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Eduardo Calanche, Maribel De León, and Melissa Unzueta

MILK INDUSTRY
ANALYSIS
Global, National and Local Context, Lala as the Industry Leader and
Zaragoza the Main Local Competitor

Competitiveness and Geo-Economics

Market Overview
The milk industry have had a constant growth on the last decades. This mainly has happen
because of the population growth. Actually, a 70% of the growth in this industry was
produced by the growth on the population, the other 30% refers to the consumer behavior
and its perception on this product, (Secretaría de Economía, 2012). On the countries that
still in development, the milk is not produced by industries, mainly, it is produced by local
small business, or even the same consumers. On the other hand, in the developed countries,
most of the production of milk is done by the industries and big companies, (ONU, s.f.). In
either case, developed or non-developed countries, the milk production and consumption is
growing.
The market for the milk industry is quite big. On the developed countries, the
average milk consumption per capita is 200kg, on the potential countries that stills on the
develop process, the milk consumption per capita is 44kg. To give a brief example of this,
in Mexico at 2012, the annually sales of the milk industry were of 155,000 million of pesos.
It represented a 5.3% annually growth from 2007 to 2012. It is expected to keep on growing
from a 2-3% per year until 2017, (Soto, 2013). Mexico is a country that its milk
consumption per capita is of 97kg, the half of the developed countries. This means that the
milk industry in the developed countries generates twice the income that the milk industry
does in Mexico.
International Context
The global market and consumption of the milk is affected by a series of factor that refers
to the macroeconomics expected context, the population growth, and its location. These
factors affect the demand, supply and the global commerce. By 2014 the total value of the
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milk industry in the globe was USD 335.8 billion, (PRNewswire, 2014). Nowadays, the
highest consumption of milk is concentrated on the industrialized countries, because of its
income per capita and its greater affluent. However, the consumption on the potential
countries in development is also high, mainly because of the population growth.
The milk industry constantly faces barriers, such as regulations and subsidies that
make the commerce more though. However, despite this fact, the demand and supply is not
balanced, and this favor the growth of the market. The global commerce of milk depends
on two main factor: the purchasing power of different currencies (US dollar is not the main
currency on this industry, the euro and New Zealand dollar lead this market), and the levels
of demand of dairy products depend on the urbanization (a bunch of dairy products cannot
be produced in rural areas). Last, the international market of milk does not have many
surplus for export. The availability of dairy products for the export depends on the
production cycles of the northern and southern hemispheres. In spring-summer the north
has a high cycle, while the south has a low cycle. In fall-winter, it is vice versa.
(Secretaría de Economía, 2012)
Key Players:
As it has been said, the production of milk is pretty big at an international level; also, the
demand is bigger than the supply. Mainly, the production of milk is focused just for a
national consumption. Economies that are small even designate their milk production for a
local consumption. There are just a few large economies that have surplus on their milk
production. The following graphic shows a global production of milk, from 2002-2010.

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(Secretaría de Economía, 2012)

As it can be seen in the graphic, there are two regions that have high productions of
milk: U.S.A. and EU. A common factor on this two regions, is that United States and the
countries of the European Union are big developed economies.

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(Secretaría de Economía,
2012)

Focusing on the 2010, the production in clearly leaded by the EU and USA, but
referring to the exports of milk, another country turns out to be more important than EU
and USA. Nez Zealand is the country has lead the exports on the last decade. Exports will
be shown on the following tableaus and graph.

(FOA, 2014)
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As it can be seen on the previous tableaus and graph, the top three countries that lead
the worldwide exports are: New Zealand, USA, and EU. Getting a bit in context, to export
milk is a difficult task, because of two main factors. The demand in each country is higher
than the supply, therefor to export it will be needed to have a surplus; and second, the dairy
products are perishable. United States and European Union are quite obvious to realize why
they are at the top. But, what happens with New Zealand and makes it be superior that the
past two countries in exportation terms? It is because USA and EU mainly designate their
production to national consumption, and their surplus is exported. However, New Zealand
do not produce high quantities of milk, but almost every little produced is designated to be
exported. National consumption is not important for this country. This can be seen on the
following graph.

(Secretaría de Economía, 2012)

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Comparing this graph, to the worldwide milk production, there is a huge difference
between New Zealand production and consumption. It produces milk, but do not consumes
it. This is why New Zealand is the country that leads the exports.
Trends
There’s a series of trends taking part in the industry for over a decade:
The developed countries have a tendency to decrease their per-capita consumptions.
Back in 2001 US used 254 kg in a year per consumer, nowadays the use of milk per
consumer is above the 200 kg per year. The developing countries are increasing their
consumption because of the demographic growth that implies the urbanization. By 2010 the
average consumption per-capita was 44 kg. Less than a quarter of the recommended
quantity, (Secretaría de Economía, 2012).
As it can be seen on the consumption graph, India is the biggest consumer of milk in
the world, quickly followed by China. The fact that the population of both countries has
been increasing is an opportunity for every producer that has the possibility to export there.

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National Context
The average milk consumption per capita in Mexico is of 94 kg, the half of the developed
countries. Even if the average milk consumption on developing countries is of 44 kg per
capita, and Mexico doubles this quantity, it stills being considered a developing country.
However, the annually dairy products in Mexico has been increasing. From 2003 to 2011
the total milk production has increased 1000 million of litters (this can be seen on the
following graph from this paragraph), which is a great quantity. Mexico might be a
developing country, but its milk market is quite attractive. In 2014, the annually production
was 11´129,921 thousands of liters; this number times the average milk price, which
according to SAGARPA is $14.34 per liter, give a total income of $159,603 million of
pesos, (Secretaría de Economía, 2012).

