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Tuesday, Jul 23, 2024

Nascent Wants to Become Mexico’s Largest Wholesale Food Distributor

Sandro Piancone knew there had to be a better way of getting imported foods into Mexican supermarkets, restaurants and hotels, and set out to create the first nationwide food distribution network in Mexico.

Having worked in Mexico selling Italian pasta and olive oil to food stores, Piancone had to deal with at least 30 different distributors to get his company’s products into a variety of channels. Most of the distribution companies were small, independent operations that served a particular city or region.

“The food service distribution network is a fragmented market made up of about 25,000 independent distributors. There is no major player like a Sysco or a U.S. Foodservices in this country,” Piancone said.

Nascent Foodservice, which conducted a reverse merger with a dormant public company last year, appears to be on its way toward becoming a major distributor.

It acquired one of the largest merchandising and promotions companies in Mexico, with 4,500 employees, for $4.5 million this month. It was the ninth acquisition for the company, which was founded in 2001 and now has 4,700 employees.

Just Acquired

Merchandising companies such as the one Nascent just acquired, Grupo Sur Promociones de Mexico, work as middlemen between food purveyors and Mexico’s many food retail outlets, particularly larger supermarket chains. The company sets up displays and often conducts samplings of food products inside stores, helping to attract new customers, and secure prized shelf space.

Last year, GSP had sales of $25 million and 180,000 retail accounts, according to Nascent.

Also last year, Nascent signed a five-year contract to become the exclusive distributor of Miller Beer in Mexico. Financial terms of the deal were not disclosed.

“Part of Nascent’s appeal was their vision of becoming a national distributor in Mexico,” said Julian Green, a Miller Beer spokesman in Milwaukee. “They were a company that acknowledged their shortcomings, and wanted to go out and acquire the expertise and talent to become competitive.”

In all, Nascent distributes more than 2,000 national and proprietary brands, including some of the best known in the world , Nestle, Haagen-Dazs, General Mills, Cora Italian Food Products and Ferrarelle Water.

According to a report from the Mexican secretary of the economy, Mexico is expected to import $268 billion worth of goods in declared value this year, and half of that will come from the United States.

Mainly because of increased operating costs in its expansion and startup phase, Nascent is still losing money. Last year, the company reported a net loss of $2 million on revenue of $4.7 million. For the first quarter, it had a net loss of $1.1 million on revenue of $5.1 million.

But its sales numbers will significantly rise this year, thanks to two investment rounds this month that totaled $19 million. The first round came from a group of 400 investors through Brookstreet Securities for $11 million. Also this month, it received an $8 million investment from York Capital Management.

The funding permitted Nascent to buy up a series of smaller Mexican distribution and merchandising companies.

So Far, So Good

Asked how Nascent, which is based in San Diego, is received by Mexican-owned companies, Piancone says so far, so good.

“Everyone (they are dealing with) knows us,” he said. “They like being our partner, and now having an exit strategy with our stock. They know they’ll be making more money than had they stayed on their own because they’ll be able to sell more products,” Piancone said.

Fluent in Spanish and Italian, Piancone, 39, said he was familiar with some Spanish, but became fluent as he was forced to learn it when he began working in Mexico.

Starting in 1998, he was the export manager for Roma Foods, a New Jersey company his uncle owned and where his father worked.

Traveling in Mexico, Piancone soon realized the challenge of having to deal with so many distributors, and what an opportunity this situation presented.

In 2001, he launched his own company, Piancone Group International, which concentrated on distributing imported Italian foods in Mexico. He knew if he was to achieve his goal of creating a national distribution network he needed capital, and set out to acquire a public company to attract investors.

Last year, Piancone conducted a reverse merger with a Nevada public company, Nascent Wine Co., which had been formed to sell wine, but was no longer operating. The stock that was issued then went out at 45 cents per share on the Over the Counter Bulletin Board exchange. As of July 18, Nascent Wine Co. (it retains the name in securities matters but does business as Nascent Foodservice) was trading at 82 cents.

Despite the many challenges that come with building the first national distribution food network, Piancone said he’s optimistic and having the time of his life.

“I’m having more fun than I ever did in my life. I love building a company like this, that’s never been done before here, and representing some of the best brands in the world. And along the way, I’m helping to make a lot of people wealthy.”

An Energy Boost

Carlos Lopez, chief executive of Liquid Brands Management Inc., a San Diego supplier of several products distributed by Nascent, said his firm has helped boost sales of one product, Kabbalah Energy Drink, by 50 percent in the last nine months. He declined to reveal dollar figures.

“Before we joined with Nascent, we had to distribute our products through 12 different distributors and to 12 different warehouses. This has simplified our operation considerably,” Lopez said.

The key to the rapid growth of Nascent is making the right decision on what distributorship to buy, Lopez said.

“In Mexico, as in every Latin American country, the relationship between the supplier and the vendor is extremely important,” he said.

A good deal of the company’s success is due to Piancone’s experience in the industry and his credibility, Lopez said.

“His dad was in the food-service industry, and he’s been in it all his life,” Lopez said. “They saw what happened in the United States (with the formation and growth of major distributors such as Sysco) and wanted to replicate that in Mexico.”

Piancone readily admits he’s a direct beneficiary of the North American Free Trade Agreement, the trading pact with the United States, Mexico and Canada that took effect in 1994.

“It lowered the tariffs on goods being imported into Mexico from this country, but it also created a mountain of paperwork and other nightmares for a lot of the smaller distributors,” he said.

Particular Product

The tendency was for companies to specialize in a particular product such as dairy goods or beef, and abandon any idea of distributing a range of different products on a wider scale.

As for doing business in Mexico, Piancone says he’s not put off by the barrage of news about drug cartels, murders and rampant political corruption.

“I’ve been traveling in Mexico for 10 years and never had any problems. There’s never been a time when someone has broken into our facilities (the company has 16 warehouses) or had anyone steal a truck,” he said. “But shortly after we purchased a company in Miami, someone broke into that facility and stole a bunch of our merchandise.”

Mexico has been making great strides in recent years in many areas, particularly in growing its middle class, and creating ways for people to improve their lives, Piancone said.

“I’ve seen a lot of changes that have come about with the loosening of credit. More people can now get loans to buy cars and buy homes. Their new president (Felipe Calderon) is also more pro-business (than former President Vicente Fox), and that’s having a good effect.”


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