Metalmix started out manufacturing steel tables and chairs for Brazil’s major breweries. Then, practically overnight, the breweries decided they wanted plastic furniture instead. CEO Valdenir Rodrigues tells Michael Sommers how the company not only stayed in business, but thrived by developing a vast line of products from home furniture to gym equipment.
The primary goal of Metalmix’s founders was to create a solid company that manufacturerd metal tables and chairs. Things certainly seemed stable enough when Metalmix first opened its doors for business in 1986. The town of Birigui, São Paulo, where the company was located, was an important metallurgical center with a workforce that had a long tradition of working with steel. In the mid-80s, there were no fewer than eight enterprises manufacturing metal tables and chairs based in Birigui. Along with upstart Metalmix, they had cornered 90 percent of the Brazilian market. And at the time, the market seemed boundless. To beat the tropical heat, Brazilians’ favorite pasttime consists of gathering for icy beers at outdoor bars, whose folding tables and chairs – supplied by beverage distributors and beer-making giants such as Brahma and Skol – were traditionally manufactured by Metalmix and its colleagues.
Metalmix started out with six employees, but quickly prospered. Over the next decade, it achieved its original goal of solid, incremental growth. However, in the mid-late 1990s, this stability, not to mention Metalmix’s very survival, was suddenly threatened when the breweries made the decision to begin substituting steel tables and chairs with lighter, more practical plastic ones.
“The year 1999 was a watershed year for us,” recalls Metalmix’s CEO Valdenir Rodrigues. “We urgently needed to conquer new markets and, in order to do so, we needed to diversify our product lines. So we began making affordable steel furniture for residential use: kitchen shelving units, tables with granite tops, step ladders, ironing tables, even units specially designed for storage of tropical fruits.” The strategy not only proved fruitful, but life saving. Proof is the fact that of the eight major Birigui players that dominated the market a decade ago, Metalmix is the only one still standing. It is also currently the leading manufacturer in its market segment throughout Brazil, with a production output of 20,000 units a day and capacity for more at its 65,600-square-foot plant.
“The others didn’t diversify,” explains Rodrigues. “They didn’t innovate. For instance, today we have over 70 items. But we are constantly tweaking and updating the models and designs to make them more desirable. Even though the products we make are simple, low-cost units for a working class consumer, we don’t think this has to be synomymous with low quality. And that’s a mistake
many other manufacturers make. We want to give our customers options as well as quality they can trust.”
CLIENTS LARGE AND SMALL
From the outset, the major hypermarket chains that sell low-cost furniture throughout Brazil, such as Wal-Mart, Pão de Açucar, and Casas Bahia, recognized the quality and design of Metalmix’s products and, despite the significant number of products already on the market, were eager to stock them. In fact, it was through the foreign affiliates of multinationals such as Pão de Açucar, who specifically sought out Metalmix, that the company made its forays into export markets such as Argentina, Uruguay, Angola and even Canada. However, back in Brazil, Metalmix didn’t want to limit itself exclusively to major chains. In a strategy that set it apart from most of its competitors, the company also courted small store outlets as well.
“We wanted to have a mixture – 40 percent big clients and 60 percent small,” says Rodrigues. “And what made us different was this focus on the small ones. Although logistically, they are more complex, we had the advantage of experience. With major chains, the cost diminished because the volumes of the orders are larger. We produce more and can pass on these discounts in terms of lower prices. With small clients, it’s the opposite. Volumes are smaller and costs higher. But we also charge them higher prices.”
Indeed, Rodrigues estimates that Metalmix’s items are priced, on average, 15 percent higher than those of its competitors. However, this is a consequence of making good quality products, something that doesn’t concern many competitors, who are in search of a quick buck from items they view as cheap and relatively disposable. “If you place our products next to another company’s, superficially you might not see an obvious difference,” confesses Rodrigues. “Although we try to distinguish our products, there are many that are similar to ours. The big chains are aware of the difference, but smaller clients don’t always. So we really focus on personal contact with these clients. We have developed our service sector with sales managers spread throughout 10 Brazilian regions, and technicians and follow-up sales reps that make sure clients are always satisfied.”
Metalmix has found that the service element is key. These days, the big chains, in particular, demand punctuality (quality is already a given). Logistics are of paramount importance and on-time delivery is essential. During the massive transformations undertaken in 1999, the company invested heavily in technology in order to increase and automate production and reduce labor costs. However, this downsizing didn’t signify a de-emphasis in its work force. On the contrary. Metalmix has also invested considerably in training personnel. “The items we manufacture are low-cost and easy to make,” confesses Rodrigues. “They don’t involve a lot of technology, but do require a qualified workforce that, fortunately, is easy to find in this region, due to its metallurgical tradition. Moreover, we are always retraining supervisors and managers to make sure they can respond quickly, and with sensitivity, to our clients needs.”
GROWTH AND CONSOLIDATION
For a medium-sized company in a large, rapidly changing market, maintaining close relationships with its customers has been essential in keeping up with market trends. Metalmix views many of its clients as partners. “I can’t force the market to swallow a new product,” points out Rodrigues. “But many of our clients travel outside of Brazil. They often make suggestions for new products they would like us to produce.”
It was such a suggestion that prompted Metalmix to begin manufacturing steel gym equipment in 2007. Rodrigues claims the company initially didn’t believe this foray into the gym segment seemed very promising. “This wasn’t our market, but our clients wanted these items and knew they already had popular appeal. And, due to our solid history, they wanted us to be the ones to manufacture this equipment. So we did.” Already, several major chains throughout Brazil carry three different types of Metalmix fitness machines.
Indeed, last year was a major year for Metalmix. The roll-out of its new fitness equipment line was accompanied by the company’s self-financed purchase of Dalmar, an established manufacturer of kitchen furniture with an important client base. (This was the second major acquisition in the company’s history; the first occurred in 1999, when it bought Metalclean, a producer of metallic tables and chairs). As a result, Metalmix achieved its biggest annual growth rates ever, with a 30 percent increase in production output and 35 percent rise in profits.
When asked if the company plans a repeat performance for this year, Rodrigues replies that, on the contrary, the company’s goal is to grow a modest 5 percent. “We’re already number one in the marketplace,” he explains. “So during 2008, we want to consolidate our gains. We want to weed out a few products that are selling less and analyze where we want to go from here.” For a company whose mission from the beginning has been to maintain stability, there is something to be said for staying planted. “This is a year of taking stock,” concurs Rodrigues. “And of eeping our feet firmly on the ground.”