(Secretaría de Economía, 2012)
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The distribution of the production is quite different in each state, this will be covered
in the following paragraphs. However, each state has different conditions that make the
production of milk more or less favorable. The factors that are important are: technology,
techniques, cows feeding, and race of the cows. The availability of water was not a quite
important factor, because, Chihuahua for examples, is a dry area that contributes
importantly to the milk industry.
Key Players
When it comes to talk about the key players on the milk industry in Mexico, three main
brands come to mind: Lala, and Alpura. These three brands are the ones that lead the
market of the dairy products. But, before keep on talking about the market share of the
biggest firms, it will be important to analyze the share that the states have on this industry.
Almost every state on Mexico have its own production of milk, however there a just a few
that really represent an important share on the production. Those states are represented on
the following graph.

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(Secretaría de Economía, 2012)
As it is seen on the pie graph, the main producers of milk are four states: Jalisco,
Coahuila, Durango, and Chihuahua. This mainly is because the environmental and weather
conditions of these areas are the most favorable of the country, in order to increase the
efficiency and effectiveness of the milk production. Even the previous graph shows data of
2010, the following graph supports that each data has not change in the past five years.

(SAGARPA, 2015)
Talking back about the main firms that leads the milk market, Lala and Alpura by
themselves produced 10,700 million of litters and 65,000 millions of pesos of profit on the
2010. This represents a huge participation in the market. In other words, Mexico is facing a
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situation where the milk industry can be classified as a oligopoly. Lala has 19,000
employees working on 8 plants, plus other 9 plants that represent support activities for the
company. Lala also counts with a wide range of brands, which are: Boreal, Nutrileche, Mi
Leche, Parmalat and Volcanes On the other hand, Alpura has 142 ranches, and 106,500
cows, where 92,000 of that number produce 24 liters of milk per day. Also, Lala and Alpura
is focusing on growing their market share because the new entrant, FEMSA, who just
acquire Leche Santa Clara.
Trends
The whole world is going through a common trend, the healthiness on the food. This is
because all the rise of obesity and the diseases caused having wrong diet habits. Mexico is
also facing this situation, and the trends tend to rely on this. The trends in the milk industry
that are happening nowadays in Mexico are:

Fortification of products with more nutrients.
Products for new niche markets, in order to reduce cholesterol, heart diseases and




help articulations.
To improve the life style (more vitamins, minerals, etc.).
Products for athletes.
Products for kids.
Products that control the weight.
(Caballero García, Codigo Postal, 2010)

Local Context
In Mexico, only 12 states are the ones who produced almost all the milk in the country.
Chihuahua is the fourth positioned state on the milk production in Mexico, surpassed by

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the states of: Durango, Coahuila and Jalisco. Actually, in the year 2010, Chihuahua
represented the 9% of the whole milk production in the country.
The reason why Chihuahua has developed quite well on the milk industry is because
on the past century, the cattle start rising in the state. This created favorable conditions for
the rise of milky cows, and therefore, the development of the milk industry. Nowadays,
approximately, Chihuahua has over 200,000 heads of dairy cattle, turning the dairy industry
quite important where close to 20,000 farmers work. On the following graph, shows the
annual value in 2005 of some industries, and the milk one is at the top.

(Gobierno de Chihuahua, 2008)
On 2014 the total milk production in the state of Chihuahua was of 1´007,316 thousands of
liters (this number is shown in the following table), times the average price of liter of milk,
which is $14.34 according to SAGARPA give a total annual value of $14,444.911 million
of pesos.

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Key Players
There are five main milk production centers in the state, which are located in: Delicias,
Cuauhtémoc, Juarez-Nuevo Casas Grandes, Parral-Jimenez, and Chihuahua.

Delicias: Because of its production level, 43% of the whole state production, this is
the most important of the state. It has around 56,000 heads of cattle, producing

almost a million liters per day.
Cuauhtémoc: It represents the 28% of the whole state production. Cuauhtémoc has

80,000 cattle heads, and produces almost 600,000 liters per day.
Juarez-Nuevo Casas Grandes: This regions produces 18% or the whole state
production. It has a bit more than 40,000 of cows, and produces yearly 152 millions

of liters.
Parral-Jimenez: This regions has around 10,000 cows, produces 64 millions of liters

per year, which represents 7.5% of the whole state production.
Chihuahua: This regions counts with more than 10,000 cows, produces 46 millions
of liters per year, which represents 5.4% of the total state production.

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The two main firms that lead the production and market in Chihuahua are Alpura and
Zaragoza; Zaragoza being the most important for the state. In the year 2008 Zaragoza
distributed and produced 249 millions of liters, which turn out to be almost the 30% of
all the dairy products in Chihuahua for that year. On the other hand, in the same year,
Alpura produced 164 millions of liters, turning out to be the 20% of all the dairy
product for that year. This data talks by itself. Those two companies have huge
productions and great infrastructure that let them lead the milk market in Chihuahua.
It will be important to emphasize that the milk is not the only important dairy
product in production on the state of Chihuahua. Actually, in the year 2008, the cheese
turn out to be more important. On the following tableau, show the main dairy products
that were produced in Chihuahua on the year 2008.

