Jugos del Valle, S.A. de C.V.

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Jugos del Valle, S.A. de C.V.

Avenida Ejército Nacional 904
Mexico City, D.F. 11560
Mexico
Telephone: (52 55) 2581-6500
Toll Free: (888) 349-2234
Fax: (52 55) 2581-6566
Web site: http://www.jvalle.com.mx

Public Company
Incorporated: 1960 as Jugos del Valle, S.A.
Employees: 3,359
Sales: MXN 4.73 billion ($433.94 million) (2005)
Stock Exchanges: Bolsa Mexicana de Valores
Ticker Symbols: VALLE; JUVAY
NAIC: 312111 Soft Drink Manufacturing

Jugos del Valle, S.A. de C.V., is among the leaders in Mexico in the production and sale of fruit juices, fruit nectars, and fruit drinks. (Nectars are fruit juices with pulp retained rather than filtered out.) It also produces soft drinks. Besides Mexico, Jugos del Valle sells its products chiefly in the United States and in Brazil, where it maintains one of its six production plants. In all, Jugos del Valle has 11 subsidiaries dedicated to the manufacture, bottling, sales, and import and export of juices, nectars, fruit drinks, pulp and concentrates, soft drinks, and food products. The company delivers its own products and those of some other firms by means of its own distribution network, but it also uses the services of independent distributors. It has a presence in all national and regional self-service supermarkets, and also in Mexican convenience stores and with the nation's principal wholesalers.

PRIVATE FRUIT JUICE COMPANY: 1947–93

Jugos del Valle got its start in 1947, when Luis F. Cetto, an Italian immigrant to Mexico, formed the company, dedicated principally to the production of grape juice in a Mexico City plant. It was incorporated in 1960 under the Jugos del Valle name. Five years later, the company was acquired by a group of investors who authorized the construction of a production plant in Tepotzotlán, located in the neighboring state of México. This site remains the company's center of operations. Its opening allowed Jugos del Valle to increase its production and sales volume appreciably and to diversify its output.

Jugos del Valle was reincorporated in 1978, after being acquired by an investor group headed by Manuel Albarrán Macouzet, who became its principal shareholder. The U.S. corporation H.J. Heinz Co. was a minority partner in this purchase. Under Albarrán's administration, the company developed new products and established a department of technical research. The Albarrán family bought Heinz's share in the business in 1990, but in the same year the federal development agency Nacional Financiera S.N.C., plus two investment funds, Procorp, S.A. de C.V., and Fondo Inverpro, S.A. de C.V., acquired stakes in the company. The Albarrán family bought out these partners in 1992, however. The funds to do so came from Bankers Trust Co., the New York-based financial institution that acquired a 14 percent stake from the Albarráns in 1993.

By this time Albarrán Macouzet had become chairman of the board, leaving everyday administration of Jugos del Valle to his son Roberto Albarrán Campillo. Largely educated in the United States, the junior Albarrán first served the company as a financial analyst, and later as export director when, in 1987, it began to export fruit nectars to the United States. It also offered tropical style fruit drinks including mango, papaya, and guava. Albarrán targeted the Hispanic segment of the U.S. consumer market but failed to make major inroads, which he blamed on substandard packaging in the form of steel cans. The preferred aluminum cans used for soda and beer could not be used by Jugos del Valle, because noncarbonated drinks did not provide the pressure needed for the thin metal to hold its shape. New technology eventually solved the problem, but at a cost to the company of $4 million.

Another production problem that needed a solution was the detergent used to wash the fruit at Jugos del Valle's Tepotzotlán plant. The company built its own $3.2 million treatment facility so that detergent would no longer be released into the community water supply. Instead, after going through all the different juice processes, the plant's water went through a purification system and was ready for crop irrigation by surrounding farms. In this case there was more than one incentive to the firm's good corporate citizenship: Jugos del Valle avoided a government fine and received credits that resulted in a dramatic decrease in its water bills.

Jugos del Valle obtained a second production plant in Zacatecas at the end of 1992 by purchasing Industrias Alimenticias de Zacatecas, S.A. de C.V. This facility, besides producing and bottling fruit juices and nectars, was responsible for meeting a great part of the company's requirements for fruit pulp. In December 1993, Jugos del Valle purchased FDI Corp., a Puerto Rican enterprise that was producing Frutsi, Frutsi Freeze, Fruit Break, and concentrates for preparing drinks. It was selling its products in Central America as well as Puerto Rico.

