December 26, 2010 Cooking Up Profits

Volume 13 | Issue 4

A pioneering Brazilian manufacturer of gas stoves, Esmaltec has grown into the country’s leading producer of these essential appliances whil

It’s quite fitting that Esmaltec is currently the number-one manufacturer of stoves in Brazil. Forty years ago, when the company first began producing this essential kitchen appliance, it was an industry pioneer. Today, 98 percent of Brazilians cook on gas stoves. However, in 1963, when Esmaltec was founded in Fortaleza, capital of the Northeastern Brazilian state of Ceará, gas was a rarity. Back then most Brazilians – particularly those in the traditionally poor northeast – still used wood-burning stoves.

EXPANDING INTO NEW LINES
“When we started out, our mission was to promote the use of gas in Brazil,” remembers Annette de Castro, Esmaltec’s chief executive officer. The company began by producing kitchen gas cylinders (used to supply gas to stoves, these are sold individually to consumers throughout Brazil). Within a year, the company launched its first line of stoves. “We were instrumental in developing the gas stove category throughout Ceará and the northeast states,” adds de Castro.

By the 1980s, having consolidated its presence in terms of stoves, Esmaltec began adding new product lines – water coolers, refrigerators, freezers, washing machines, and microwaves – expanding its portfolio until it had a complete selection of “linha branca” items (in Brazil, “white line” refers to electrodomestic appliances that have traditionally been finished with white enamel). In 2002, aiming to expand beyond the northeast and stake a claim to the national market, Esmaltec moved into a new 753,000-square-foot facility located on a 36-hectare site outside of Fortaleza. Today, in regards to the appliance segment, the facility is considered one of the most modern in all of Latin America.

The move gave the company room to expand its existing lines and ramp up production capacity (its present total monthly output is 300,000 units). As a result, it doubled its market share, becoming not only the top manufacturer of stoves in the country, but the leading maker of water coolers as well (garnering 55 percent of the market). With its products now widely and evenly distributed throughout the country, in recent years Esmaltec has enjoyed average annual growth rates of 15 percent. Revenues also have been steadily heating up; this year the company expects to earn R$659 million (roughly US$388 million).

CATERING TO CUSTOMERS
From its start, the company leveraged growth by knowing who its final customers are and catering to their specific needs. “One of the big factors that distinguishes us in the marketplace is that we specialize in products for Brazilians in the C, D, and E classes,” says de Castro, referring to Brazil’s socio-economic categories.

“We’re located in the northeast, which traditionally has been the region where people face the largest difficulties and earn the lowest incomes,” continues de Castro. “Esmaltec was born out of the need to meet these consumers’ demands, which means creating products that offer good design and high quality in terms of functionality, but that also respect people’s financial realities. As such, we do everything we can to keep our prices low and to develop technology that focuses on energy reduction.”

Energy reduction is one of the biggest concerns driving the industry. As such, Esmaltec focuses its product development on how to increase the cost-benefit ratio by creating fridges and freezers that require less electricity, stoves that consume less gas, and washing machines that use less water. The concern is part of a larger environmental commitment that the company has embraced. This commitment resulted in the implementation of effluent reduction programs, the treatment and recycling of water, and the use of powdered enamel, which cuts down on chemical waste.

The added value the company strives to supply its customers extends to new features as well. Recently developed water coolers now feature water purifiers. The latest line of refrigerators boast modified internal lights along with external thermostats equipped to measure isobutane (a gas being used in refrigeration systems that doesn’t harm the ozone layer). Meanwhile, a new line of stoves comes equipped with burners that have three different strengths of flame, as well as ovens that automatically light up when the door is opened.

THE HUMAN FACTOR
Over the last few years, the Brazilian economic boom, combined with the impact of far-reaching social polices implemented by President Lula’s government, has led to an improvement in the lives of many members of the C, D, and E classes throughout Brazil, particularly in the northeast. “Today the northeast is the fastest growing market in Brazil,” de Castro points out. “It’s growing twice as much as the rest of the country, at rates that far exceed the GNP.”

While this prosperity has been a boon to Esmaltec, the company concedes that those retail margins are reducing, due to innumerable mergers and acquisitions in this field. As a result, the company also recently decided to branch out into the commercial freezer and refrigeration segment, supplying appliances to clients such as supermarkets and food and beverage distributors. “This segment has enormous growth potential,” de Castro says. “The distribution channels are different than those of retail, and there are very few other players in this field. The fact that we have a proven track record, solid structure, large volume capacity, and a reputation for technical competence provides us with an important competitive edge.”

That Esmaltec has such an edge is hardly surprising. After all, the company places great emphasis on state-of-the-art facilities and equipment and on highly trained employees. “We have a very strong in-house training program,” reports de Castro. “We groom employees for long careers.”

The company provides aid and incentive to employees already in its service, as well as to their family members and communities. In fact, the Edson Queiroz Group (to which Esmaltec belongs) through the Edson Queiroz Foundation maintains UNIFOR, a private university with 25,000 students. Here, employees can study and carry out research in areas such as mechanical engineering, thermodynamics, heating, combustion, and refrigeration – all of which not only pave the way for future employment at Esmaltec but also generate important research in terms of product development.

“As a company that takes pride in the fact that we’re Brazilian, we make an effort to put people first,” says de Castro, summing up the firm’s philosophy. “Ultimately, if we invest a lot in our workers, they will not only achieve prominence within the company but also within Brazilian society.”

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