0:01
Thank you very much for joining us today. >> Speaker 2: Thank you.
Search this video
0:04
>> Speaker 1: I wanted to open by asking you how your approach to leadership has evolved as you've risen through the ranks in FEMS over 20 years.
0:13
>> Speaker 2: First of all, it's very nice having you here.
0:18
My big surprise is the success about the trip.
0:21
I didn't know thatten0 days of free beer would do so much for all of these guys.
0:26
>> [LAUGH] >> But it helps. It looks like it helps.
0:34
Well, I had the very good luck of having a great mentor in PHMSA.
0:41
And before that, I started working.
0:45
I've been working all my life since when I was 15 years old.
0:50
Every summer I had to work.
0:52
I wanted to work, and I had to work in a bank and I had to even distribute milk or do a lot of crazy stuff when I was in high school, when I graduated, I worked for basically three companies.
1:12
I worked for one company that is now owned by Pepsi, thank God, not by them.
1:17
Gamesa, it's a cookie factory, big cookie factory in Mexico.
1:22
And then I was hired to go to work with my father-in-law out of PHMSA in a small machine tool company called Race and Chrome.
1:35
And one the big, the first lesson that I learned there is he told me I'm shareholder of that company.
1:45
Your father is shareholder of that company.
1:47
My father owned 25% of that company.
1:49
And you're not going to be the boss, so you better learn.
1:53
And I don't want anybody to feel that you are the boss.
1:57
So I said, well, it's not.
1:59
I didn't understand why he said that.
2:02
And I started working there, programming production only, doing the production scheduling and trying to sell.
2:11
And he called me once and told me one very important thing that I didn't pay too much attention by then.
2:18
And many years later, I learned that it's one of the most important things that I have to take care of.
2:24
He told me this business has only one big problem, which is it doesn't control its own commercial agenda. And I said, why is that?
2:35
We sell everything that we produce.
2:39
Yes, but you sell it through only three distributors that make more money than you.
2:45
So those were the machine tool distributors of Mexico, two of them, German companies that control everything from the company.
2:54
And he said, if you want to be successful in this business, you have to go away from distributors and sell direct because you have to control your commercial agenda.
3:05
And we tried, I had to hire the first direct salesman.
3:12
And eventually when we sold the company, we had 50, 50 on sales, distribution, and we were able to control prices and margins and the agenda.
3:23
This, which was a very interesting learning, didn't come back till now that we're partnered with Coca-Cola.
3:32
Coca-Cola would like to control our agenda, commercial agenda.
3:38
And we can never accept that.
3:41
The prices of Coke to public have to be controlled by you, by yourselves.
3:50
And that goes also in beer, and that goes also with oxo.
3:55
Commercial agenda has to be controlled.
3:57
And there's where you make money.
3:59
If you go to, let's say, Walmart and allow them to start doing the cross docking they call it and distributing.
4:10
You don't have to distribute your beer in all the stores, you just leave it in one of the sites, and we'll send them all over the country.
4:19
When you accept that, you're dead because they will control your prices, they will control your inventories.
4:27
Commercial agenda of consumer product company has to be controlled by itself.
4:33
That's one of the things that helped me a lot.
4:38
Then, when I went to PHMSA, one very important thing that helped me a lot was to learn how to respect your team's decisions.
4:52
One of the toughest things that I have to respect and to control myself is not to impose decisions.
5:00
If you want somebody that reports to you or defends from you to be responsible of what he does, you have to, okay, advise him, ask him, suggest him, hint him, but let him decide.
5:18
Obviously he knows that if he fails, I cannot blame but on him, and he will be responsible of failing.
5:27
But if you impose any decision, you are first of all protecting him and second, you are responsible of what could happen there.
5:40
So those two things I think have to helped me a lot as I advance in France.
5:47
>> The scale of the business has increased significantly, especially over the last few years.
5:51
Went from being largely a Mexico based company to now having operations in nine countries all over Latin America.
5:58
So what are some of the leadership challenges associated with managing this increasingly global organization?
6:04
And has the culture of the organization evolved at all you've begun to acquire?
6:09
>> Speaker 2: I think that the culture from Monterrey has helped us a lot.
6:12
We have honestly exported some of the good things that we learned, and we inherited from the brewery, has 120 years of existence, never had a strike, very good relations with unions.
6:29
And we keep trying to do that model in Nicaragua or in Argentina. And it has helped a lot.