RAPID EXPANSION: 1994–99

Jugos del Valle became a public company in 1994, when it made its initial offering of shares of stock on the Bolsa Mexicana de Valores. Much of the proceeds was used to help modernize the company's production facilities, enabling the export to the United States of tray wrapped, two-piece aluminum cans of nectar. The company also began shipping tray wrapped glass bottles and cans to club stores and smaller retailers throughout Mexico. Jugos del Valle acquired, at the end of 1995, the assets of Salsas y Chiles Californiananos, S.A. de C.V., and its Val-Vita brand. This purchase allowed the company to diversify its production.

Jugos del Valle began offering fruit pulp in Mexico as well as the United States in 1997. In the same year it acquired the two plants, in Guadalajara and Tijuana, of Grupo Tropicana S.A. de C.V., plus the right to use the Tropicana brand name in Mexico for five years. This allowed the company to expand its market share in the orangeade sector, where it was relatively weak. Jugos del Valle was Mexico's leading producer of fruit juices and fruit juice drinks, with 29 percent of the domestic market. In early 1998 the company bought a plant in Villazueta, Veracruz, to grind fruit, principally pineapple, into pulp. Before the year was out, Jugos del Valle got into the carbonated soft drink business by purchasing 90 percent of Grupo Básico, a company with more than 60 years of experience in producing, selling, and distributing soft drinks with flavors considered typically Mexican, such as tamarind, pineapple, mandarin orange, and grapefruit, under the Barrilitos name. The acquisition, for about $13.8 million, was also prized by Jugos del Valle as a means of gaining access to a national network for glass recyclable containers. With four factories, Grupo Básico had annual sales of about $25 million and was shipping some 18 million boxes of drinks a year.

COMPANY PERSPECTIVES

We are a multinational enterprise expert in fruit drinks, which generate value to consumers, associates, customers, suppliers, communities, and shareholders, because all are focused on knowing the customer and satisfying his needs. Serve the market with the highest standards. Share the same values.

Jugos del Valle began, in 1999, manufacturing fruit juices and fruit drinks in the Brazilian city of Americana, São Paulo. One of the most modern facilities in its field in Latin America, this $20 million plant eventually was turning out 26 products and had annual capacity of 23 million boxes. By early 2001 Sucos del Valle, as the Brazilian firm was called, enjoyed onequarter of the ready-to-drink fruit juice market. The investment in Brazil was part of Jugos del Valle's plan to become the largest juice company in Latin America, employing also its FDI plant in Puerto Rico—second in its market, which included other Caribbean islands as well—and distribution agreements in Colombia, Ecuador, El Salvador, Guatemala, Peru, and Venezuela. Jugos del Valle also considered opening a plant in Argentina, but stepped back as the southern nation's economy slid into recession.

To accomplish this goal, Albarrán Campillo was focusing on advanced technology in every aspect of the business, from plant processes to packaging and delivery systems and customer service. The company's system of direct store delivery, which since the early 1980s had enabled Jugos del Valle to serve its small store segment, about 65 percent of its business, without relying on wholesalers, was brought up to date. The system had proven so successful that Jugos del Valle was distributing products for Kellogg de México, S.A. de C.V., the Mexican units of Nabisco Group Ltd. and Procter & Gamble Co, and Nestlé México, S.A. de C.V. Technology was also prominent in other areas of the business. Jugos del Valle was in the process of providing handheld computers for its 600 sales representatives in Mexico so that they could enter a variety of data on the company's 200,000 points of sale to its offices and warehouses. Jugos del Valle was also in the process of using technology on a daily basis to measure speed and exactness in fulfilling customer orders, while also tracking customer satisfaction and consumer preferences. (One problem not yet solved by technology was the estimated 15 company trucks robbed each month while on their routes.)

TOUGHER GOING IN THE NEW CENTURY

Jugos del Valle was rated Latin America's hottest growth company in 1999 by Latin Trade. Sales reached almost $240 million, and profits rocketed sixfold to nearly $50 million. In 2000 it acquired two more juice companies, Florida7, S.A. de C.V., and Codeméxico, S.A. de C.V. The following year it bought out Bankers Trust's minority stake and the 10 percent share not previously purchased in the Grupo Básico acquisition. However, the company had fallen into the red and was soon struggling to meet payments on its considerable debt, which by late 2001 reached $85 million, more than half of it short-term. The Puerto Rican production plant was closed that year. Albarrán entered into sale negotiations with bigger beverage companies, including PepsiCo Inc., the Coca-Cola Co., and Cadbury Schweppes plc. In 2002, it reached a preliminary agreement to be acquired by Kraft Foods Inc. for a sum reported to be near $300 million. In the end all of Jugos del Valle's suitors "walked away over price," according to a Wall Street Journal article.

