MEXICO – Grupo Lala, a leading Mexican dairy company, has announced that it will shut down its operation in Costa Rica in an effort to refocus time and resources to its key markets.
The shut down of operations and exit from the Costa Rican market comes just four years after the Mexican dairy company launched operations through a strategic alliance with Costa Rica’s Florida Ice and Farm (Fifco) and Coopeleche.
In mid-2019, Lala acquired the milk brand Mú! owned by Fifco and both companies maintained a cordial relationship.
Although Grupo Lala reached planned goals in 2019, the market was more diffiuclt that they thought, encountering difficulties along the way.
Grupo Lala’s business in the country is reported to have struggled to grow partly due to stiff competition from Cooperativa de Productores de Leche R.L. popularly known as Dos Pinos.
“Costa Rica is a country that has many roots with traditional brands and it has not been easy at the level of procedures, but little by little we are solving that and, although It has not been easy, we are complying with our strategic axes,” Francisco Arroyo, Lala’s marketing manager for Costa Rica, told El Financiero in February.
By the time of exit, the Mexican company emphasizes that Costa Rica represents 0.4% of the group’s annual sales, a very small contribution compared to other regions.
The move is expected to have a $3 million favourable impact on 2021 full-year earnings before interest, taxes, depreciation and amortisation (EBITDA) for Lala’s Central American business.
Commenting on the decision, Lala CEO Arquímedes Celis said: “After a detailed analysis and review of Lala’s Costa Rica operation, we determined that related resources and focus are better allocated towards stronger paths to profitability and shareholder value within the company.”
Celis further noted that the capital freed up with this closure will be reallocated to our businesses in Nicaragua and Guatemala where there is more potential to achieve sustainable and profitable growth.
The closure will result in an MXN 126 million ($6.3 million approx.) impact on Grupo Lala’s EBITDA and MXN 480 million ($24.2 million approx.) impact on net income for Q4 2020.
At the end of last year, Grupo Lala announced that its CEO Mauricio Leyva was stepping down, and said that the company’s results for the fiscal year had “fallen short of stated goals and objectives”.
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