Pochteca plans to grow organically above the rate of GDP growth and through acquisitions.

Eugenio Gerardo Manzano Alba

EXECUTIVE DIRECTOR, POCHTECA

January 11, 2018

Could you provide a brief introduction to the history of Pochteca?

We started in 1988 as a paper distribution company and grew to roughly $50 million in sales by 2005. We always had the vision of becoming a distributor of industrial products beyond Mexico. As paper consumption began decreasing due to digital communications, we looked for opportunities to acquire distributors of industrial products where we could apply our core competencies in large-scale distribution. We acquired our first chemical distributor in 2005, Grupo Dermet, one of Mexico’s largest and which focused on food ingredients, solvents and inorganic chemicals. It was going through difficulties but we turned it around after a couple of years.

In 2008 we purchased Adydsa, a solvents and blends distributor. Then in 2010 we acquired Shell’s lubricants assets in Mexico, becoming their master distributor in the country. Later in 2013 we purchased another competitor in inorganics called Mardupol, as well as Coremal in Brazil. This year we purchased Conjunto Lar, a specialty distributor focused on personal care and household goods based in Mexico City.

What is the extent of Pochteca’s geographic and product reach?

We sell over 6,500 SKUs to more than 18,000 industrial customers every year. We deliver in 500 different Mexican cities every month and have our own fleet of trucks in Mexico and Brazil so that we can safely transport chemicals 24/7. We have small operations in Costa Rica, Guatemala and El Salvador which are growing gradually. Brazil is significant for us and we see large opportunities for growth there. We have application labs in food, household, personal care, coatings, solvents and pigments where we work with our customers to formulate products like sauces, dressings, beverages, architectural and industrial paints, personal care and cleaning products.

How is the company’s portfolio split between specialty and industrial chemicals?

What constitutes a specialty chemical is contested. Some say that specialty products are those that are bought for their specific functionality; others think that specialties are products that cost more than $3 USD per kilo. The first is a better definition, which means every product that is sold as a technical sale based on the product´s functionality can be classified as a specialty, even some basic solvents or inorganic chemicals. 35% to 40% of our sales meet this definition.

We prefer to focus on what meets clients’ needs, reduces total cost of ownership and improves productivity. Our go-to-market strategy is to add value to products and to provide solutions by being a one-stop shop; this has been the key to Pochteca’s continual growth.

What are the main industries Pochteca focuses on and the main growth drivers behind them?

Food and feed, water treatment, household and personal care are some of the key high growth- industries for us.  We are investing heavily into labs and technical people to serve them. A growing middle class with more disposable income as well as the growing global requirement for food and clean water are some of the main growth drivers behind this.

We also have dedicated teams to serve basic industries like automotive and general manufacturing, where there is a large demand for lubricants, metalworking fluids and other chemicals. Mexico exports more manufactured goods than the rest of Latin America combined. These industries are growing due to a healthier domestic demand as well as strong export sales to North America. Finally, mining and oil and gas are also significant in our portfolio

What are Pochteca’s main strengths?  

Our application labs are outstanding in terms of our equipment and technical staff such as our food, coatings and lubricants specialists. Lubricants are used in all industries and are a very technical sale. We have technical staff that spends several days in customers’ plants before making recommendations. Client employees also work in our labs with our technicians, which makes us extremely proud. Secondly, we have a large and diversified portfolio; none of our products (or customers) represents over 3% of our sales so we can solve problems across many product categories.

Thirdly, we have extensive logistical reach across the region, which reduces costs to our customers and suppliers. For example, we can supply products for a client headquartered in Houston for offshore oilfields in Brazil and at the same time deliver for them in the Mexican Gulf coast. We have more than 300,000 square meters of warehouse space and 300 bulk storage tanks which provide security of supply to our clients.  Fourthly, it is the quality of our HSSE standards. Pochteca is the only Mexican company certified by the National Association of Chemical Distributors under the Responsible Distribution program.

How do you intend to maintain growth going forward?

Our strategy is to grow organically above GDP growth, which we have consistently done, and through strategic acquisitions. We are always open to acquisitions that complement our portfolio. The distribution market in Latin America is very fragmented; in Mexico there are over 300 companies. Suppliers and customers are consolidating their distribution. Producers need stronger, value-added partners that can cover larger regions and product categories. Customers are now buying in Brazil or Mexico, for example, for the rest of Latin America. They need a distributor that can safely deliver in an efficient way all over the region and add value through technical sales, special packaging, blending and new products and applications.

Distribution in Latin America represents an incredible opportunity, with growth of 8% to 10% and consolidation will continue. We will be in this business in the long term and will continue to invest. We are in the right region, in the right industry and in the most dynamic part of the value chain; it is a bright future.

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