6:38
When we went to Argentina first time, that was the first outside country that we went to, we thought, my goodness, the unions here are tough.
6:47
I mean, this is going to be a mess.
6:50
We had to go there because Coca-Cola told us, look, if you want to expand with Coca-Cola, you have to prove that you are ready to expand.
6:59
So we said, okay, Argentina is a very nice country to live and to go to work and to manage. But it's very tough.
7:09
And honestly, it hasn't been the most successful business in Argentina.
7:16
But what has helped us a lot is that since we were successful there, we were able to convince Coca-Cola to get more territories from them.
7:24
And then that's how we got to Brazil, which is great country to be.
7:29
And then we got Colombia and all the rest of the countries.
7:34
Now, scale helps a lot when you now we can dedicate international relation people from Mexico to help manage good relations with all governments, unions in these nine countries.
7:50
And we have a lot of new ways of sending good messages to these countries.
7:59
When we went to Brazil Still, Brazil tax contingencies for the company were very tough.
8:05
We were very transparent with government, went there and said, look, we want to clean this mess.
8:10
We don't want to be tax evaders in this country.
8:13
Tell me, what do I have to do?
8:16
They charge us a flat fee to clean all the former problems with taxes that we had.
8:23
And since then we have been considered a good citizen and the government of Brazil likes us and helps us much more than before.
8:33
In Nicaragua, for instance, there's a lot of need of social programs.
8:41
There's a lot of poverty there.
8:44
And we have experiences from Southern Mexico that we take to Nicaragua.
8:49
We are doing some water programs in Colombia, where there's a big water problem in the rural areas of Colombia.
8:58
And the experiences of Mexico can be exported all over to Latin America also.
9:04
>> Speaker 2: Do you think what you've learned in Mexico could be translated to doing business in the US or if you chose to expand into other parts of the world outside of Latin America?
9:12
>> Speaker 1: Some of them I think they can, some of them are not so easy.
9:19
Latin America is very different in the way the markets run our consumer products like beer and Coke.
9:30
We have to distribute very small drop sizes to many hundreds of thousands of retailers every day.
9:39
Mexico City on itself has more retailers in number than all United States.
9:47
That's incredible, but drop sizes in Mexico City are two cases per store a week.
9:55
And in United States, it's 200 or 400 cases per store per week.
10:04
So we had to learn, I mean, the brewery has a very different need than a brewery in United States.
10:15
A Mexican brewery needs to be an expert in distribution, not only in marketing or in brewing beer, but in distribution.
10:23
And you have to learn how to treat what we call very small customers that buy from you one case per week or two cases per week.
10:36
In United States, Walmart or the supermarkets buy maybe 50 or 60% of all the Coca Colas that you sell in the United States.
10:46
In Mexico, maybe they account for 8% of the market or less.
10:53
So the mom and pops of Mexico are most important customer by far.
11:00
And those are things that cannot be applied here.
11:03
We always say, well, we have a big advantage on distribution in Mexico because we learn about this big problem, how to cope with it.
11:13
But in the United States the power of the supermarkets is so, so big that it could be different.
11:21
>> Speaker 2: We've seen a huge amount of consolidation in the beer industry, most recently with the Anheuser Busch in the merger.
11:26
How has that consolidation impacted PHMSA to today and then how would you anticipate it would impact your business going forward?
11:35
>> Speaker 1: Well, today we haven't seen the consequences of that consolidation yet.
11:47
The big merge of these two giants in beer is starting.
11:56
Thank God, it was decided when the prices of companies were so high.
12:04
So now they have a big debt to fulfill.
12:09
>> [LAUGH] >> And that will give us some time to see them act on behalf of their debt.
12:21
Maybe five years from now, seven years from now, ten years from now, that will not be the case.
12:26
And they will be the strongest competitor by far in the world.
12:36
We are completely convinced that there's still a lot of room for local breweries or for continental breweries.
12:46
Brands are local, we have to continue doing well and much better than anybody.
12:55
What we can do, you compete in every town with your brand and that's how you have to be able to compete against the giants.
13:06
Now if they come and spend billions in marketing, eventually they will, they will hurt you.
13:16
So I see that the consolidation is not stopping and it will not stop.
13:21
I think that there are many ways of doing alliances with others and there are many ways of counterbalancing powers.
13:34
Our presence in Brazil is very important.
13:37
I think we have idle capacity in Brazil for maybe 50% which can be used at a low price or marginally if needed, strategically wise, we don't care to do that.
