June 26, 2009 Drinking to Success

Volume 5 | Issue 2

Brazilian soft-drink company, Refrigerantes Xereta, produces 35 million liters of beverages every month, both for the national and internati

Refrigerantes Xereta was founded in 1960 by the Schincariol family. Originally a soda producer, the development of the company accompanied the evolution of packaging in Brazil. Until the 1990s, soda was sold in glass bottles. The arrival of the plastic bottle on the market in 1994 marked the start of a new phase of success for the company.

Realizing the importance of the more economical and practical alternative to its glass predecessor, Xereta became an industry pioneer when it invested in equipment to manufacture its own plastic bottles – the first company in the national soda market to have such capability. Having developed a taste for innovation Xereta was also the first Brazilian soda producer to use the aluminum can in 2000.

The company’s main product was the sparkling guaraná drink, a soda using the guaraná berry from the Amazon. Xereta Guaraná is still a leading product, sold all over Brazil, and even exported.

MAINTAINING THE LEAD

In an increasingly competitive market, the need to expand the range of products became obvious. In 2003 and 2004, Xereta began outsourcing the production of additional soft drinks such as fruit juices and teas. “The move to increase the number of drinks under the brand came as a result of the market tendency toward healthier options,” says Fábio de Macedo, executive director.

The strategy has led to the successful creation of the Vittal line, a range of healthy option drinks such as mineral water, iced tea, coconut water and real fruit juices. “The Vittal line has been very well accepted and represents 20 percent of our sales,” says Macedo. Today, Xereta also produces cereal bars and powdered juice mixes.

Macedo is not only a director of the company but an industrial chemical engineer, who is responsible for the creation of a revolutionary procedure used in the preservation of coconut water. “Natural coconut water is traditionally a very hard product to package, because it goes off within a matter of days. Xereta was a pioneer in the invention of a process that packages the water in aluminum cans and preserves it for up to one year,” he explains.

In addition to the invention of this process, another important differential is that Xereta possesses all the technology to produce its own packaging in-house. Machinery for pasteurizing juices, hot-fill equipment (used for non-carbonated drinks sold in aluminum cans), as well as plastic bottle blowers and nitrogen injecting technology from the U.S. are all part of the company’s state-of-the-art capabilities.

Xereta has four production units in Brazil. The main facility is located in São Paulo state, and employs 240 people. Additional factories in Paraná, Goiâs and Ceará, are responsible for the production of other product lines.

INVESTMENT IN EXPANSION

“Our most significant investments are being made in our products,” says Macedo. “We will be launching two new flavors of Vittal fruit juices this year, and will increase our export markets.” Overseas markets, which currently include Argentina, Paraguay, Chile and Bolivia, as well as the U.S., Angola, Lebanon and Japan, represent between 7 and 10 percent of Xereta’s total business. In addition, Guaraná soda will soon be available in Saudi Arabia, Bahrain, and in Asia.

Xereta is certified by the FDA (Food and Drugs Administration) and Kosher organizations, which apply rigorous measures to the quality of export products, enabling the company to sell to all international markets without restriction. “There is enormous potential for our brand overseas,” says Macedo.

In the development of new products, Xereta works in partnership with customers and suppliers. Recently, directors also visited trade shows in Dubai, Germany and South Africa to maintain upto- date knowledge of market trends and tastes.

Such research and market understanding resulted in the launch of the product H2X, a sparkling mineral water drink, which dramatically boosted growth in 2007. Nowadays, Xereta is among the 10 largest Brazilian drink companies, with an annual turnover of approximately $15 million. “Future growth will undoubtedly be supported by international sales,” explains Macedo. “The soda boom has passed, a lot of factories closed in Brazil, and we know that our new lines and markets will contribute to our continued success.”

The closing of soda factories was an opportunity for Xereta, whose increased and well-dispersed infrastructure has come from renting former competitors’ premises. The strategic positioning of the facilities – in Paraná (south), Goiâs (central west) and Ceará (north) – help to keep logistics costs low. “Our product is very reasonably priced and we cannot cover long delivery distances. For bottled drinks we avoid distances of over 150 kilometers, although cans can travel further,” explains Macedo. Distribution is carried out via transport companies, depending on the area of delivery and the client.

STRUCTURED SALES

Xereta is no longer a family company, a change that has inspired a more structured commercial strategy, notes Macedo. “We have collected a highly professional group of industry specialists, and Xereta has benefited from the results.” The company sells directly to supermarkets, retailers and through distributors. It also produces soda for the supermarket chains Carrefour and Walmart, as well as bottling drinks for other producers. A sales manager for each region ensures that the purchasing process runs smoothly and products are delivered on time. The largest local market is the city of São Paulo and São Paulo state, which constitutes a client base of 14 million customers.

“Although the economic crisis has affected sales, we have not been hard hit,” says Macedo. In fact, reduced customer spending has increased the sales of cheaper products such as powdered juice drinks. As Xereta’s soda is an accessibly priced alternative to more widely recognized international brands also available in Brazil, many customers have returned to buying the company’s drinks. Sales are also seasonal, rising in the summer months, a factor that is also controlled by exports and new product markets.

With 39 years of experience in the industry, Xereta successfully overcomes the challenges posed by the market. Having made the transition from a soda factory to a soft drinks producer, the company is better positioned to achieve its goals for the future.

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