At some point in its history, Arcor decided to evolve from a company that manufactures and sells confectionery to one that produces and sells food; at another point, it moved from the interior of the country to reach the whole of it; and finally, it targeted the world and began exporting. At present, the Company is undergoing a new change in strategy, which is as deep as or even deeper than the previous one: it will focus on healthier products, with high nutritional content and increased respect for sustainability. “Arcor is a group accustomed to transformation”, said Marcelo Siano, Consumer Food General Manager.

With 70% of its sales in the domestic market, Arcor is not immune to the general fall in consumption, which will put its balance sheet in red this year. “Although we try to adjust our figures, we cannot transfer everything to the price”, commented Siano. According to the executive, Arcor's bet goes beyond the short term, which is why the Company has invested US$12 million in research and development in the last year, and for 10 years, it made an average investment of over US$100 million per year (from 2006 to 2016).

What is this Arcor’s new transformation?

-Arcor has a new business strategy based on incorporating the nutritional and healthy lifestyle profile into the Group’s general strategy. It grew from being a company of instant gratification products to being a food company: we have cereals, seeds, dried fruits, dietary supplements, dairy products and flours. This new approach is based on three pillars: the portfolio, which deals with reformulations, reduction of critical nutrients and expansion of categories; communication; and scientific alliances, thorough which we reach out to institutions, chambers and agencies to contribute studies and knowledge.

How much are you investing in this Company transformation?

-That´s difficult to say, because the investment is dynamic, but what I can say is that last year, the Group’s investment in innovation and development amounted to US$ 12 million. In this department, there are 190 people working on innovation, specifically, on the improvement of the nutritional profile of our portfolio.

Do you have any investments planned for next year?

- It’s impossible for this Group not to invest; however, let’s see what happens this year with our returns. During the last ten years we invested, on average, over US$ 100 million per year (from 2006 to 2016); but today that figure has been reduced because we need to adjust our balance sheets. Investing is a necessity, because there can be no growth if we keep doing things the same way. Investment needs are still substantial, and nowadays, we are being somewhat circumstantially conditioned by access to credit and results.

Was the decline of the traditional consumption model the reason why you launched this new strategy?

I would say that the first reason was science advances. From there onwards, we became aware of how harmful certain ingredients can be and how beneficial some lesser known nutrients can be. Thus, people start looking for certain products, creating a trend. As a “major league” company, we could not ignore this new reality. Today, food and sustainability go hand in hand, reshaping the business vision. Because of this, we created a nutrition area and defined the system of nutritional profiles of all our products.

How many new products have you launched since you are in this transformation?

-Seeds and dried fruits, dietary supplements, cereal bars, dairy products (today we hold 42% of Mastellone’s stock, but we are not yet involved in the Company's management); we have also strengthened our focus on canned food and fruits. Furthermore, all categories are impacted by this beneficial filter. And we are going to announce interesting surprises in this sense. We have also teamed up with Bagó to make an almost medicinal product.

Will some categories be replaced by new ones?

-They will not disappear, instead, they will lose their place in the portfolio. For example, we used to be the leading global producer of candies; however, today that is no longer the case because we have expanded our portfolio. In complex times in terms of consumption or recession, it is this wide range that has allowed us to offer more options.

Is it not risky to launch these new categories at a time when consumption is declining?

-If we were handling it with tactical and opportunistic criteria, this would not be the moment. But this is a long-term strategic vision. Launching a product with a AR$ 300 price tag is certainly not the best thing, but we are thinking about the future. We are in a very special scenario, but who can guarantee us that there will not be another? Besides, Arcor is a group accustomed to transformation.

Where does this decline in consumption affect you most?

-We have two types of instant gratification products, which are the cheapest in the market; so there is always an option. When the sales of these products start to drop, that is when things are really going bad. This is what is happening right now, but we compensate for it by diversifying and adopting channel strategies.

-Will you fall in line with the industry, around 2%, which is the estimate for this year?

We are aiming at a smaller figure and we are working towards that, because we believe the second half of the match is still to come. -Do exports make up for the decline in domestic consumption? No, exports have been so sluggish in the last ten years that, although we are trying to recover our positions, they are not enough to compensate. Today, the domestic market accounts for 70% and exports for 30%, but we used to have a mix of 60% to 40%.

How do inflation and devaluation affect transformation?

-Well.... they hit us almost directly. Most of our supplies are directly affected by the dollar. Although we try to adjust our market values, we cannot transfer everything to the price. We are trying to increase volumes, but the sales have shrunk significantly.

Do you think sales will pick up in 2019?

Given my position at the Group, I must be optimistic, also because I am responsible for the commercial area.

Will Arcor report losses in this year’s balance sheet?

We are making every effort to ensure that this is not the case, but it is difficult. I would rather not talk about figures, but we are working hard on it. When it comes to volume, we are OK, it is profitability that concerns us; that is why the situation is complex.

BRIEF BIOGRAPHY

Studies: Bachelor´s Degree in Business Administration (UBA) Professional background: He joined Arcor in 1995 as Manager of the Confectionery Business Unit and then held a regional position, in charge of operations in Chile, Peru, Ecuador and Bolivia.