13:54
We wouldn't like to have to do that, but that's a helpful weapon if needed.
14:03
In United States, we have to continue pushing our brands, getting a lot of leverage here.
14:12
I mean, Dos Equis has been great, very successful here.
14:17
And we have been able to increase prices of Dos Equis in Mexico maybe three times inflation in the last five years and volumes still growing.
14:29
So the foreign preference of one of our beers or one of our brands gives the brand a lot of equity.
14:39
And we've been able to make money with Dos Equis in Mexico now.
14:44
Tecate Light is coming also to United States, very well, from a very small base.
14:52
And Tecat is doing as always, very, very good.
14:56
Now we see that there will be more consolidation.
15:01
That's what we see in the future for sure.
15:06
>> Speaker 2: Femsa, although public, is family controlled.
15:08
And I'm curious to hear your view on what's different about being the CEO of a family controlled business versus the CEO of a business controlled by institutional shareholders.
15:20
>> Speaker 1: This is very interesting and very important to mention.
15:23
This company was founded by five families in 1890 and since then, one of the families were responsible for running the company.
15:36
And the others were only shareholders.
15:39
So since 1890, there are board meetings where this guy responsible for the brewery, had to respond and inform the other four families or the other families through the board.
15:57
And they are shareholders meetings since 18 Registered since 1890.
16:03
So the company has been really very institutional since the very beginning. That has helped a lot.
16:10
There is a professional preference to have minutes of every meeting, inform transparency, some corporate laws since the very beginning.
16:29
And that has been evolving quite well.
16:32
When we became public, I was not running the company yet, but there started to need for new policies to be able not to have the families deciding things without contacting the rest of the board members or the rest of the shareholders.
16:58
Now today I can tell you and I can prove to anybody that there is no family influence in a special way to the board.
17:11
The only difference maybe you could say is I have one meeting which is not one family with exactly with the five families where I inform what is happening.
17:24
But I have never been requested to do anything special or not to present anything to the board.
17:31
They are represented in the board.
17:33
We have half of the board members are independent and everything has been decided and will be decided on the board.
17:42
I have never been in the position of having to do something in favor or against any shareholder.
17:53
If I'm requested to do that, I would leave the company because I don't think that's fair for a public company.
18:01
So one of my managers that passed away, very old guy always used to tell me, you have always to remember the dentist of Omaha.
18:13
And that's a guy that maybe has 1,000 shares of PHMSA, bought it in New York Stock Exchange.
18:19
He doesn't know anything about the company, but it was recommended by his fund manager or whatever.
18:27
And he is expecting from us to make the most better decision for him as if he was the only owner of the company.
18:37
As long as I will be there, will happen because I will never allow anything to go beyond what is good for the whole shareholders, for the 100% shareholders.
18:50
>> Speaker 2: Mexico has faced some very well publicized challenges recently, ranging from this very violent drug war that's going on in your country to a recent outbreak of swine flu.
19:01
How have these obviously unfortunate developments impacted your business specifically and perhaps more importantly, what is the role that the business community is playing in helping to get through some of these challenges?
19:14
>> Speaker 1: Well, first coming back to the question before the prior question that you made and talking about what is happening with this crisis that we're many crises, all these plaques that we have to the swine flu and the drug problems and the global economy crisis that we are facing.
19:40
Also one of the advantages of this, we can call it family ownership or private ownership of certain amount of the equity of the company.
19:59
Is that the long-term view is there and that is very important.
20:05
None of these controlling families are there because they want to sell the shares someday.
20:13
They want to create long-term value.
20:16
And that I think is very important.
20:19
We are not thinking or worried about the next quarter numbers, never.
20:25
If you ask me, how are they going to be, I don't know and I don't care.
20:29
Because we see the long-term potential of the company and that's how we work for that.
20:37
We are always making decisions that will influence the numbers in the future, not in the very next quarter.
20:47
If you have to save some maintenance to make the numbers of the quarter look nice, you're killing the company yourself.
20:55
And the message that you're sending to all the ranks of the company is very, very bad.
21:01
So we even don't care about the budget.
21:05
I only ask how were you doing last year?
21:08
How are we doing this year?
21:10
And we have to look for the next five years of growth of the company. Now seeing this crisis.
21:17
Well, Mexico has been a typical emerging country with all the typical problems that we have and they have, which is every period of time we have some kind of either political or economical crisis.
21:41
This is the first time that the economical crisis was not created by Mexicans.