(Secretaría de Economía, 2012)

Trends
As it has been said, the most important firms on the state of Chihuahua are Zaragoza
and Alpura. However, nowadays the perception of dairy products is not quite well seen
as it used to be. People is tending to look out for substitutes of dairy products, such as
soy products, almond milk, etc. Because of this, Zaragoza and Alpura are trying to

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develop products that are healthier for the people, light products, etc. Also, the milk
industry in Chihuahua is focusing to develop milk 2.0, which is the use biotechnology
to add vitamins and special functions to the milk, (Caballero García, Codigo Postal,
2010).
Potential Entrants
As in any other industry, on the milk industry there are certain barriers for entry. In this
particular case, the barriers will be analyzed from a perspective of entering to the
Mexican market. The entering barriers are the following:

Economies of Scale: For any dairy company trying to enter in the Mexican
market, whether it is a foreign or national company, it must have to face two big
companies who are leading the market and have a huge infrastructure, Lala and
Alpura. Therefore, to be able to enter in the market, the company must have

great economies of scale.
Product differentiation: This is an actually problem for the two main dairy
companies in Mexico, Lala and Alpura, they lack of differentiation, (Soto,
2013). The customers start perceiving most of the dairy brands as same as the
competitors. Therefore, to be able to compete in the Mexican market, any
company who is intending to enter, must develop a differentiation, or the clients

will not receive it well, and stay with the actual brands.
Access to distribution channels: As it has been said, Lala and Alpura almost
control all the market share. Also, there are quite some other big companies that
are competing on the market. This means that the distribution centers, retailers,

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distribution channels etc. are being controlled by the big and medium companies

on this industry.
Government Policy: Because the dairy products are perishable, there are some
governmental regulations and policies that the new entrants must face in order to
keep on going with the business.

Having said all the entry barriers that the new entrants have to face in order to be
able to perform well and be able to compete in the Mexican market, there are some
international companies that are much bigger than two main dairy Mexican companies that
may represent a threat for the national companies. Some examples are:

Santa Clara: This is a national company, however it was recently purchased by
FEMSA, which is a huge company, (Santa Rita I. , 2015). This may represent a

threat for the other dairy Mexican companies.
Fonterra: This is the fourth biggest dairy company, talking globally. Fonterra is a
company from New Zealand, which is the most efficient country on milk
exportations. Therefore, if this company decided to enter in the Mexican, the

national firms must be very worried.
Dairy Farmers of America: Being the fifth biggest dairy company in the world, and
a company from the neighbor country, this may represent a threat for the national
companies.
(Canadian Dairy Information Center, 2015)

Buyers
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On a national level, the balance on the bargaining power is at the side of the industry. The
milk is a product perceived important for the Mexican population. In Mexico, from each
$100 pesos wasted of food for home $34 pesos are designated for milk, (Santa Rita I. ,
2015). The buyers have a characteristic on the bargaining that empowers them. It is that
there is no real perceived differentiation between dairy brands. However, Mexican people
will keep buying milk, and there options are limited. Lala, Alpura, FEMSA, Zaragoza and a
few other firms are the ones competing on the dairy market.
The buyers of milk are all the people. Almost every person drinks milk. However,
the highest consumption is from the 20 years and over, (SAGARPA, siap.gob.mx, 2013).
When people overcome this age, the consumption declines. Even so, children, youth, men,
women, elders, etc. they all consume milk or dairy products.
Suppliers
The bargaining powers of suppliers, on the milk industry, is in the side of the industry. The
reason is that, first, there are just a few great competitors. This means there is not many
companies to decide to sale. Second, the incomes of the suppliers mainly are represented by
the milk industry. Last, but not least, the dairy companies are quite big that they could
perform backward integration and become their own suppliers.
Some of the suppliers on the milk industry are:




Cattle food supplier
Machinery equipment supplier
Milk containers and bottles supplier
Raw material and chemicals supplier
Livestock supplier

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Substitutes
Milk Substitutes
Cheese Substitutes
Any other animal (not cow) Soy cheese
milk.
Vegan cheese
Soy Milk
Coconut Milk
Almond Milk
Oat Milk

Yogurt Substitutes
Vegan Yogurt
Soya Yogurt

Industry Competitors
The two main companies that lead the milk market in Mexico, Lala and Alpura, the new
entrant (Santa Clara), and the social firm Liconsa are firms that have in common a
characteristic: all of them have experience and scale. This turn out to be an advantage for
them, and a pain for all those who are competing or willing to enter on the milk market.
Lala is the biggest milk firm in Mexico, owning the 34.5% of the market share. It was
stablished in 1949. In 2000 Lala started an acquisition process, where the company acquire
Nutrileche, Mileche, Boreal and Los Volcanes, as well Parmalat, the company Foremost, in
Guatemala, and Gelatinas Art. Also, Lala nowadays has 17 industrial plants, 161
distribution centers and 31,000 collaborators, (Arteaga, 2010).
Alpura, on the other hand, has the 21.8% of the market share, (Pallares, 2014). Itis the
second biggest dairy firm in Mexico. It was founded in 1971. Alpura has 256 associates,
142 ranches and 13,000 employees. Clearly the infrastructure of Alpura is quite big,
(Arteaga, 2010).
Santa Clara owns the 2.5% of the market share, (Santa Rita I. , 2014). It is not exactly a
new company. Actually, it was founded since 1924, which clearly means that it might be the
oldest milk company of the country. However, it was bought by FEMSA (the Coca-Cola

