Could you tell us briefly about the origins of Farmacias Benavides?
Farmacias Benavides was founded in 1917; it has already been operating in the Mexican market for 83 years. During the first stage of the company, we dedicated ourselves to the distribution of drugs as a wholesaler, with a small proportion of retail sales. Later, in the 50's, an important decision had to be taken: whether to be a wholesaler or a retailer. The focus of the company moved towards the retail sector, and the growth of the company continued in the same way, until we became the largest pharmaceutical chain of the country, and also in the whole of South America. Currently, we have 631 stores located in 118 cities, mainly in the north of the country. We are present in the following states: Tamaulipas, Nuevo León, Coahuila, Chihuahua, Sonora, Sinaloa, San Luis Potosí, Aguascalientes, Guanajuato and Veracruz. We have recently decided to enter the Federal District. Our objective is to have 8 stores in the city by the end of this year, and that they should all be in-line with the current company concept. Our interest in entering into this market is for strong growth, but in an organized, intelligent way, targeting the strategic points. The Federal district is so big that we will have to think in terms of zones. The Federal District represents 25% of the total drugs market of the country.
Why is it, that after 83 years, Far-Ben is not present in the Federal district?
That's an interesting question. The Far-Ben strategy has always been to create growth through an unfolding process, that is to say, concentrating on the saturation of nearby areas. We have always had the idea of entering the Federal District in mind, but it was important to carry out this expansion in a worthwhile way. It was important expand with a clear objective, which we have worked on for some time; it just so happened that last year an interesting opportunity arose. This was to establish eight outlets in Home Mart stores, and as they have large and appropriate installations we decided to take up the opportunity. We feel that there is a synergy between us that permits us to unify our joint projects. Our entrance into the Federal District, was brought forward due to the fact that our stock distribution is carried out by a nation-wide distribution company. Prior to 1999, we were purchasing directly from laboratories and distributing the products ourselves, which proved to be an obstacle - in terms of entering the Federal District - as our expenses were considerably elevated. We feel our entrance into the Federal District was delayed due to other strategies that we wished to accomplish beforehand. Initially, we were located in the north-east of the country, then we expanded towards the centre and then to the north-west, always following a precise order. We decided to fully saturate the areas where we were present, as we did not want to have just 5 stores in Monterrey when it needed 80 stores, the same with Guadalajara, and always in relation to the density of the population. In Monterrey we have a total of 118 stores, 67 in Guadalajara and 41 in Chihuahua; our work logic is very clear in our current locations and our distribution is very well controlled. We have previously had promising opportunities to enter the Federal District, but we feel that now the time has come.
If the agreement with Home Mart has positive results, would you consider expanding into other regions?
With them, yes, because they are located in several regions, but our idea for the Mexican market is not solely to be with Home Mart. We also want to have stores that are completely independent and wholly owned by the company. The city of Mexico offers us enormous opportunities. We already have staff dedicated to this end, and our objective is to have between 400 and 600 square meters of sales floor, covering all the different service areas.
What were the specific reasons that propelled the balance towards the retail business rather than the wholesale business?
At that time it was partly to do with the situation of trade within the country. Both areas would have been beneficial for the company. However, this decision was taken because it was difficult to cover both fields at the same time, due to both competition and a conflict of interests. Initially, Benavides began life as a chemist store, but due to the conflict of interests we dedicated ourselves to the wholesale trade. Actually, we had our own distribution service, but at the end of '98 we decided to close down our distribution centers and entered into an important agreement with Casa Autrey (presently Saba). Internal delivery is not part of the company mission, therefore we decided to subcontract this service.
Are you satisfied with the results of this agreement?
The results have been positive for both parties. That's how we see it and we are going to continue with them. It is not an exclusive agreement, we have the possibility to work with others such as the company Nacional de Drogas (Nadro); the agreement is open.
What is the current position of the retail trade in terms of competition? What is Far-Benīs market participation?
We have the largest market participation in
the private consumption market for drugs. We have
almost 5% of the national market. This is due to
the fact that this type of business is very fragmented.