21:45
>> [LAUGH] >> Well, that's good or nice.
21:51
We are in very good shape internally.
21:54
The bad news is that all the auto industry, which Mexico depends a lot from, is dead or it's in a very bad shape and will be looks like for at least two more years.
22:08
Hopefully no more than that.
22:12
So we had a big devaluation, it's recovering a little bit.
22:16
We are in a very good exports position.
22:19
But now there is nobody to export to.
22:23
So we will have to wait on that.
22:27
Tourism is very important for us and growing.
22:30
My problem is that I don't see sometimes the government to prioritize on tourism as much as they should, I think.
22:39
Because if, if we are all convinced that this is key for the growth of the country, we should protect it.
22:47
And one of the examples that we were talking recently is that for instance, with this flu that we had, I think the government did very prudent things.
22:58
The things that should have been done were done.
23:04
We didn't know how harmful this could happen to the world and how bad this pandemia looked like.
23:11
So they closed the country almost.
23:15
And the problem was exactly only in Mexico City and some other close state called San Luis Potosi, basically when it started.
23:23
So Los Cabos didn't know anything about the flu and hasn't had maybe any case, what they should have done is they should have said, okay, Mexico City, we will isolate the problem areas, but the tourist areas should be open to United States and to Americans or to Europeans that come to those areas.
23:45
Now, the problem is everybody in Europe hears Mexico.
23:49
The world Mexican says, no, no, I cannot go there.
23:52
So Los Cabos is maybe with the lowest capacity Use in decades.
24:03
Cancun is going to suffer the rest of the year because of this.
24:08
And the government didn't consider Turing, okay, we should protect this, and just isolate Mexico.
24:16
That was one of the cases that I think has been hurting us.
24:21
The other is the drug problem.
24:24
There are a lot of reforms that are needed to be done by federal government, by Congress, changes of laws, and everything in order to be able to fight against the drug dealers in Mexico in a more efficient way.
24:41
President Obama is helping.
24:42
It's the first time you see a position of saying, okay, this is a joint problem and we will help you.
24:49
And it looks like they are really acting.
24:51
The Merida plan is coming, and honestly, President Calderon is fighting very, very bravely.
25:00
And we have to recognize that this is a problem nobody wants to have.
25:06
You have to fight against big families that control the largest business with the largest margins that you could imagine.
25:15
And they have a lot of power.
25:17
And this is the first president that you see that he's attacking frontally, using the army and being successful.
25:28
You cannot imagine how many, because we only read outside of Mexico the bad side of this, the killings, and the problems.
25:38
But I can tell you, in Nuevo Leon, since the army is taking control, I think there has been maybe eight to ten times more drugs.
25:52
How do you say, the comisarias, I mean, confiscated?
25:59
Eight to ten times more people sent to jail, cars taken, security houses discovered everywhere in Nuevo Leon.
26:10
And if you compare that to the whole country is the same thing, I mean, army is being very, very effective attacking this huge problem.
26:20
It will never end, the problem I don't think will end, but at least they will go, hopefully, to some other region of the world.
26:29
>> [LAUGH] >> Or leave Mexico alone, we need peace for a while.
26:35
>> [LAUGH] >> Speaker 2: Many of the countries in which you operate have health care systems and welfare systems which provide less extensive benefits for employees than what you would see here in the US or in Europe.
26:51
And I'd just be curious to know, what does PHMSA do, if anything, to fill that gap for its employees for the 120 some odd thousand folks that work for you?
27:01
>> Speaker 1: Well, one very special characteristic of the company is that it started with a social program, very strong since 1918, that included savings and school, and health care.
27:22
It was basically in Monterrey and then in Mexico City and certain other cities.
27:26
We took that concept to all over Mexico, and we are taking it to every country where we are, more on a virtual way, we have a hospital in Monterrey, we don't have hospital in Argentina or Brazil.
27:43
But we have the health services subcontracted in Brazil.
27:49
We have the savings programs, which is very, very powerful.
27:56
The oldest magazine in Mexico is owned by, well, it's a magazine that is issued by the company since 1918, which is called Trabaco y Ahoro Work and Savings.
28:11
And it's an internal magazine that we send to hint people to tell our company people how to save money, how to spend their money, and how they can be much more productive.
28:28
Those things taken to some of these countries that never had.
28:33
When we went to Argentina, I was very lucky to find out that Argentina is very special. You know it.
28:47
>> [LAUGH] >> He learned Spanish in Argentina, as you could imagine, he had a lot of fun.
