Early in September 2010, Sigma Alimentos, a leading diversified food processor based in Mexico and a division of ALFA, S.A.B. de C.V., acquired Phoenix-based Bar-S Foods. Armando Garza Sada, chairman of the board for ALFA, said the acquisition would help Sigma to become a meaningful player in the United States refrigerated processed meats market by targeting the US Hispanic market.
“There is a very good ‘fit’ of core competencies and strengths between both legacy companies that have [already] yielded very significant synergies,” says Warren Panico, who was promoted to president and CEO of the new entity created by this acquisition named Bar-S Foods – A Sigma Company – on Jan. 1, 2013.
Fifty-two million Hispanics, the nation’s largest ethnic minority, reside in the US, according to the 2011 US Census. Only Mexico outranks the US for the most Hispanics living in a country (112 million Mexicans as of 2010). Representing 16.7 percent of the US population in 2011, Hispanics will number 132.8 million by 2050 – or 30 percent of the US population. From 2005 to 2010, the aggregate spend on processed meats in the US by Hispanics increased by 8.2 percent vs. non-Hispanic growth of 1.7 percent.
Bar-S, which calls itself the only national value brand in the US, offers more than 120 processed meat products including pre-packaged franks, bacon, lunchmeat and sausage, and frozen corn dogs. Sigma, originally a leading producer of processed meats, began diversifying into other product categoriess, including yogurt, cheese and ready-to-serve meals, in 1994. Its markets include Guatemala, Honduras, Nicaragua, Costa Rica, El Salvador, the Dominican Republic, Peru – and now the US.
New management team
A unified management team comprised of Sigma and Bar-S key executive positions was created to manage the new entity. This team includes Panico; Bob Kopriva, senior advisor to the CEO; Sergio Ramos, executive vice president, operations; Helio Castano, vice president, administration and integration; Mike Suriano, vice president, finance; Leslie Pellillo, vice president, marketing; Tom Moses, vice president, sales; Gerardo Guillen, vice president, DSD sales; Danny Dupree, vice president, operations; and Jim Kline, vice president, supply chain.
Members on the new entity’s board of directors include Sada; Alvaro Fernandez Garza, ALFA president; Alejandro Elizondo Barragan, ALFA senior vice president of development; Mario Paez Gonzalez, Sigma Alimentos president; Ricardo Doehner Cobian, Sigma Alimentos senior vice president administration; Timothy Day, Bar-S founder, former president and CEO, now Bar-S Foods chairman of the board; Panico; and Kopriva.
The management team is focused on maintaining the existing cost discipline and improving the execution capabilities in areas such as business plan implementation, new product introductions and supply-chain optimization. “We developed production redundancy, which allowed us to make some key products at multiple facilities versus being dependent on one single facility,” Ramos says. “This execution efficiency has also helped us manage programmed equipment repairs better, as well as handle unexpected events without disrupting our supply chain. Our market intelligence has been consolidated. We have been able to identify opportunities to develop new items for the Hispanic segment plus target major customers with existing items.”
Points of distribution have grown dramatically for many products in the last two years, he adds. “We also have a state-of-the-art technology center with more than 100 employees in Monterrey, Mexico,” Ramos continues. “Our R&D capabilities have been leveraged to improve our product sensory attributes and consumer appeal. Our core strategy is to have a value proposition in the marketplace and offer the highest-quality products in the industry.”
Becoming a dominant player in the refrigerated foods market for the US Hispanic market is an important priority for Bar-S Foods, Panico says. “We are continually evaluating US Hispanic market trends and utilizing consumer insights to determine how to best serve this important market segment with the ideal product portfolio,” he adds.
The company has executed some successful new product launches and line extensions this past year that were specifically targeted to the US Hispanic market, Pellillo says. Some of the new products include ham and turkey products for the service deli counter, a bologna line and a new spicy grill sausage. “All were specifically developed to better serve the Hispanic consumer needs in the US,” she adds.
Bar-S Foods’ marketing team works closely with the sales and R&D teams to create new products and innovation ideas. “Consumer insights and food technology are utilized to help us develop successful new products,” Pellillo says. “To support new product launches, we execute various promotions to increase consumer awareness and product trial or run ad programs typically executed around key selling seasons or holidays.”
Bar-S Foods markets eight brand names for its meat and dairy products: Bar-S, FUD, La Chona, Longmont, El Cazo, San Rafael, Nortenita and La Playero. “The company is working to strengthen these names, increase their brand equity and reinforce their position in the marketplace with our customers and consumers,” Pellillo says.
The company operates four meat-processing production plants in Oklahoma, Ramos says. The 191,000-sq.-ft. Altus plant manufactures franks, lunchmeat and corn dogs; the 83,000-sq.-ft. Lawton plant produces franks and skinless smoked sausage; the 124,000-sq.-ft. Clinton plant manufactures franks, lunchmeat, smoked and specialty sausages and hams; and the 130,000-sq.-ft. Seminole plant processes franks and service deli hams.
Sigma Alimentos and Bar-S Foods initiated their relationship several years ago and their respective CEO’s nurtured the relationship until conditions were right for both parties to proceed with the acquisition, explains Mario Paez Gonzalez, Sigma Alimentos president.
“There are many similarities between the companies that made the merger a guaranteed success,” he adds. “Both companies are leaders in the processed meats market in their respective geographies and segments; they both had strong financial structures, and they both shared common organizational and business practice values. This made the merger of these two companies and cultures an easy transition and a winning combination.”
Important synergies between Sigma and Bar-S have been achieved already. “We first started with efficiency projects at our production facilities, sales and distribution networks, and relied on our R&D expertise to mitigate unprecedented raw-materials increases,” Castano says. “We also revamped our go-to-market strategy and consolidated our back-office functions. As a result of the important synergies we attained, the company has become even stronger financially and in the coming years we have set the bar even higher.”
Most people from the pre-merger management teams are currently leading the company today in a management or advisory role, Castano says. “We believe our company has the best people in the industry and we’ll continue to develop the talents of our internal staff,” he adds.
The management team has done a great job integrating the company, Castano says. “Besides achieving significant synergies, improved distribution and unified operations, we have a single cultural identity based on teamwork, continuous improvement and total customer satisfaction,” he adds. “Team Bar-S is committed to delivering the highest-quality products at the lowest possible cost.”
Bar-S Foods recognizes there are different levels of acculturation within Hispanics that have an important effect on consumers’ attitudes towards buying brands and product preference. “We are continually evaluating US Hispanic market trends and utilizing consumer insights to determine how to best serve this important market segment with the ideal product portfolio,” Pellillo says.
Bar-S customers have responded very well to the acquisition, Panico says. “The new entity now has two different go-to-market sales models,” he adds. “Some customers prefer a direct store delivery [DSD] system, while others prefer distribution through a warehouse distribution model. The sales team has done an excellent job addressing the individual needs of our customers and ensuring that customer satisfaction is a priority.”
The US Hispanic market has evolved very quickly over the last few years and will become a more relevant and dynamic market in the near future, Pellillo says. “It is very important for Bar-S Foods to understand evolving consumer needs and quickly adapt to changes in this important market segment,” she adds. “The company feels confident that we have a solid strategy in place that will allow us to successfully service the US Hispanic consumer needs in refrigerated foods.”
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