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distributor in Mexico), in 2012. FEMSA owns some great brands, such as Oxxo. If the
experience that Santa Clara has on the milk production is summed on the expertise that
FEMSA has on distribution, marketing, production, bottling, etc. Santa Clara might be one
of the leaders in the market, just in a couple of years.
Liconsa is a social company that works with the government to produce healthy milk at
a low price for the society that lives in extreme poverty. Liconsa is present throughout the
Mexican Republic, distributed in the 32 states, 1,950 municipalities and 6,184 villages. It
has 10 plants on the country, distributed in: Tlalnepantla, Tláhuac y Valle de Toluca,
Colima, Jalisco, Michoacán, Oaxaca, Querétaro, Tlaxcala y Veracruz. In 2014, Liconsa
produced 999´828,383 liters which represented the 9% of the national market share,
(LICONSA, 2015).
The four companies previous mentioned are companies that have full experience on the
milk production, distribution and commercialization. Also, each of them have huge amount
of capital. This are the characteristics that have let this companies be the main competitors
on the milk industry.
However, the milk is not the only diary product. Following will be described some
other products and the market leaders.

Yogurt industry: Danone is the leader, other participants are Nestle, Alpura, Lala
and Sigma.

Cheese industry: Chilchota and Sigma have the 50% of the market share. Lala and
Alpura also represent important share on the market, but not enough to be
considered the leaders.
(Redacción Énfasis Alimentación, 2014).
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Company Analysis
SPACE Analysis of Lala Company

Factors determining environmental stability
Technological changes

Many

0

1

2

3

4

5

6

Few

Rate of inflation

High

0

1

2

3

4

5

6

Low

Demand variability

Large

0

1

2

3

4

5

6

Small

Price range of competing products Wide

0

1

2

3

4

5

6 Narrow

Barriers to entry into markets

Few

0

1

2

3

4

5

6

Many

Competitive pressure

High

0

1

2

3

4

5

6

Low

Price elasticity of demand

Elastic

0

1

2

3

4

5

6

Inelastic

Other_____________________

_______

0

1

2

3

4

5

6 _______

Average – 6 = -2.00

Factors determining industry strength
Growth potential

Low

0

1

2

3

4

5

6

High

Profit potential

Low

0

1

2

3

4

5

6

High

Financial stability

Low

0

1

2

3

4

5

6

High

Technological know-how

Simple

0

1

2

3

4

5

6

Complex

Resource utilization

Inefficient

0

1

2

3

4

5

6

Efficient

Capital intensity

High

0

1

2

3

4

5

6

Low

Ease of entry into market

Easy

0

1

2

3

4

5

6

Difficult

Productivity, capacity utilization

Low

0

1

2

3

4

5

6

High

Other _____________________

_______

0

1

2

3

4

5

6

______

Average = 4.75

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Factors determining competitive advantage
Market share

Small

0

1

2

3

4

5

6

Large

Product quality

Inferior

0

1

2

3

4

5

6

Superior

Product life cycle

Late

0

1

2

3

4

5

6

Early

Product replacement cycle

Variable

0

1

2

3

4

5

6

Fixed

Customer loyalty

Low

0

1

2

3

4

5

6

High

Competition's capacity utilization

Low

0

1

2

3

4

5

6

High

Technological know-how

Low

0

1

2

3

4

5

6

High

Vertical integration

Low

0

1

2

3

4

5

6

High

Other ___________________

________

0

1

2

3

4

5

6

________

Average – 6 = -2.125

Factors determining financial strength
Return on investment

Low

0

1

2

3

4

5

6

High

Leverage

Imbalanced

0

1

2

3

4

5

6

Balanced

Liquidity

Imbalanced

0

1

2

3

4

5

6

Balanced

Capital required/Capital available

High

0

1

2

3

4

5

6

Low

Cash flow

Low

0

1

2

3

4

5

6

High

Ease of exit from market

Difficult

0

1

2

3

4

5

6

Easy

Risk involved in business

Much

0

1

2

3

4

5

6

Little

Other ____________________

________

0

1

2

3

4

5

6

________

Average = 3.57

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According to the SPACE analysis, Lala has an aggressive posture. This could not be on any
other way, being the biggest company on the milk industry in Mexico, it was obviously that
Lala was going to be on an aggressive posture. The environment stability is not the best,
and the milk is seen as a commodity, which means that it is quite hard to generate a
competitive advantage. However, this has not been a problem to Lala, because the company
have had act efficiently to create awareness of its brand, if someone ask anybody else
something about the milk industry, the first firm that comes to mind is Lala. Also, the
industry strength is great, because the milk is consumed almost by every Mexican, and the
financial strength of Lala is huge. All these factors combined makes Lala a company that
has been having an aggressive posture since a couple of decades.
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(Caballero García, Codigo Postal, 2010).
SWOT Analysis
Strengths:




67 years of experience
Biggest company in the Milk industry in Mexico.
17 production plants and 161 distribution centers
Large fleet of vehicles used for distribution (more than 8,700)
Variety of products (milk, yogurt, cheese, cream, juice, butter, desserts, and many


more).
Public company (LALA in BMV).
Becoming a multinational company (presence in Mexico, Guatemala, Honduras,



El Salvador, Nicaragua, Costa Rica and USA).
Strong financial position.
2nd place in consumer brands in Mexico.
Own University used for training future employees.

Weaknesses:



Production points are not close to points of sale
Milk is perceived as a commodity.
Communication between hierarchy levels in the company
Lack of milk production, it buys all the milk from other producers.

Opportunities:




Develop new products.
Develop substitute milk products, which is the trend nowadays.
Try to penetrate international markets.
Do vertical integrations and start producing its own milk.
Acquire new production plants and dairy farms to be able to produce its own milk in
a 100%.