28:54
>> [LAUGH] >> And not watching soccer games.
28:58
>> [LAUGH] >> Speaker 1: One of the things that is very important for leadership and for all of you guys when you start business, you have to learn is to ask the experienced people about what has happened.
29:16
That's why these programs I like, I mean, I have made lots of mistakes in my life, and I love to share those with somebody else to help.
29:29
Coca-Cola had problems with the distribution company in Argentina.
29:36
Imagine [COUGH] sending a guy that was very efficient running a small bottling company in certain city in United States that you send it to run the Buenos Aires bottling Company.
29:54
And you become the star of the city like this.
29:59
You have the best wines, you have the best companies.
30:05
>> [LAUGH] >> Or friends and you go to concerts.
30:08
And when we were doing the due diligence process, two months, now we do it in two weeks.
30:14
But those years, accountants were having a lot of influence in the company, and they were doing due diligence of two or three months.
30:24
I discovered one of our chief due diligence responsible for buying a smoking.
30:30
Had to buy a smoking because he was going to a concert. What are you doing?
30:36
Well, it's the last Stradivarius violin is going to play here in Teatro Colon in Argentina. This is an event.
30:45
What does this have to do with us?
30:47
Well, you have to be a social guy here. I said, my goodness.
30:54
And I asked the Coca-Cola executives, what was the problem when you were running this?
31:01
Well, the last guy that ran this company here had two divorces and became alcoholic, and it was a mess.
31:09
>> [LAUGH] >> Speaker 1: I said, my goodness, I cannot send a frivolous guy there.
31:14
I cannot send a military guy, somebody.
31:18
So I convinced myself to send, instead of the best operating guy, I sent a very serious, honest family guy, and human resource guy. And it was impressive.
31:35
He had an interview with all the workers, employees, workers, production workers, everybody.
31:43
And 50 or 60% of them didn't even know who was the boss, never met the manager.
31:50
80%, never had a handshake with the general manager of the bottling company.
31:57
And we celebrated the first.
32:00
In 60 years the first Christmas dinner with all the workers together, and the main part of the program, we gave a recognition award to a guy that has been working for the company 30 years, and he has never been recognized at all.
32:25
So they gave him a recognition, gave him some money and a watch, a golden watch, a gold watch or whatever.
32:34
He cried in front of everybody, the company was completely turned around.
32:39
We had 700 lawsuits when we started there, and two years later, we didn't have any lawsuit at all.
32:48
And that's because you start talking with people and treating them like human beings.
32:52
I mean, we asked them, what do you want?
32:54
We want a better dining room because we don't have a good place to watch soccer games after we work.
33:03
So we have to buy a big TV because it's important for them to watch the soccer games. So, okay, we did that.
33:09
And they stay, they don't go to drink outside, they stay at the company, watch the soccer game after their time shift, and they go home very happy, loving the company.
33:23
So those kind of things are important when you go to outside Mexico.
33:29
And what I learned is you have to ask the guys with the experience.
33:34
I mean, the guys that suffered those problems in Argentina were the guys that told me what to do or what not to do when you go there.
33:44
>> Speaker 2: Like to open the question to the audience here in a moment, but before I do that, the recent marketing campaign here in the United States of Dos Equis has been incredibly successful, needless to say.
33:59
And it's revolved around this gentleman, the most interesting man in the world.
34:03
I imagine he's a fairly cantankerous employee and I wanted to ask you, what's it like being his boss?
34:08
>> [LAUGH] >> Speaker 1: We've been very lucky with the campaign, honestly.
34:17
It's funny, some of our people said it's not going to work.
34:22
And we did focus groups, and I saw so many people loving it, we started asking the students all over, and it's shocking, and it's amazing.
34:38
The other big thing is that it has been discovered gradually by consumers.
34:44
We don't advertise it on the super bowl or whatever, which is too fast.
34:51
It has to be discovered and you have a lot of hits on YouTube because they want to know what is the new thing.
34:58
And it's a funny thing that doesn't talk bad about beer.
35:07
I don't think that the jokes on beer should go to kind of icon beer drinkers or dumb guys or funny guys like that.
35:19
You have to give beer what it deserves, beer is one of the best products in the world in many ways.
35:28
Very old, is the best alcoholism fighter that you can find in the country.
35:35
It's proved by, in any, many, many ways that the high beverage per consumption of beer, high per cap consumption of beer in a country are the countries with lower alcoholism.
