Insperia

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CHALLENGES INTO ENDURING STRENGTHS

At Grupo Herdez, we understand the challenges of an evolving market. Thus, the ideas we develop in critical moments become our strengths over time.

WELCOMING A NEW MEMBER OF THE FAMILY

The challenge of the Helados Nestlé® acquisition was not only to integrate the operations into the Group, but also to incorporate its almost 500 employees into our workforce. The personnel integration from this division was successfully completed on June 1.

To reach the more than 49,000 points of sale for Helados Nestlé® in Mexico, we added a frozen division to our logistics network with access to nine distribution centers and eighteen cross-docks with a capacity of 9,200 pallets. From the Lagos de Moreno plant, we serve 5,000 trailers yearly to cover the entire territory.

At year end, the Helados Nestlé® logistics programming and planning was carried out under the Grupo Herdez model. The challenge for 2016 is to complete its integration along with Nutrisa®, and thus optimize the logistics and distribution of frozen products throughout the country.

MANAGING THE RISKS

We diversify the supply risks of raw materials and packaging with hedging instruments and by entering into annual and seasonal contracts with different producers, suppliers and agricultural maquila plants.

Given that some of our main inputs are denominated or referenced in foreign currency, we manage this risk through hedging instruments in order to provide visibility to the operation.

In 2015, this strategy allowed us to reduce the impact of the strengthening of the US dollar during the second half of the year, and enabled us to reach our profitability goal for the year.

INVESTING IN EFFICIENCY AND PRODUCTIVITY

In January 2015, a $30 million dollar investment was authorized to double the capacity of Los Mochis, Sinaloa distribution center, sufficient to satisfy the foreseen storage requirements over the medium term.

This distribution center will service the domestic and export markets, and begin operations in August 2016.

We also integrated the Santa Rosa Vegetales plant, increasing its capacity by 17% and production per hour (line productivity) by 31% for the main products. Efficiency in the use of raw materials improved 9% thanks to the implementation of technology and new processes. Likewise, to increase the efficiency and comfort of personnel in processing lines, we installed 35 ventilation systems, which take only eight minutes to completely change the air inside the production space.

In December, we incorporated a new tuna vessel to the fleet in Tapachula, Chiapas. The vessel, named El Duque”, has a capacity of 1,600 m3 —equivalent to 1,200 tons— increases the fishing fleet’s capacity by 20% and extends our responsible fishing practices.

STRENGTHENING OUR BUSINESS IN THE UNITED STATES

The main reasons for restructuring our Don Miguel® plant were to improve service, efficiency, safety and quality control.

During 2016, we will focus on sustaining the positive trend of indicators at this plant and improving production costs by implementing cost-saving initiatives across our operations. The main objectives for the year are to strengthen sales in the convenience store channel and expand the business towards new channels.

INVIGORATING NUTRISA®

The segmentation of Nutrisa® product offerings is the basis of our decisions. Innovation in this regard played a key role in the year and enabled the brand to get closer to new consumers every day through different formats and products.

While consumption in 2015 showed an upward trend, Nutrisa® faced a year of challenges. On one hand, we speeded up store openings to capitalize on brand leadership; on the other, the sale of commercial products did not recover at the expected levels after the restructuring that began in 2014.

Towards the end of the year, the integration of the business into Grupo Herdez began, which meant extraordinary charges that affected the financial outcome. In 2016, we will complete the integration of Nutrisa® into Grupo Herdez, as well as the Helados Nestlé® operation.

We are confident in the potential of this segment. We expect to double Nutrisa® sales in the medium term and to improve its profitability, capitalizing on its leadership in the health and wellness category.