Threats:
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Identification to local Brand from local consumers (like Zaragoza in Chihuahua)
New trends are rising:
- Substitute products (almond milk, soy products, etc.).
- Healthy, fit, and organic products.
Milk is start losing its reputation of healthy product, and it’s rising a reputation of a

non-healthy product.
Forecast of recent acquisition of FEMSA (Santa Clara) suggest that this brand will
take great participation on the market share.
(Caballero García, Codigo Postal, 2010).

Internal Information of LalaCompany
History
In 1949, at Torreon, a group of small milk producers join together to found the
“Union de Productores de Leche de Torreón”. Seven years later, in 1956, the milk
factory Nazas is founded. In 1960, an automatic milking system is incorporated to
the company. Almost a decade after, in1968, Lala revolutionaized the industry by
introducing a cardboard packaging system. In 1969, Evases Especializados
(manufacturer or cardboard packaged) was founded, and the milk factory expand its
market to Mexico DF, with the name of Lala (first time used).
From 1969 to 1987 Lala focuses on expandind its market to other places in
Mexico, and a new factory was opened in Gómez Palacio. In 1992, Lala opens a
yogurt factory in Torreon. Five years later, Lala opens a new factory in Guadalajara,
to be able to compete with the west.
In 2003, Lala acquires five factories in: Aguascalientes, Hidalgo, Goméz
Palacio and two in Veracruz. Also Lala bought Nutrileche, Mileche, Boreal and Los
Volcanes brands. A year later, Lala bought Parmalat, and started a distribution in
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Chiapas, and Baja California (corners of the country) and Lala finally had presence
in the whole country.
(Grupo LALA, Grupo LALA, 2016)
Present Days
Nowadays, Lala is the biggest milk company in the Mexico. It has the biggest
market share, and the biggest production with the most advanced technology of
milking in the world. Also, Lala owns Foremost (an original milk company of
Guatemala) which allowed Lala to expand its market to Center America. Finally,
Lala is a public company, which stocks can be bought in the BMV.
(Grupo LALA, Grupo LALA, 2016)

Mission
"We feed a lifetime" With a team of capable and committed
We make and sell products of the highest quality.
We develop high-value brands.
We work with the greatest efficiency.
Constant Innovation
(Grupo LALA, Grupo LALA, 2016)
Vision
Become leaders in the food industry, considered as the best choice for consumers,
customers, employees and shareholders.
(Grupo LALA, Grupo LALA, 2016)
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Brands






Lala
Aquafrut
Chiquitín
Yomi Lala
Nutrileche
Mileche
Los Volcanes
(Grupo LALA, Grupo LALA, 2016)

Values

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Respect
Positive
Ambitious

Passion

Integrity

Austerity

Discipline

Simplicity

(Grupo
LALA, Grupo LALA, 2016)

Competitive Strategy of Lala Company
In present days, the milk has been seen as not a healthy product, as it was a decade before.
Also, the milk is considered a commodity. These two facts make any brand seen as
replaceable or substitutable. People use to have its favorite brand but if the favorite brand is
not available, they will easily buy other. This is why most of the milk companies seek for a
differentiation, because they want people to prefer them from the others. Lala seeks for the
same strategy: the differentiation. But what makes Lala different from other companies?

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The answer is simple, the scale and size. Most companies seek differentiation but focused
on a local context. Lala is pretty big to not focus on a certain sector of the country. Lala has
the sufficient capital, workforce, infrastructure and financial stability to be able to seek for
a differentiation not focused in any place, but to have a national scope.
However, Lala is not the only milk company in Mexico that has a huge power. Its
main competitor, Alpura, is also a huge company who competes for differentiation in a
national context. Far beyond the national context, Lala and Alpura are trying to expand its
market share, and go global. Also, the presence of Santa Clara, company owned by CocaCola represent a huge threat on the national market and the international market, because
Coca-Cola Company has an enormous experience in the global scope.
According to the CFO of group Lala, this is not a matter of be profitable by cutting back
the expenses, is more about going global and the current strategy of Lala is the following:


Generate economies of scale and leadership in their products.
Keep the presence in attractive growing markets
Keep expanding their product portfolio.

This is currently being supported with aggressive marketing campaigns and their popularity
in the financial markets.
The mission and vision of Lala explain his strategy quite well. Lala seeks for the
highest quality product, high quality brands, great efficiency and constant innovation. Lala
wants to be the best option for the consumers, workers and shareholders. Clearly, in few
words, tobe different and, in such way, the best. (Grupo LALA, Grupo LALA, 2016)

27

Growth Vetor Analysis

(Grupo LALA, Grupo LALA, 2016)
Product Portfolio Matrix

Lala Fiber milk was considered a product with a potential growth in its sales. The reason is
nowadays the trend focus on the healthy food, and Lala fiber milk offers greater quantities
of fiber to the consumers. These facts are the reason why Lala belongs to the 3rd quadrant
28

(left-upper side). On the following quadrant the 4th (right-upper side) is the Grekos yogurt.
This was considered the star product because it is considered by Lala is most innovated
product and the sales were greatly increasing. The next quadrant, the number 1, is the Lala
milk. A product that Lala has been selling since its foundation, and the sales are high and
stable; sales do not growth, neither decline. Finally, on the 2nd quadrant is the AquaFrut
juice. Lala focus on dairy products, not on juices. That’s why the market share and sales of
AquaFrut are low.
(Grupo LALA, Grupo LALA, 2014)
Capabilities and competencies
Capabilities:


