LUCCHETTI

GROUP 2
F14011 F14023

The Luksic Group

1950

Founded by Andronica Luksic

City of Antofagasta in Northern Chile

1960

Diversified its business thereby taking advantage of growth opportunities

of Chilean Economy

1970

1974

Restrictions eased in Chile

Renewed its interest in Chile

2003

Became one of the Worlds largest copper mine

Private Sector activities were restricted

Expanded into Argentina, Colombia and Brazil

Quinenco
1957

Established
Engaged in supplying wood to the Chilean coal mine industry

1960

Andronica Luksic acquired majority interest

1996

Ownership structure of the Luksic Group was reorganized

Financial and industrial investments were placed under the control of Quinenco

1997

Succeeded in raising 280 million USD

Lucchetti
1900

Established

1965

Purchased by Luksic group

1994

1996

Became 93.7% consolidated subsidiary of Quinenco

Reached 38% of the Chilean market share

Finding new growth opportunities was a challenge

Expansion in Argentina and Peru appeared promising

Lucchetti Peru
1995

Luchetti Peru was incorporated

1996

Decision was made to go ahead with the construction of plant

Applied for certificate of compatibility from the district of Chorillos and Lima
Import Duty Tariff was increased in Peru

1997

Press expressed concerns about the factorys size

Major of Lima cited concerns about environmental impact
Cost of Goods Sold was 107% of sales because of price wars

1998

City of Lima declared contract void

Restarted after courts order
Production started

Lucchetti Peru
1999

Positive margins

2001

Reduced sales due to negative image

2003

Order to shut down the plant

Peruvian market

Market Opportunities in Peru Appeared attractive for harvesting

Consumption level was 8-9 kg/individual/year Packaged pasta

Competitors just started off packaged pasta

95% of sales was bulk selling

Competitors Offered low quality pasta

Lucchettis Strategy to enter Peru

Developed an export based presence to build market share.

Positioned Lucchetti Pasta as a premium brand selling at cost higher than the competitor brands.

Within a year demand for Lucchetti pasta outstripped the supply in the Chile plant, and so they st
arted to import pasta from Italy at $760 per ton.

The Peruvian government increased the import duty tariff from 15 to 20% and imposed an additio
nal 5% duty on wheat derivative products.

As a result, Lucchetti decided to build its own plant in Peru.

Was it a Mistake ?

Competitors Strategy
1. Romero Group (Alicorp S.A.)

Acquired La Fabril one of the largest companies in food industry in Peru. (Lucchetti lost the bid)
Romero merged La Fabril with its subsidiary Peru Pacifico, the second largest producer of edibl
e oil in Peru.
Further merged these two companies with another subsidiary to form Alicorp S.A. that became th
e fourth largest company in Peru accounting for 2 percent of the Peruvian GDP.
Distribution Network of Alicorp was its Key Advantage. It reached 90% of the total points of sale. I
n Peru only 10% of food was sold in supermarkets and the rest through mom and pop stores.

2. Carozzi

Purchased the Peruvian Company Molitalia (which accounted for 18% of total market share).
Never changed the name or built a new facility in order to retain the domestic identity.

Both focused on selling high quality pasta at lower prices.

External Factors
1. Location near Pantos de Villa wetlands

Near to ports easy transportation

Environmental hazzards wildlife reserves

2. Political & Legal Factors

Certificates from both Chorillos and Lima

Political influence from Romero family
ISO 14001
Certification for wildlife and environment reserves

3. Competitors
4. Tax rates

EFE Matrix
Opportunities

Weight

Rating

WScore

High consumption rates of pasta in Peru

0.1

0.4

Lower quality of pasta sold in Peru markets currently

0.05

0.15

Growing Peruvian economy

0.1

0.4

Willingness of customer to purchase higher quality, higher priced pasta

0.1

0.3

Tax and repatriation benefits

0.05

0.15

Political Climate

0.15

0.3

Fluctuating government policies

0.15

0.3

Competitors

0.1

0.1

Price wars

0.10

0.2

No local connections

0.1

0.2

Total

Threats

2.5

IFE Matrix
Strength

weighting

Rating

Wscore

Quality product

0.2

0.6

Distribution and service network

0.2

0.6

Diversified holdings

0.05

0.05

Strong balance sheet

0.1

0.2

Higher market share

0.05

0.05

Weak strategy formulation team

0.1

0.3

No political connections

0.1

0.2

Ethnocentric approach

0.2

0.6

Weakness

CPM Matrix
Alicorp

LP

Critical success factors

weight

Rating

Wscore

Rating

Wscore

Political connections

0.25

0.75

0.25

Product quality

0.2

0.4

0.8

Market share

0.1

0.2

0.3

Home turf advantage

0.1

0.3

0.2

Distribution & network

0.1

0.3

0.3

Price

0.1

0.2

0.2

Production facilities

0.15

0.45

0.15

Total

2.6

2.2

What Could have been done?

Better Competitor analysis

Massive distribution network reached 90% of all points of sale

Market leader in wheat flour, cookies and crackers
Alicorp won Lucchetti in acquiring La Fabril and hence Lucchetti missed a point of entry
Entry of Carrozzi

Better analysis of external environment

Better analysis of the political Scenario

Evaluated the political scenario from a national level they should have tried to understan
d the regional level political implications

Better market analysis

Competitors just started off packaged pasta

High pricing spectrum

Options

Diversify

Leave the Peruvian Market and absorb a $150 million write off

Continue to Invest by leveraging the existing market share

Re-enter the Peruvian Market when the political conditions are right

Thank You