Reinaldo Medrano, Director Commercial, Makeni Chemicals

Makeni has a very rich history in Brazil, dating since 1981. Could you provide us with a brief overview of Makeni's main milestones during all these years?
Makeni is a typical Brazilian family-owned business, and was founded in 1981. Its history comprises of two different stages: one from 1981 to 1990 and the other from 1990 to present times. During the first period, Makeni acted as an export agent in Brazil, dealing mainly with Brazilian petrochemical products, especially products BTX (Benzene, Toluene, Xylene); this was a time in which Makeni gained a lot of international exposure and expertise. By 1990, Brazil was opening up to the world, its domestic market was growing rapidly, and the country's exports were starting to diminish, due to high internal demand. That is when Makeni decided to make a strategic shift towards the import and distribution business, which was beginning to be sought after by a number of big international players wanting to gain access to the booming economy of the country. The organization kept its original role at a lesser scale, and it shifted its focus on the import and local distribution component, which today constitutes the backbone of Makeni. Currently, 65% of our business deals with industrial commodities such as paints, coatings and process chemicals while the other 35% is focused on food, consumer care, and pharmaceutical products.
Brazil's GDP growth in 2012 was 0.9%. Given this context, what was Makeni's economic performance last year?
The year 2012 was a frustrating year for all of Brazil, the initial growth expectations of 4% to 5% were not achieved. Makeni performed differently however and we succeeded to boost our sales as well as our economic indicators in the end. Brazil's industries were in an overall vulnerable position when the crisis hit in 2008 and already, in 2009, Makeni had taken steps to strategically place itself in the market so as to avoid the effects of the economic slowdown. We started investing in specialty products, while maintaining our commodities portfolio. In 2009, we had a ratio of commodities to specialty products of 8: 2, and by 2012, the proportion had changed to 6: 4. Our target for the year 2015 is to have a balanced portfolio of 50% 50% commodities and specialties.
Inventory levels represent an area in which various distributors adopt different policies. What is Makeni's philosophy regarding this?
Makeni has very strict policies regarding its inventory levels. On one hand, it is necessary to have a good level of inventory, to be able to supply the market with products when needed and on the other hand, these same high levels lead to us incurring costs. We operate on the retention policy of 60 days for imports (which represent 85% of our goods) and 30 days for national products (15% of our business), and we also label these products according to the speed with which they are absorbed into the market. However, there are many fluctuations and variables and Makeni is always collecting data to improve its ability to predict these market trends and adjust its stocks.
Makeni's rich history has helped it establish itself as a reference in the Brazilian market for foreign partners. What are the other competitive advantages that set Makeni apart from its competitors?
Makeni's main differentiator is represented by its pioneering spirit. We were among the first to look for foreign suppliers when Brazil opened up its borders, and we were among the first to get quality certifications such as Responsible Distribution Process (PRODIR), ISO 9001 and ISO 14001. Makeni maintains this forward-thinking approach today by constantly looking to innovate, and to find new suppliers, solutions and practices that will ultimately help our clients. We are a Brazilian organization with tremendous international experience and we manage to create a very constructive synergy based on that. The service that I would like to highlight is the Makeni Intelligent Systems and Solutions (MISS), which is the unit that deals with creating tailor made solvent blends for our clients. Based on the original recipes, and under a confidentiality agreement, MISS provides cost-effective outsourcing capabilities for the blends that our customers usually produce exclusively in their plants; and this is especially useful when factories are already producing at 100% capacity. Makeni is educating the market, which is still conservative, and even though the legislation in the field needs to evolve more, this solution represents the future.
How is your business affected by the growth of the Brazilian middle class, social governmental programs such as my house, my life and the future sporting events that will be happening in Brazil in 2014 (World Cup) and 2016 (Olympics)?
Brazil is going through difficult economic times at the moment but we are well positioned to exit the crisis faster than European or Asian countries since we are more influenced by the USA's improving performance than they are. This year, we expect Brazil to have 2% to 3% growth, notably driven by the services industry, and while internal demand will be increasing, local industries will not be able to keep up the pace. This is very good for Makeni, due to our strong focus on imports and products that cannot be found in Brazil. My House, my life was temporarily suspended but this year, the structural funds allocated for it will be released once again; the government needs to take advantage of the World Cup and the Olympics to incentivize the entry of external investments into the country because currently, foreign money is being used mostly for applications. Lastly, the rise of the our middle class implies more purchasing power on the part of the Brazilian end consumer who is increasingly asking for more sophisticated and higher added value food and consumer care products. Makeni's focus on imports and specialty products puts us in a very favorable position to be able to take full advantage of this growing trend in Brazil.
What does the future hold in store for Makeni in 2013, as well as in the next five to ten years?
The year 2013 will be a very good one for Makeni, with strong increases not only in sales, but in all our financial indicators, trend which will be largely driven by our specialties segment. We are pursuing a sustainable growth policy and to that end, Makeni is trying to implement a unified corporate vision where HR training plays an important part. The future of the distribution sector in Brazil will be characterized by increased competition and higher quality standards, more and more foreign suppliers will be entering the country. Makeni, through its constant investments in quality control, lab applications, IT and its people, will be consolidating its strong position in the market and will be fully prepared to face this ever-increasing competitive landscape.