full 45 percent of its business. Five of its 22 bottling plants are located in that country, as well as a portion of its management. “The corporate leadership is very strategically distributed,” Paredes explained, adding that the company’s facilities and plants in Mexico “allow us to serve a market of almost 100 million consumers.”
Worldwide, Mexico is one of the fastest growing bottled beverage markets, but Ajegroup hasn’t stopped there. Of course Peru remains one of its other strong markets, and the company maintains six bottling plants there (although they are somewhat smaller than the Mexican plants). Venezuela and Ecuador have several plants, and Central America has been important for Ajegroup’s growth as well. The company maintains plants in Costa Rica and Guatemala.
The company’s infrastructure map doesn’t stay the same for long: Ajegroup seems to be adding new bottling facilities as fast as it can. In addition to plants recently opened in Thailand, the company this year will be moving into the Colombian market with a new plant there. The plant will be located close to the capitol and have two lines of production. The annual output capacity will be around the order of 25,000 to 30,000 crates to start with, and the plant will expand along with demand.
Low prices, high quality
Ajegroup’s continuing and rapid expansion has been no accident. Paredes said the company set out with a careful strategy that had two main components. First of all, Ajegroup undercuts its competitors’ prices by a wide margin, usually 40 to 45 percent. Second, the company has put a strong emphasis on quality. “With us, people have gotten used to understanding that a quality product, particularly a quality beverage, doesn’t have to be expensive,” Paredes said. “Simply enough, (with us) one can have the best quality at the best price.”
This has been true of Ajegroup’s flagship products, like Big Cola, but it has been especially relevant considering the worldwide trend toward value-added products. Traditionally, drinks like mineral water, sports drinks, and healthy beverages have been up-market affairs. But as Ajegroup delves further into the development and marketing of products such as its Free Lite brand of water, its cost-cutting has made these products available to a whole new demographic.
Referring to the company’s new sports drink brand, Paredes said, “Besides the fair price that we’re offering, it allows the athlete to have a product with the best characteristics of hydration and mineral replenishment.” And at the price they’re offering it, Paredes added, it’s marketed toward not just athletes, but “anyone who wants an active lifestyle.”
Quality and automatization
Paredes mentioned a total of three trends affecting Ajegroup’s decisions and the beverage industry as a whole. One important trend is the consumer’s new interest in health and value-added waters and sports drinks. Along with that, consumers are also getting more demanding when it comes to quality. Ajegroup therefore recently worked to get the ISO quality assurance certification for food manufacturing.
The third trend, Paredes said, has to do with production. As the business matures, production facilities are getting more and more sophisticated, and Ajegroup has had to keep up with that trend, especially by automating much of the process. In addition to higher productivity and lower costs, the automation has had the added benefit of less human contact with the product, and therefore more sanitary conditions and a higher-quality product.
Investment for next phase
In considering the future, Ajegroup has many different options in front of it. The company’s success in Thailand has encouraged management to take a closer look at that continent. “We weren’t clear on what the public reaction to our product would be,” Paredes said. “Fortunately, it’s gone very well,” so well that Ajegroup is considering opening new fronts in Cambodia, Laos, India, and, of course, China.
Even with the possible incursions into new markets, Paredes said the company is well aware that its current gangbuster growth can’t last forever. “We’re always working very hard to bring our product to the consumer, but we’re aware that the market is constantly moving and evolving, and the consumer is as well,” he said.
For the company’s next phase, therefore, it’s looking at consolidating itself in the markets where it has a strong presence, both through strengthening its infrastructure – distribution, production, and marketing – as well as developing more of the newer value-added beverages that consumers are demanding.
The next phase will also mean looking into new ways to raise capital. Ajegroup remains a family-run company at the moment, but Paredes said it is looking at any number of different ways to raise investment to keep growth steady and to keep expanding into the new markets that the company has chosen.
A different brew
And finally, just like in its beginning, the leadership of Ajegroup is still prepared to take up any challenge – no matter how unlikely – where it sees an opportunity. The latest: beer. Unlike its first breakout in 1991 with its Kola Real drink, Ajegroup is turning to experts for development help. Paredes said the company has German and Dutch technicians helping with product development and showing them the ropes of beer brewing.
But like the company’s first forays into beverages, Ajegroup’s beer will start local – and from there, who knows? “It’s a very complex and interesting challenge,” Paredes said, adding later: “Peru is the country of analysis, study, and development, after which, depending on the result, will come other alternatives and potential markets.”