MBA: Lucchetti Case Study

  • Company in Peru
  • Consumer product packaging sector
  • Luksic group subsidary (purchased in 1965)
  • Lucchetti
  • Founded in 1900’s
  • Pasta, edible oils, soups and broths
  • Known for quality, nutritional value and competitive prices.
  • Multiple household names
  • 1996 had 38% of chilean pasta market
  • Wanted to get into Peru for expansion
Company Analysis
Business model
Other notesFounded in 1900’sPasta, edible oils, soups and brothsKnown for quality, nutritional value and competitive prices.Multiple household names1996 had 38% of chilean pasta marketWanted to get into Peru for expansionPremium brandBusiness started in June 1995Decided to build plant in 1996 (due to new import duties and growth) seemed approval before starting etc.Assigned Carlos Aramburu to oversee environmental concerns of constructionInitially imported products from ChilePartnered with a distribution firm for direct sales and distribution
Internal Environment Analysis
StrengthsPart of existing conglomerate (diversified holdings)Newer / optimized production processesDistribution and service networkGrowing market share despite factory issuesEnd of 1998 had 23% market share
WeaknessesImport dutiesNet losses of 15$M 1999Sales decline in 2001 from 45m to 34 (still had $6 profit)Major losses from operations 61M.No political connections?
General Environment Analysis
OpportunitiesHigh consumption rates of 8 to 9 KG per capita per yearPasta normally sold in build, packaged pasta relatively newLow qualityAnticipated a growing economy price increase and demand increaseTax and repatriation benefits
ThreatsPossibly being targeted by politicians during building expansion as other companies were not being scrutinized (3M, KMB, etc.)Price warCompetitorsAdditional increasing import duties (18 to 25% of wheat) Negative publicity from MotesinosNational level support, but not at the local level
Industry Environment Analysis
Social/CulturalMajority of food sold in neighborhood markets and mom-pop stores10 % sold in supermarkets
Political/LegalPeru encouraged external investment through tax incentivesRepatriate profitsNo discrimination between local and forgein in investorsFujimori president elected in 90’s, reelected after some constitutional changes in 95.Major Anti corruption campaign Made it tough for the domestic manufacturers, workers and poor2000 major political upheval
EconomicGrowing economy
DemographicLower income nation
Porters 5 Forces Model
Bargaining Power of Buyer
Bargaining Power of Supplier
Threat of new Entrants
Threat of Product Substitutes
Inter firm Rivalry
Competitor EnvironmentProducing lower quality pasta in older factoriesLess optimized production facilities
Alicorp – 3000 pound gorilla in Peruvian pasta market4th largest company in PeruEconomies of scalePort handlingflourCookies and crackersEdible oils etc.Massive distribution network reaching 90% of POSAlso built a new plant in 1997
Carrozzi – Lucchettis main competitor in ChileAlso entered PeruEntry mode AcquisitionPurchased company Molitalia (18% market share)Didn’t build a new factory or change its name
Competitive Advantage
Imperfectly Imitable“Costly to imitate”
RecommendationsCould have made a better bid for local companyBetter competition analysis of AlicorpMisjudged external environment (specifically political situation)
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