Job market in Chihuahua
More than 25 brands in the categories of dairy products, derivatives and functional.
Institutional strengthening: Lala Foundation also detects and supports high-impact


projects in health, education and culture
Employing more than 27,000 Mexican workers with a percentage in Chihuahuaç
In Chihuahua they are produced daily 2.6 million liters of milk, of which 1.2 million

were acquired by Alpura, LALA group and ZaragozaThe most important dairy basin are located in Cuauhtemoc, which provide a large

percentage of the state production.
Chihuahua milk is used to make cheese 35%, milk powder 19% and the remaining
46% is processed to produce pasteurized milk, ultra pasteurized and various dairy

products.
   Competences:
 Consolidation of market position
 Maintainig profitability
 Increasing in sales and profitability (4.3 increase of sales compared to the prior year,
a margin of 12.2,
29

Customer satisfaction gained through innovation and the launching of new products,
such as, Greeks Greek-style yogurt, ready to drink tea break, flavored milks, café

con leche, lactose-free dairy products)
Acquisition of Eskimo, a Nicaraguan food company that is the leader in the ice-

cream segment.
LALA was included in the Mexican Bolsa´s IPC Sustainability index because of
their commitment to applying the highest standards in environmental stewardship,
providing healthy food options for marginalized and underprivileged children, while


also supporting projects related to education
LALA´s ability to to quickly respond and adapt to an ever-changing environment
Shares of LALA already included in important exchange indexes such as the MSCI,
FTSE and the Mexican Stock Exchange´s IPC

Competitor Analysis
Space analysis for Zaragoza Company
Factors determining environmental stability
Technological changes

Many

0

1

2

3

4

5

6

Few

Rate of inflation

High

0

1

2

3

4

5

6

Low

Demand variability

Large

0

1

2

3

4

5

6

Small

Price range of competing products

Wide

0

1

2

3

4

5

6

Narrow

Barriers to entry into markets

Few

0

1

2

3

4

5

6

Many

Competitive pressure

High

0

1

2

3

4

5

6

Low
30

Price elasticity of demand

Elastic

0

1

2

3

4

5

6

Inelastic

Other_____________________

_______

0

1

2

3

4

5

6

_______

Average – 6 = -2.71
Factors determining industry strength
Growth potential

Low

0

1

2

3

4

5

6

High

Profit potential

Low

0

1

2

3

4

5

6

High

Financial stability

Low

0

1

2

3

4

5

6

High

Technological know-how

Simple

0

1

2

3

4

5

6

Complex

Resource utilization

Inefficient

0

1

2

3

4

5

6

Efficient

Capital intensity

High

0

1

2

3

4

5

6

Low

Ease of entry into market

Easy

0

1

2

3

4

5

6

Difficult

Productivity, capacity utilization

Low

0

1

2

3

4

5

6

High

Other _____________________

_______

0

1

2

3

4

5

6

_______

Average = 4.75
Factors determining competitive advantage
Market share

Small

0

1

2

3

4

5

6

Large

Product quality

Inferior

0

1

2

3

4

5

6

Superior

Product life cycle

Late

0

1

2

3

4

5

6

Early

Product replacement cycle

Variable

0

1

2

3

4

5

6

Fixed

Customer loyalty

Low

0

1

2

3

4

5

6

High

Competition's capacity utilization

Low

0

1

2

3

4

5

6

High

Technological know-how

Low

0

1

2

3

4

5

6

High

Vertical integration

Low

0

1

2

3

4

5

6

High

Other ___________________

________

0

1

2

3

4

5

6

________

2

3

4

5

6

Average – 6 = -2.625
Factors determining financial strength
Return on investment

Low

0

1

High
31

Leverage

Imbalanced

0

1

2

3

4

5

6

Balanced

Liquidity

Imbalanced

0

1

2

3

4

5

6

Balanced

Capital required/Capital available

High

0

1

2

3

4

5

6

Low

Cash flow

Low

0

1

2

3

4

5

6

High

Ease of exit from market

Difficult

0

1

2

3

4

5

6

Easy

Risk involved in business

Much

0

1

2

3

4

5

6

Little

Other ____________________

________

0

1

2

3

4

5

6

________

Average = 2.57

-2.625

32

According to the Space Analysis, Zaragoza Company has a competitive posture. The
company is not a weak one, however it is not as big or powerful as Lala and Alpura. It is
clear that the industry strength is quite big, however, Zaragoza should focus on reducing
costs and on improving its financial strength. Also, it must protect and develop its
competitive advantage. If the company does these things, it may create a more stable
environment, and so it could become a company with an aggressive posture and not a
competitive one, therefore, become a threat for Lala and Alpura.
(Zaragoza, 2016)

Why Zaragoza as Lala´s Competitor?
The main competitor of Lala is Alpura, however the companies are really similar. Both
companies control the 50% of the market share. Lala is a bit bigger than Alpura, but both
companies mainly have the same strategy, therefore, between Alpura analysis and Lala
analysis, differences will not remarkable. On the other hand, Zaragoza is a company that is
much smaller than Lala, and the differences between both companies are huge. But, why
Zaragoza and no other company that still being different from Lala? The reason is that
Zaragoza is a local company.
SWOT Analysis for Zaragoza Company
Strengths:

The cattle are certified as a milk producer free of tuberculosis and Brucella,
which means, healthy milk.

Have one of the biggest farms in Latin America.
33

Zaragoza produces almost 500 thousand litters of milk every day.