During 2004 Jugos del Valle restructured its operations and administration. Measures recommended by an independent auditing committee resulted in savings of about $30 million through the dismissal of 600 employees and reduced spending on communications systems. Even so, by the summer of 2004, the company had less than $8 million on hand to meet short-term debt of nearly $80 million. The company was rescued late in the year by a loan of MXN $655.5 million ($58 million) extended by a syndicate headed by Grupo Financiero Scotiabank Inverlat, S.A. de C.V., and also including Grupo Financiero Banamex, S.A., and HSBC Bank plc. Jugos del Valle announced in January 2005 that, thanks to this sum, it had successfully refinanced its short-term bank debt to long-term. Nevertheless, its stock was trading at less than book value, and another 318 employees lost their jobs. During the summer of 2005, Andrés Escalante Juanes, the company's director general, resigned after less than a year on the job. Jugos del Valle appointed a four member board in his place, headed by Albarrán, who was chairman of the board. The company lost money in 2005 for the fifth, and possibly sixth, consecutive year.

KEY DATES

1947:: An Italian immigrant founds the enterprise in Mexico City.
1965:: New owners authorize a production plant that becomes the center of operations.
1978:: Sale of Jugos del Valle to the Albarrán family has H.J. Heinz Co. as the minority partner.
1993:: Bankers Trust Co. has replaced Heinz as the Albarráns' minority partner.
1994:: Jugos del Valle goes public, selling shares of stock on the Bolsa Mexicana de Valores.
1998:: Jugos del Valle enters the soft drink market by purchasing Grupo Básico.
1999:: Jugos del Valle opens a fruit juice and fruit drink plant in Brazil.
2001:: Acquisitions have saddled Jugos del Valle with $85 million in debt.
2005:: A bank loan allows the company to restructure its short-term debt.

Jugos del Valle had six plants in Mexico in 2005. The Tepotzotlán facility was producing juices, nectars, fruit drinks, and carbonated beverages. The Zacatecas plant was turning out juices, nectars, and fruit pulp and concentrates. The Tijuana plant was manufacturing orangeades and fruit drinks. The Ensenada plant was making tomato sauce. The Monterrey plant was producing carbonated beverages and fruit drinks. The Tepeji del Río plant was making milk-based drinks with the bacteria found in yogurt. The plant in Brazil was making fruit juices and nectars. Jugos del Valle's brands including the juices and nectars Del Valle, Del Valle Light, and Florida7; the fruit drinks Frutsi, Bébere Frut, Tropifrut, Apretón, and Del Valle Frut; the soft drinks Barrilitos and Del Valle; the tomato sauce Valvita; and the milk drink Kultai. It also introduced a soy-based drink, Del Valle Soya. In 2005, juices and nectars accounted for 65 percent of net sales; fruit drinks and orangeades, 21 percent; and soft drinks, 11 percent.

In Mexico, Jugos del Valle had 27 distribution centers serving 213,000 points of sale in 2005. Exports accounted for almost 27 percent of net sales, by far a new high for the company. In Brazil, Sucos del Valle held 30 percent of the juice market and 22 percent of the production of soy-based drinks. Jugos del Valle USA Inc. held 20 percent of the fruit nectar market and was enjoying rapid sales growth. Some 80 percent of its customers were Hispanic, especially Mexican immigrants seeking the company's familiar line of Barrilitos soft drinks and Del Valle nectars. In 2005 it introduced a new product, the Blue Shot energy drink.

Manuel Albarrán Macouzet, the patriarch of the firm, held 38 percent of the shares of outstanding common stock at the end of 2005. Holdinmex, S.A. de C.V., held 28 percent. Roberto Albarrán Campillo had 10 percent. Roberto's brothers Manuel and Ricardo each had nearly 3.5 percent. Public investors held the remainder.

Robert Halasz

PRINCIPAL SUBSIDIARIES

Asesores y Promotores de Mercados, S.A. de C.V.; Codeméxico, S.A. de C.V. (98%); Comercializadora Val Vita, S.A. de C.V.; Grupo Alimentos Mexicanos, S.A. de C.V. (67%); Grupo Embotellador Barrilitos, S.A. de C.V.; Holdinbras Participações, Ltda. (Brazil); Infonet Consultoria en Redes, S.A. de C.V.; Jugos del Valle Venezuela, S.A. (Venezuela); Juvasa Servícios, S.A. de C.V. (98%); Servícios Administrativos Jugos del Valle, S.A. de C.V. (98%).