January 26, 2010 Tile & Substance

Volume 13 | Issue 1

Brazil’s number one manufacturer of ceramic tableware, Cerâmica Porto Ferreira experienced some serious growing pains before resurfacing as

Having been in business for close to a century, it’s hardly surprising that, during the course of its long history, Cerâmica Porto Ferreira has had its share of near-death experiences and resurrections. Founded in the 1920s, in the town of Porto Ferreira, São Paulo, its original incarnation was as a tiny factory devoted to the production of ceramic tableware. At the time, the main goal of the founders was to create work for the local population of mostly Italian immigrants in an area where agricultural possibilities were scarce. While their civic pride was admirable, the founders’ technical and administrative prowess was lacking and in 1930, Fábrica de Louças de Porto Ferreira went out of business.

RISING, FALLING, AND RISING AGAIN
Although the operation of the ceramic business had been a failure, the idea itself had been a good one and the following year, a local ceramicist of Portuguese origin encouraged a group of São Paulo investors to acquire the abandoned factory and bring it back to life as Cerâmica Porto Ferreira. Over the following two decades, the small business gathered steam only to explode in 1951 when, with financing from government banks, the company built a brand new factory that allowed it to significantly increase productivity and make considerable improvements in quality. Operational costs fell, profit margins soared, and suddenly what had hitherto been a local business was selling its products all over Brazil. By the time it opened up a third plant in 1958, Cerâmica Porto Ferreira had become the number one manufacturer of dishware in the country, producing 1.2 million pieces a month.

By the late 1960s, however, a combination of internal and external factors had caused the company to fall on hard times. Moreover, by the 1970s, cheap and resistant glass dishware had begun to invade the Brazilian market, followed in the 1980s by inexpensive Made-in-China products. Already anticipating the demise of the ceramic tableware segment, in 1971, Porto Ferreira built a fourth plant – this time, entirely devoted to the production of ceramic floor tiles. The introduction of the new line saw revenues double and was a sign of the success to come. When the company was finally forced to discontinue its dishware line in 1986, it was already doing big business in terms of floor tiles and, subsequently, wall tiles as well.

More recently, the company once again gained a new lease on life after a period in the early 2000s that saw it suffering financially and losing market share to competitors. In response, in 2007, Porto Ferreira made radical strategic transformations – changing the company’s board of directors, overhauling its managerial system, and redirecting its focus towards the consumer market. “Undergoing these transformations allowed the company to rediscover itself,” says Edison Corrêa de Toledo, who took over the company reigns as president in 2007 and has since watched it enjoy unprecedented levels of growth.

POINT-OF-SALES TACTICS
“I’ve been with Porto Ferreira for 42 years now,” says Corrêa de Toledo. “I started out as a salesman. And I’ve never seen such enormous growth in such a short time period. In the last two years, we’ve increased our client base in Brazil by 450 percent; the prices of our products have risen by 48 percent, and our revenues have soared by 90 percent.”

Corrêa de Toledo chalks up much of this “brutal” growth to the enormous efforts the company has undertaken in terms of sales strategies. Last year, Porto Ferreira created a program called the Universidade de Varejo (University of Retail) in which it offers training not only to its own sales reps, but also to managers and vendors in the stores that carry its products. While the majority of these are construction materials stores and megastores based in the state of São Paulo, the company boasts an increasing number of clients in Brasília, the central-western state of Goiás, and more recently, the Brazilian South.

“We’ve really made an effort to ramp up our point-of-sale presence with over 170 sales reps at stores in major centers such as São Paulo, Rio, Belo Horizonte, and Curitiba. To date, our efforts have really paid off,” says Corrêa de Toledo. “Many of our competitors are weak when it comes to marketing. They think the secret to sales is just dropping the price. This tactic works with commodities, but not with our type of product.”

ADDED-VALUE PRODUCTS
In terms of the products themselves, Porto Ferreira takes great pains to stay at the vanguard of global ceramic trends. The company boasts its own in-house product development department whose director has forged important partnerships and technology exchanges with leading ceramic studios in Italy and Spain. Right now, the most prominent industry trend revolves around the creation of products with more added value: better quality and resistance, more visual appeal, improved coloring of enamel and a larger range of sizes.

“Recently, we launched a new line of wall tiling kits featuring a combination of white tiles and tiles featuring designs such as fruits or flowers that has been very successful,” says Corrêa de Toledo. “In fact, some of our competitors have already copied us, but their kits are far more expensive. Our prices aren’t cheap, but they aren’t absurd either.”

Porto Ferreira also plans to start manufacturing rectified tiles, in which each unit is exactly uniform. The process is expensive, which explains why, to date, the company has outsourced it. However, due to the profit margins involved, it is already working on creating its own products in-house.

ROOM FOR GROWTH
Indeed, the company certainly has lots of room to grow; currently its facilities total 197,000 square feet on a site that measures 984,000 square feet. As it is, Porto Ferreira boasts a monthly production capacity of 1.1 million square meters (3.6 million square feet) of floor and wall tiles. With the aid of funding from the BNDES (the state-owned National Bank for Economic and Social Development), it is getting ready to add another plant to its facilities which will allow it to double its present output. “Today, we´re among the top 10 in the industry and we’re in sixth place in terms of production volume,” says Corrêa de Toledo. “By 2011, our goal is to be among the top three.”

Already, Porto Ferreira possesses around 2,300 clients throughout Brazil. Due to the valorization of the Brazilian real against the U.S. dollar and competition of inexpensive products from China, exports have fallen significantly – from 200,000 to 20,000 square meters (656,000 to 65,600 square feet) of tiles a month. In compensation, the national market – where Porto Ferreira has decided to redouble its marketing efforts – is extremely robust due to major incentives the federal government has created for the civil construction sector.

“There is still an enormous lack of housing in Brazil. As a consequence, we’re seeking to take advantage of the building boom that is sure to last for at least another five to 10 years.” Explains Corrêa de Toledo. Indeed, Corrêa de Toledo confesses to feeling more optimistic about the company’s prospects for growth than ever before in his 40-year career with Porto Ferreira. “We have a company motto that is our guiding principle as we look towards the future: ‘If you’re not already the best, then you have got to be the best’.”

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