35:53
Because you drink more liquid with less alcohol and it really helps and you enjoy them.
35:59
If you drink good beer, you will be healthy all your life.
36:02
>> [LAUGH] >> As long as you don't drink too much.
36:07
Because you have to control that, that's very important.
36:10
I keep saying I want everybody drinking one of our beers every day.
36:16
Not more than one, but every day, please, and that helps a lot.
36:20
>> [LAUGH] >> Speaker 2: Very good, good advice [LAUGH].
36:28
I think we have a couple of microphones and hopefully if you have a question, please raise your hand and we'll call you so we can hear them on the tape.
36:42
>> Speaker 3: Hi, everybody is laughing because I'm from Argentina, but all what you said is true.
36:54
>> Speaker 1: And we respect and we love your country a lot and we have fun a lot there and we make good business there.
37:00
>> Speaker 3: I love my country as well.
37:03
I have a question regarding to how you face human resources.
37:07
You are first like a Mexican company and then you expand into a lot of Latin American countries.
37:14
I was wondering how you changed, how you manage your human resources, especially your top talent for top management.
37:23
>> Speaker 1: Thank you, this is important to mention.
37:29
The best thing to create leadership or create leaders is to move the people around.
37:37
The most important thing that the leader has to learn is to be able to manage hostile environments or unknown environments.
37:51
The minute you feel very safe with what you do, the minute you are starting not to make your effort, that's the natural human thing. Make your best effort.
38:02
I mean, so we do a lot of exchange of executive, that's very important.
38:10
My first big, big exchange I made was in 2000.
38:15
I took the CEO from the Coca Cola company, Coca Cola Penza, to run the brewery and the guy from the beer business to run Coca Cola.
38:24
Everybody told me I was crazy, and it was the most successful decision I've made in human resource.
38:33
So since then we have been changing everybody.
38:36
The guy that is running Mexico for Coca Cola Penza today, last year was running Brazil and Argentina before for maybe 10 years.
38:46
Very successful in Argentina and Brazil, now he runs Mexico.
38:52
The guy that was running Venezuela is now running Colombia, he needs a little bit of peace.
38:59
>> [LAUGH] >> The guy that is in Colombia, he needed a little bit more action, was sent to Argentina.
39:08
So we moved all the guys, and that has been tremendously good.
39:13
Honestly, it's very powerful.
39:17
My own experience was when I got invited to go to work for Fensa.
39:25
I started on planning, and I think I told this when in the trip of some of you to Mexico.
39:32
I started on planning and the beer division had a very small business that nobody cared and nobody put attention to this, which was the convenience store chain called Oxo.
39:50
We had by then 500 stores, losing all the money that you could imagine.
39:55
And the CEO of the brewery used to say, I don't even know.
40:00
Understand, this business, this retailing business, is not for us, we in Monterrey are not commercial guys, we like to produce and transform things we don't understand, I don't know why we have this thing.
40:15
And I was too, I didn't learn to shut my mouth at the proper time, and I said, you know, this business has a lot of potential, and it's a pity that nobody takes care of it, so this guy, an Indian guy, Indian from Argentina, you could imagine the mix, it's very intelligent guy, he's 85 now, Shankar Dadu was my boss by then, I said, so you think that OXO has some potential?
40:46
Yes, I think it has potential, it's poorly managed, okay, why don't you go and run it?
40:55
I said, well, if you want me to, I will do it, or let me ask you another thing, you think it has potential?
41:01
I can convince the board, and maybe we can give it to you for free, you take this business, you run it for free, you have to be only exclusive on our beer, and you do whatever you want to do business, and I was very scared of him and said, no this is not for me, I will run it for you, but I will not take it, I should have taken it, >> [LAUGH].
41:27
>> And leave, so I went there and started running that thing.
41:34
One of my closest advisors told me when he came to visit me a month later, I was scared him to death I mean, I said, why did I accept this thing?
41:47
I don't know anything, I don't understand the business, it was a mess, total mess, and this guy comes and tells me, you know what?
41:57
They send you there because they want to burn you and take you out of this group, you will never going to make it, I'm sorry, but this is the last business you want to run in PHMSA.
42:12
So I started looking for new team of people, and all the things that I learned in OXO have been very important for my career, that I did, changing the employees, asking for new things, closed half of the chain, we went down to 300 stores almost in six months and tried to try to understand, to define ourselves, to create a vision, to create a dream, we were dreaming to have 1,000 stores, now we have almost 7,000.