Wide variety of products, such as: Milk, Yogurt, Optima Milk, sour cream,
cheese and fruit juices.

Zaragoza has a strong presence in the state of Chihuahua, having six distribution
centers (Cuauhtemoc, Parral, Soto Maynez, Casas Grandes, Delicias and
Camargo).

Weaknesses:

They don’t have a lot of diversity

They have ess than the 5% of the participation in the Mexican dairy market.

The transportation of goods has to be improved.

The company does not have a presence on the whole country.

Compared to Lala and Alpura (the two biggest companies of the industry),
Zaragoza is a pretty small company.

Opportunities:

They can improve their processes and capacity in order to compete.

Zaragoza can expand its distribution, and cover different regions on the country.

The children market in Chihuahua has not much competence, which means that
Zaragoza can develop products for such market and lead it.

Going green is a trend, which means that Zaragoza could recycle to reduce
costs, taxes payments and have a better image with customers.

The organization chart is vertical, and the communications between levels must
be improved.

The juice production can be improved.

Threats:
34

The two main competitors (Lala and Alpura) control a 50% of the market share,
and the tendencies indicate that those companies will keep growing.

Santa Clara is rapidly growing since it belongs to Femsa.

Besides Santa Clara, Lala and Alpura, there are a lot more of competitors.

(Caballero García, Colpos Digital, 2010)

Internal Information of Zaragoza Company
History
In 1936, the brothers Pedro and Rafael Zaragoza decided to found a company that
produced milk which was named Zaragoza Hermanos, however, it was quite little
because the brothers only had 10 cows.
In the 40´s due to some financial problems the company went bankrupt. Pedro,
with the intention to pay the debt, went to the USA into a farm to work and gain
some money where he also gained experience and knowledge.
In 1955, the brothers opened again the company, but this time they named the
company “Leche y sus productos S.A.”. This seemed to be prosperous, and the
company was getting into an age of prosperity.
In 1960´s the brothers stop being partners, and dissolve the company. Pedro saw this
as an opportunity and stablished Zaragoza milk. With his son, Pedro start hard
working, and bought a 600 hectare ranch in Delicias, which is one of the most
important ranches of milk production nowadays.
35

(Zaragoza, 2016)
Present Days
Zaragoza nowadays has one pasteurizing plant and two production ranches; the
company also has six distribution centers in the state, and presence in Agua Prieta
Sonora, Torreón Coahuila and Reynosa Tamapulipas. All this has helped Zaragoza
to have the 5% of the national market share with sales of around 2,579 millions of
pesos annually. (Zaragoza, 2016)
Mission
Zaragoza is a company committed to society through a competitive and sustainable
operation that contributes to proper feeding with good quality fresh products.
(Zaragoza, 2016)
Vision



Gain consumer trustiness through quality.
Our employees have commitment with continuous improvement.
We are a social responsible company.
We have an institutional company.

(Zaragoza, 2016)
Brands




Zaragoza: has seven types of milks, and three types of cheese.
Levia: has 4 types of yogurts.
Optima: Only one product, a low-fat milk.
Bonacrema: Only one product, sourcream.
Tampico: has two products: citrus punch and mango punch. Both products have a range of
different packages.
(Zaragoza, 2016)

36

Values

Service
Kaizen and
Innovation

Honesty

Loyalty

Congruence

Integration

Discipline

Respect

Competitive Strategy of Zaragoza Company
Zaragoza has a focus in differentiation strategy; the company is trying to differentiate its
products from being good quality ones, however, Zaragoza does not have a national scope,
the company is focusing on the state of Chihuahua, a couple more of places (Agua Prieta
Sonora, Torreón Coahuila and Reynosa Tamapulipas). An important factor of this strategy,
is that Zaragoza has its own two ranches that produce milk. The first one is located in
Juarez City, which started production with the company. The other ranch is located in
Delicias city, it was established in 1993 to satisfy the demand and to avoid buying milk
from external agents. This two ranches represent a vertical integration that Zaragoza did,

37

with these actions and policies, the company tries to avoid the insufficient supply and
drastic changes in prices; however, it also has helped to keep and add more value to the
products. They do not have to worry if the product has a bad quality because they are
producing it, and following their own standards for quality. Also, the vertical integration
that Zaragoza did was within, which means that they stayed locally. This was another
advantage according to Porter´s lecture, “Choosing the USA”. The reason is that, if
Zaragoza would buy or do offshoring for producing its milk, the company may save certain
costs of production, however, it will face cost of land, transportation, etc. But more
importantly, the company may sacrifice value of its products. On the other hand, because it
stayed in the state, the company could focus to acquire knowledge and experience, and in
that way, to develop the company, and offer products with more value. With lower
production costs they can compete and offer their products at a lower price than their
competitors.
(Caballero García, Colpos Digital, 2010)
Summing, the strategy of Zaragoza is based on focus in differentiation, because even
if the company has presence in other states of the country, they focus on Chihuahua´s state
consumers. With their actions the company has shown that they want to be the leader in the
state before win market share around the country. The local consumers feel identified with
the company because it gives them quality, which is the factor that the company cares a lot.
The company also shows its appreciation to the local consumers with several social events
to benefit the local communities.
Growth Vector Analysis of Zaragoza Company

