In Step with the Times

Alberto Grimoldi

Alberto Grimoldi

Job Title

Chairman, Grimoldi, S.A.
What I find most important is getting the younger generation, who has lived through such a devastating economic time, to believe that the future can and will be better.

Grimoldi S.A. was founded in 1895 by my grandfather, his brother, and his brother-in-law. My grandfather was the son of an Italian immigrant, whose family migrated to Argentina in 1860. From 1880 to 1930, Argentina enjoyed decades of exceptional growth, importing capital and exporting goods. Argentine businessmen had a very favorable entrepreneurial environment. When the economy grows like that for fifty years, at an accumulated rate of 6 percent, business is easier. In those first several decades, Grimoldi grew and became one of Argentina’s and Latin America’s leading footwear companies. And like other growing businesses in Latin America at the time, the core of the business was involved in manufacturing, not marketing.

Starting in 1930, however, Argentina’s economy began to plateau. In my opinion, this is also something that can happen to a company—it is imperative for a company to continuously innovate and transform itself. My father believed this too, and starting in the 1930s, he began opening retail stores to sell the shoes being manufactured in Grimoldi factories. He had ties with many American and European companies, and he was able to open stores in the leading commercial areas on those continents. They sold shoes to third parties, but the company’s retail operations became a very significant part of the company’s profits.

When the war broke out in 1940, the Argentine government basically drew its inspiration from Italy’s fascism. That was significant on account of its economic impact, not to mention the impact on society. Perón’s emergence in the 1940s and his election as president in 1946 brought this trend towards fascism to a head. The economy became even more closed than before. Foreign competition dropped sharply. Strong industrial growth followed, but with a competitive component. Grimoldi did very well in this period, although Argentine business began to decline in general during this decade.

During the 1960s I was working for the company, but I decided to leave it in the 1970s. I wanted to professionalize the senior leadership, but the rest of my family was against that idea. I was offered a job in the Argentine government, so I left Grimoldi to become Under Secretary of Economics and Labor. I have always believed that a family business performs best when management is professionalized, and around 1986, the company was almost broke, so I bought it back and rejoined the company, and in addition to reorganizing the senior leadership, I put a focus on marketing.

The company’s public image hinged on quality and the idea of expensive footwear for men and children. Those images are very hard to change once they are embedded in people’s minds. We really wanted to attract female customers, so we focused on brands. Some brands were Grimoldi-born, and others we sold in our stores, including Hush Puppies, Sperry Top-Sider, and Kicker, a French children’s footwear brand. Brands enabled us to use age-based, gender-based, and price-based market segmentation. We kept the Grimoldi name for the company and the stores.

At the same time, Argentina’s economy, which performed terribly in the 1980s, was trying to bounce back. Eventually the inflationary period came to an end, and Grimoldi was economically stronger than it had been before it started. Argentina also underwent a very significant change by opening its economy, which enabled us to secure licenses for foreign brands and import foreign products.

Even so, it was very hard to attract young customers, who grew up thinking Grimoldi shoes were for older generations. But once the economy opened, many young people started looking for fashion brands that they had not been able to purchase before, so our branding strategy paid off nicely.

In 2001 and 2002, the Argentinean economy experienced a major downturn, with unemployment near 25 percent and a 20 percent drop in per-capita GDP in four years. The peso went from a one-to-one parity with the US dollar to an exchange rate of 4 pesos to a dollar. Part of our business involved domestic products but also a large share of imported goods, so a devaluation of that kind had a phenomenal effect on the company, not to mention all other firms in Argentina. Grimoldi lost 60 percent of its net worth. We paid off all our debts, but the company’s equity was severely impaired. We went from $80 million to $12 million in annual sales.

So how did we deal with such a massive downturn? We managed to get the owners of those brands to let us manufacture in Argentina. In ten years we went from importing 80 percent and manufacturing 20 percent of our goods to manufacturing 80 percent and importing 20 percent. In 2016 we made almost $300 million in sales through this strategy. With that said, I’m sure Argentina will begin to import products again and I envision the 80-20 percent ratio for Grimoldi shifting to a ratio of 60 percent imports and 40 % manufactured in Argentina.

What I find most important is getting the younger generation, who has lived through such a devastating economic time, to believe that the future can and will be better. It is important for them to have hope that business can innovate and turn itself around despite hard times. 

This story is a condensed and edited version of a longer interview conducted by the Creating Emerging Markets project at HBS.