42:48
And to make business, to make money with the thing, now when I go there and see what they have been able to do, when you isolate the business from the brewery that was shadowing it too much and ask them to focus on and get the highest sophistication on retailing as possible.
43:09
Now this is a tremendous today is the most profitable business we have on return basis, by far one of the most profitable business in Mexico, and with a lot of potential to go into outside, so another thing to learn is we always disregard small businesses because it's so small that nobody takes care of it, but you should never forget that that small business can always be a huge business if you find a way to make it in a huge business.
43:46
And the second thing is that, yes, it's the same difficulty to run a small business than a large business, so a lot of people say, well, don't take so much attention to this small thing, it's better to run a larger thing, but it's better to run a small thing and to make it large, that's the best way of creating value by far.
44:13
>> Speaker 2: So thank you for being here, first, as a Mexican woman, I'm very curious to hear what are your views on what needs to be done to have more women in leading positions in our country, and in particular, your company has done a great job developing their employees, what are you doing to develop women in your company?
44:31
>> Speaker 1: This is very good to hear, we have been very worried about having more women working at the company, and it's incredible, it's very difficult to find women that want to stay longer than needed in their careers, I never thought of that, I couldn't believe that, but it's what has been happening.
45:05
We had for years a very nice lady working with us that is now doing her MBA in Harvard, she asked for permission to go for Harvard for two years, she will return hopefully in next August, She was in investor relations.
45:28
She's from Wisconsin, I think, and she told me, she asked me that question once, three, four years ago, and I asked her, why don't you help me with that?
45:38
Let's see what we have to do, I'm open to change anything that is needed to have more women here.
45:47
And after research, interviewing American companies, European companies, all of them told her, if you find the solution, please come back, we don't know how, okay?
46:01
Obviously, Mexico is even lower in women than many other countries, there's lots of things to do, but at the end, for instance, Oxo has lots of women, more than the rest of the group in Oxford.
46:17
The best managers in certain areas are women.
46:21
And we want to move them and we have to move them.
46:23
And that's when they start saying, no, I can't.
46:27
Some of them because they are married, and some of them because when they have children, the first child, they say, I will continue second, and as they grow, it gets very difficult, some of them have to decide whether they continue being professional or not.
46:44
And the last case I was told in Oxford was a very good manager that said, I don't care, I will stay, and after three months of trying, she came back and said, look, I can't, and it's sad on operating system side, you know, which implies a lot of traveling, a lot of things.
47:05
Now, on the corporate side, when you can do systems or developing systems or any other clerical work, we are, we will, and we are opening all the possibilities of having flexible time schedules and work-from-home programs.
47:31
Those are going very well, and I think we will keep a lot of women doing having a kid, a child, and feeding him and feeding the baby, whatever, and working with us, but at the end it's not easy, I think maybe part of it is that women as husbands consider very difficult to accept that we can do the child.
48:01
Education, staying at home and having your wife working.
48:06
If she's better than you, well, she should be doing that.
48:10
Or if you agree, I remember Carly Fiorina did that when she had to decide, she was promoted.
48:18
Her husband stayed at home and it was a very good formula.
48:21
It should work for more people.
48:22
I'm sure that there are much better ladies outside that should be working.
48:28
They can teach because the flexibility of time is very open.
48:32
So universities, you see a lot of them.
48:35
But going to work and implying traveling is when it gets difficult. But we should do more. I agree.
48:46
>> Speaker 2: We have time for one more question.
48:48
>> Speaker 3: Hi, my name is Eric Dayton.
48:50
I was on the Mexico study trip.
48:51
So thank you again for your hospitality, both great meetings and also the free beer.
48:55
I'm wondering, as you look ahead, it seems to me there might be other areas, other product areas that would work for expansion, potentially, food could fit with Oxo.
49:06
And then there are also other countries to which you could potentially expand your existing businesses.
49:09
How do you balance looking for opportunities for expansion and balance that with sticking to your core competencies and having a sense of discipline as a company?
49:20
>> Speaker 1: If you see the history of the company, we come from a lot of extremist positions.
49:34
We were a brewery that it was founded as a brewery.
49:39
And since there were problems in the country or the continent and the world war and everything, lots of external influence things to push us to go for packaging and to produce our own packaging.
49:56
We were needing money, so we had a bank, and we started diversification because of circumstances.
50:10
And the group went to steel also because the crown caps were manufactured by ourselves.