38

Product Portfolio Matrix of Zaragoza Company
On the 3rd quadrant ( left-superior) is the Optima Milk, a product that nowadays that the
health care and healthy food is a trend is a product that does not has a lot of market share,
but it has a great potential to increase its sales. The following quadrant, number 4 (right
39

superior) is the product Levia. Levia is a product that is selling quite well. Actually
Zaragoza made it an independent company, and not a Zaragoza product; it has its own web
site, Zaragoza is investing a lot in publicity for this product. This has not happen with other
products. Zaragoza milk is in the 1st quadrant (right-downside), which is evident because it
is the main product, and Zaragoza has been selling it since a lot of years. Last, on the 2nd
quadrant (left-downside) is the Tampico juice. Tampico is a product that sells just a few,
and Zaragoza does not focus much on this product, because it is not part of the dairy
products, that belong to the milk industry. (Zaragoza, 2016)
Capabilities and competencies of Zaragoza Company
Capabilities:

Strong presence in Chihuahua´s state market; with six distributions centres in Chihuahua



(Cuahutemoc, Parral, Soto Maynez, Casas Grandes, Delicias y Camargo)
Two local farms that produce the milk.
Lower costs than the competence
Keeps 30% of the total production of milk in the state.
(Caballero García, Colpos Digital, 2010)

Competences:






Socially responsible
Good work environment
Social and sports events
Training and capacitation of employees
Has one of the biggest farms in Latino America.
Produces almost 500 thousand liters of milk every day.
Different brands with different products. Zaragoza, with seven types of milk; Levia,
with 4 types of yogurt; Optima, with low fat milk; Bonacrema, with one product
sour cream; and Tampico, with orange juice.

40

(Caballero García, Colpos Digital, 2010)
Value Chain:
Inbound logistics:

Plan the production process
Purchase of raw materials (animal inputs–stock and veterinary services, pasture inputs–
land infrastructure and fertilizers, packaging inputs– bottles, containers, tags for dairy

products).
Infrastructure for the production of the milk (farms, labs, industrial milk containers,
equipment for transforming the milk to other dairy products)

Operations:




Milk the cows
Process the raw milk
Extraction of milk constituents
Manufacturing of the dairy products
Warehousing of the finished products

Outbound logistics:



Order processing
Packing
Inspection of products to be shipped
Shipping the products to the different retailers

Sales:

Sales in retailer stores
Sales in personal stores

Marketing





Billboards
TV commercials
Presence in sports and social events
Participation in massive media
Donations (Rounding cents campaign)
Promotion trucks

Service:
41


Customer service (via phone and web site).
News

Refrerences
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http://www.forbes.com.mx/se-aproxima-la-batalla-de-la-leche/
Caballero García, M. (2010). Codigo Postal. Obtenido de
http://colposdigital.colpos.mx:8080/jspui/bitstream/handle/10521/83/Caballero
%20Garcia%20MA-Econom%C3%ADa-DC%202010.pdf?
sequence=1&isAllowed=y
Caballero García, M. (February de 2010). Colpos Digital. Obtenido de Colpos Digital:
http://colposdigital.colpos.mx:8080/jspui/bitstream/handle/10521/83/Caballero
%20Garcia%20MA-Econom%C3%ADa-DC%202010.pdf?
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http://www.dairyinfo.gc.ca/index_e.php?s1=dff-fcil&s2=proc-trans&s3=glo20
FOA. (November de 2014). Food and Agriculture Organization of the United Nations.
Obtenido de
http://www.fao.org/fileadmin/templates/est/COMM_MARKETS_MONITORING/
Dairy/Documents/Milk_and_Milk_Products_-_NOVEMBER_2014.pdf
Gobierno de Chihuahua. (2008). portaladm.chihuahua.gob.mx/. Obtenido de
http://portaladm.chihuahua.gob.mx/atach2/competitividad/uploads/La%20Industria
%20Láctea%20en%20Chihuahua.pdf
Grupo LALA. (2014). Grupo LALA. Obtenido de Grupo LALA:
http://www.grupolala.com/InformeAnual2014/assets/lala-resumen-ejecutivo2014.pdf
Grupo LALA. (2016). Grupo LALA. Obtenido de Grupo LALA: http://www.grupolala.com/
LICONSA. (2015). SEDESOL. Obtenido de http://www.liconsa.gob.mx/wpcontent/uploads/2015/05/Programa-Institucional-2013-2018.pdf
ONU. (s.f.). fao.org. Obtenido de http://www.fao.org/agriculture/dairy-gateway/la-cadenalactea/mercados-y-comercio/es/#.Vsi05pzhDIV
Pallares, M. (10 de February de 2014). El Financiero. Obtenido de El Financiero:
http://www.elfinanciero.com.mx/archivo/lala-y-alpura-destapan-estrategias-paracrecer-1.html
PRNewswire. (2014 de August de 2014). PR Newswire. Obtenido de
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42

Redacción Énfasis Alimentación. (10 de April de 2014). Alimentación Enfasis. Obtenido de
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SAGARPA. (2013). siap.gob.mx. Obtenido de http://www.siap.gob.mx/wpcontent/uploads/boletinleche/Bbolet_4totrim2013.pdf
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http://www.elfinanciero.com.mx/empresas/se-le-corta-a-coca-cola-negocio-consanta-clara.html
Santa Rita, I. (07 de April de 2015). CNN Expansión. Obtenido de CNN Expansión:
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http://www.economia.gob.mx/files/comunidad_negocios/industria_comercio/inform
acionSectorial/analisis_sector_lacteo.pdf
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http://www.forbes.com.mx/innovar-en-el-mercado-la-nueva-estrategia-de-lala/
Zaragoza. (2016). Leche Zaragoza. Obtenido de http://www.lechezaragoza.com/

43