There are many family stores and privately owned
stores in this sector; therefore having 5% of the
market is highly representative. However, if we
take into account only the cities in which we are
present, this figure increases to 11%. |
How do you assess the behaviour of the Far-Ben share since it was placed on the stock exchange?
The decision of the stockholder's board was motivated in the same way as any other company, in that they are attempting to institutionalise the company. The markets have not always been the best, they have not always been what we wanted, but the point is that with our future projects, growth will be forthcoming and the share will gain strength.
What were the reasons that influenced the decision to change from a family run organization to a more institutionalised company?
The idea of growth. This business requires physical investment and a large amount of working capital in order to finance its capacity for expansion. Companies have a specific determined capacity and require larger resources for growth. The stock exchange is a source of capitalization and was used as such. We resorted to the institutionalisation process, stock liquidity and obviously financing. In 1992, we had in the region of 122 branches and today we have 631. The growth has been partially financed by the retention of profits, in addition to the emission of capital to the public investor.
How would you describe Far-Ben's financial situation from a personal viewpoint?
Far-Ben is a company that has its debt structure over an adequate term to allow continued growth. Our level of debt is easily managed as the company has deep pockets, our objective is to have the necessary financial capacity to avoid company debt from becoming an obstacle to competitivity with respect to both current and future players. For this reason, our current plans are to search for elements that include additional resources, in order to further balance our current debt level so we can remain in our current market position.
What would Far-Ben's arguments be with respect to convincing potential investors to join the company?
The growth program that we have designed is adequate for our 1st ranking position in this sector. The format is: dynamic, competitive and provides high class services to our customers. Far-Ben is a company that has enormous growth possibilities. Our format is appreciated and we feel that we have the correct answers for the market. In our drugs stores we give a complete service. Additionally, we offer an excellent photo developing service, as well as cosmetics and groceries. We are located close to the consumer, and we have a substantial market in terms of the Internet. We have just formalised an association with 2 Latin American chains - one in Argentina and the other in Brazil - which are on the same level as ourselves in their domestic markets, and in addition, along with other investors, we have formed a new company called farmamundo.com. The negotiations were closed just a few days ago and we feel that this interesting project will allow us to compete in this dynamic market. The company has been created as a pan-regional e-commerce site and we are one of the partners. This is a project with great strength and is formed by three chains from Mexico, Argentina and Brazil, in addition to being in a portal with excellent content (salutia.com). This is Far-Bens virtual concept and it reflects the help of the Administration Council and its President with regard to innovative projects.
Are there any other projects in the pipeline which you would like to mention?
We are continuing with our mission to saturate our current markets. Just because we have Monterrey very well covered does not mean that our work is complete, we could also say the same of Guadalajara and the other cities in which we are present. Our aim is to continue giving high quality service to our customers - at the best possible price - in our current locations. We are aiming for a good growth rhythm, not only in the Federal District, but also in our traditional zones of influence.
How do you consider Far-Ben's image is conceived by consumers?
That it is a store which has a complete range of drugs, which aims to cover the whole range of customer necessities at a just price, close to their homes, with pleasant installations and that it aims to fulfil the expectations of its customers over the whole range of its services.
All our branches are equipped with their own parking areas and have fully trained staff. For us, the training of our staff is of high priority, as this is what makes the difference, despite the fact that staff rotation in Mexico is extremely high due to the effect of globalisation. In general, our customers have faith in us, in actual fact, the original name of the company was Farmacias Benavides, your trusted neighbour. The manner in which we carry out our business is a clear reflection of what our customers think.
Do you feel that Nuevo León will be able to join the bandwagon of new technologies?
Yes, it will because we have a government that understands the problems, and which is attempting to attract this type of investment to the state. The strength of the work being carried out in Nuevo León is very obvious, it is a highly productive state and I feel it will succeed in attracting this type of investment. One can perceive that there is great concern to attract this type of high technology investment to the state in the form of new capital, with a view to increased and improved growth. I do not believe that the development of Nuevo León will be protectionist in view of what has already been carried out, but that it will be open to new ideas. Clearly, creativity and the search for new solutions, new markets and new ways of seeing things are the industrial and financial concepts used by the state. |
FARMACIAS BENAVIDES 