50:18
And it was a good business to be in Mexico in the 40s.
50:23
And then the group grew so much that split in two and Alpha became another group with steel and petrochemicals and some other stuff.
50:33
And we kept the packaging related with beer and beer.
50:38
And then in the 80s, we started up a big move of diversification that started maybe with influence from United States.
50:50
When you remember the book In Search of Excellence, which was a classic by then, everybody read that book and the Boston Consulting Group approach and all those things.
51:03
Everybody said we should have lots of companies.
51:07
So we went from beer to whatever you could imagine, 80s and 90s.
51:12
And you cannot believe how many different businesses we were at.
51:19
We had plastics, auto plastics, we had auto plastics for cars, for auto industry.
51:28
We had flowers, we had canned food, we had pizzas.
51:34
If we had pizzas, we had cheese.
51:37
If we had beer, we said, let's have peanuts. And we had peanuts.
51:41
>> [LAUGH] >> I mentioned cheese already.
51:45
We had Burger Boy, which was some kind of McDonald's small McDonald's chain.
51:52
We had what we called the cold meat business, which was cemeteries cemented >> [LAUGH] >> And they call it a call meat. I don't know why.
52:07
Business, we were building houses by millions of houses called Technogar.
52:16
Broken business, since it started. We were fishing.
52:22
We had three joint ventures for fishing with French people, Spanish people and Japanese people.
52:29
One of the lawyers that is retired now, he says, I never saw a boat. And we never saw.
52:36
I don't know if they didn't go out of the port, look for fish.
52:40
When we were losing money, three of those things, it was kind of a race.
52:47
And everybody was diversifying in the world.
52:49
Alpha was growing us, we were growing. It was crazy.
52:53
So after that 82, we had a big devaluation in Mexico.
52:59
We came back to reality, thank God.
53:02
And we had to sell everything and went back to basics.
53:08
By then, the only business that we had was beer and Coca-Cola [COUGH].
53:13
The bank was taken away by the government, thank God then. So we were Coca-Cola. We had Coca-Cola. We bought Coca-Cola.
53:23
The company bought Coca-Cola in $60 million.
53:26
The Coca-Cola franchise for Mexico City.
53:30
We were so broke that we had to go back to Coke and say, we have to sell it back.
53:38
We cannot operate this thing. We owe a lot of money.
53:42
Why don't you buy it back?
53:43
And they offered, we wanted, we asked 22 million.
53:47
We were ready to lose $40 million on the Coca-Cola franchise.
53:53
And Coca-Cola did a very tough analysis.
53:57
And they said, we can offer you 19 million.
54:00
My colleagues from FEMSA were offended because we were willing to lose 40 million.
54:07
And they were even asking for more discount.
54:10
I said, forget it, we'll keep it then. And we kept it.
54:13
And now it's a billion-dollar company.
54:15
A $10 billion company or $11 billion company.
54:17
Thank God they didn't take it.
54:21
But since then, we have become some kind of a trauma of saying we are in beverages only.
54:32
And you will say, well, why are you in retailing?
54:35
Well, 60% or 50% of what we sell are beverages in Oxo.
54:40
And it gives us a lot of feedback from the consumer.
54:44
We learn a lot from consumer.
54:48
That information is given for free to Coke and to beer to learn about that.
54:54
And that's why we kept Oxo and me, because it's a very good business.
55:00
So going to food, which sounds logical from the distribution point of view and the commercial agenda point of view as you may, should be or could be a logical step.
55:13
But up to today, my board hasn't allowed me to move, and I haven't asked them to move towards there.
55:20
Maybe depending on how we move and how we evolve, we have been concentrating on Coca-Cola and growing with Coca-Cola very successful, and I'm sure that we will eventually have more territories, hopefully in the United States also.
55:36
For bottling Coca-Cola, the partnership has been very, very good.
55:40
They respect us because they need us, and we respect them because we need them a lot.
55:45
We are the best partners we can each other find, I think.
55:50
And on beer, we have to continue growing and protecting ourselves against this consolidation that is going to be realizing in the future and will be very tough. Wonderful. >> Speaker 2: Mr.
56:04
Fernandez, thank you very much for your time today.
56:06
We found it incredibly useful.
56:07
We have a couple of gifts for you which Nika is bringing over.
56:10
And thank you for joining us here at the Graduate School of Business.
56:14
>> [APPLAUSE] >> Speaker 1: Thank you. >> [APPLAUSE]