CEMEX’s Patrimonio Hoy: At the Tipping Point?

Click to edit Master subtitle style Made by: Neeraj Saini Sagar Gupta

7/17/12

About CEMEX
a regional Mexican cement producer founded in 1906  Acquired Colombia’s Cementos Diamante and Samper Companies in 1996, RMC Group Plc of UK in 2005 and became the world’s largest producer of ready-mix concrete.  Sells products and services under three broad categories: Cement, Ready-mix concrete and related products (crushed stone , sand and gravel).

7/17/12

5 million tons/year. recorded US$15.About CEMEX (Contd. and has over 25.1 billion in global revenue with a 16% operating margin  headquartered in Monterrey with offices across the country  local brands include Cemento Monterrey.000 employees  In 2005. owns 54 cement plants and 466 readymix plants. Cemento Tolteca and Cemento Anahuac 7/17/12 .)  operations in 50 countries  has a production capacity of 81.

 CEMEX market leader with 55% total market share . and Moctezuma. Cruz Azul. etc)  four main players: CEMEX. floors. road construction and buildings) traditional construction (private buildings). Holcim.Cement Market in Mexico  Divided ◦ ◦ into four categories: ◦ ◦ self-construction (do-it-yourself building) government (public works projects. 7/17/12 . casting/transforming (benches.

lack of credit history. informal sector  Low wages. 40% sales. half of them by low income. and high interest rates prevent them from entering the formal mortgage and housing market The Self Construction Market 7/17/12 .  Most of purchasing done by low income group.000 new houses every year to meet population growth.  Mexico needs 750. CEMEX’s largest customer segement. accounting for approx.

the team underwent 3 months of field research: visits to colonias.  To understand the market.CEMEX : exploring new opportunities  During 1994-95 Mexican economic crisis. sales to formal construction sector fell by 50% but informal sector less affected.  A multi disciplinary team created: tasked with creating an initiative that would “do good” but also make money. 7/17/12 . local distributors etc.

difficulty in accessing certified quality materials. lack of access to financing. lack of planning skills related to building homes  Found cement was relatively undifferentiated commodity. 7/17/12 . limited technical construction knowledge. consumers in the segment looked for lowest prices. Inability to store materials.Research findings 6 barriers identified that made building new homes inefficient: 1) 2) 3) 4) 5) 6) inability to save money.

 This initiated a second round of research : realized that financing was the biggest issue for low income groups to overcome for home construction. a quick learning curve. fast volume growth. positioning as the best segment option. 7/17/12  Focus now shifted: from selling cement to . long-lasting customer perceived value  First response : new product – smaller sack of 25kgs – failed.Prerequisites and Initial attempts  Mr. ◦ ◦ ◦ ◦ ◦ Francisco Garza required the initiative to have: self-financing growth.

Patrimonio Hoy  New business model : group lending program (Tanda system). CEMEX listed as sponsor to create awareness and customers renamed “socios”(partners). replaced with CEMEX micro financing. 7/17/12 . tanda system discarded. technical assistance for project construction and coordination of deliveries with distributors  Named “Patrimonio Hoy”(Patrimony Today).  With further development.

progressive.What the program offers: Microcredit for building materials • Technical Advice • Based on solidarity of a group of 3 No collaterals Benefits & Services • Advice and consultation by certified architects free of cost • Frozen prices for 70 week periods Warehousing services to store materials according to their needs • A steady. well implemented project with savings on time and less cost • 7/17/12 .

61 “cells” placed throughout country in areas with: population approx 50.Current Operations  Headquartered in Guadalajara. 7/17/12 . has a staff of 1 to 3 people and is customized to local needs  Each cell attained break even within 12 months or 600 families served.  Each cell – independent and self sustaining.000. tradition of self building.  By end of 2005. centralized staff of about 15. average family income 1000 pesos.

 Compensated on basis of number socios attracted and time they stayed in the program  Held information sessions on daily basis in homes of influential community members or those already built under the program 7/17/12 . promoter were hired on part time basis to attract new socios from the community itself.Promoters  Mostly women.

 Additionally. 20 pesos membership  Membership fees covers costs: consulting.Payment Plan  Weekly payment of 145 pesos for 70 weeks: 125 pesos for materials. helping them complete projects faster. socios eligible to join “Te Impulsa Program” that provided faster deliveries and additional credit. 7/17/12 . guaranteed fixed prices and operating cost of cell. interest of financing. after 30 weeks of regular payment.

shipment accuracy etc – helps the program decide which distributors will get future business.  Socios then evaluate distributors on factors such as delivery time. 7/17/12 . bricks. cells place orders and makes payments to local CEMEX distributor  The distributor delivers cement and other supplies (steel.Distribution  As socios make weekly payments. sand etc) directly to the socio.

material storage and delivery. and financing. 7/17/12 .Benefit to Socios  better room layout.  Higher construction quality leading to higher value for homes  Certification of recommendation: help in establishing the socio’s credit. cost savings. locked-in material prices.  Training program: allows socios with masonry skills to receive professional certification.

 Improved social image – the program won prestigious award for Social responsibility from the Centre of Mexican Philanthropy in 2004.  Branding: increase in customer loyalty. 7/17/12 .6/5 after the launch of program – nearest competitor rated 3. brand index for Cemento Tolteca rated at 4. market share and improved corporate image.Benefit to CEMEX  Increased revenues.

000 (0.6%)  By 2005. 7/17/12 .000 families  Defaults only $300. 500 promoters and 120 suppliers. program included 61 cells. program has given credit totaling $50 million to over 100.Accomplishments  Since formal launch in 2002.

overworked architects and less employees in cells may lead to less satisfactory customer service.Challenges:  Socio attrition: unable to pay for labor. training. stock outs  Armoring supply chain: preventing competitor penetration 7/17/12 .  Financial management: risk of fraud  Coordination with distributors: late deliveries. 30% of total are able to complete projects  Staffing: attracting. retaining people who can implement the model.

 Domestic expansion: deploying operations in 1000’s of eligible communities  Recruiting socio’s: utilizing help of NGO’s or non profit organizations to gain. prevent competition.Sustaining growth  Continue to improve socio lives. build and maintain relationships 7/17/12 . secure the small distributor channel. and further strengthen CEMEX’s image. grow market share.

) Markets: presently serving income groups of 1000 pesos per week. Nicaragua etc. similar opportunities for lower income groups can be created in urban and rural areas  International expansion: cell opened up in Colombia.Sustaining growth  New (Contd. Venezuela. more planned in other countries like Singapore.  New sources of funding 7/17/12 .

Thank You! Any to edit Master subtitle style ClickQuestions? 7/17/12 .

Sign up to vote on this title
UsefulNot useful