Surviving Venezuela’s Hyperinflation: Automercados Plaza’s

Alberto  Cavallo; Mariana  Cal; Carla  Larangeira

Case | HBS Case Collection | October 2020

Surviving Venezuela’s Hyperinflation: Automercados Plaza’s

by Alberto Cavallo, Mariana Cal and Carla Larangeira

Abstract

Under the rule of presidents Hugo Chávez and Nicolas Maduro, Venezuela experienced one of the worst economic and political meltdowns in modern history, culminating with a massive hyperinflation. Remarkably, during this dramatic times Automercados Plaza's had grown to become one of the most successful supermarket retailers in the country. Its management team had faced all kinds of challenges, including price indexation, price controls, scarcity and stockouts, informal competitors, and an ever-shifting set of government interventions. Showing resourcefulness and the flexibility needed to quickly adapt, Plaza’s had managed to survive and even thrive. The future, however, looked very uncertain. Could Plaza’s keep growing in an ever-shrinking economy? Would the (now larger) company manage to continue to avoid clashing with the government? Cheap financing in bolívares was no longer available, and other companies had learned to operate under high inflation conditions as well. While additional growth could help fend off new rivals if the economy improved, it was not clear when (or even if) that would happen. Despite increasing domestic and international pressure, President Maduro refused to resign. Even if he did, could Venezuela’s economy recover after more than two decades of Chavismo?

Keywords: hyperinflation; macroeconomics; populism; Retail Industry; South America; Venezuela;

Language: English

Format: Print

29 pages

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Citation:

Cavallo, Alberto, Mariana Cal, and Carla Larangeira. "Surviving Venezuela’s Hyperinflation: Automercados Plaza’s." Harvard Business School Case 721-014, October 2020.

After long dominating Mexican microfinance, Compartamos Banco faces the emergence of fintech, just as for the first time its loan portfolio and clients have declined. Enrique Majós, CEO of GENTERA, the bank´s parent company, is keenly aware of the profound changes since the Compartamos IPO in April 2007, when it was valued at $1.5 billion and became the first bank wholly dedicated to microfinance to be quoted in a major stock exchange. Since then, the market has become intensely competitive, with both large established institutions and new entrants vying for the same customers. Simultaneously, the digital era has spawned fintech, threatening to disrupt Compartamos’ highly successful model but also providing opportunities for the bank to reshape it. While challenged to manage key innovation within a leading incumbent, Majós must consider whether to commit his team to a major cost reduction in the next few years to his board of directors at their next meeting at the end of the month.

Case | HBS Case Collection | September 2020

Algramo

Michael Chu, Monica Silva and Mariana Cal

Founded in 2013 by José Manuel Moller in Chile, Algramo first became known for addressing the “poverty tax” (the surcharge paid by lower income families for staples sold in smaller sizes) through specially-designed dispensers in low-income neighborhood grocery stores that offered bulk purchasing in reusable containers, while allowing consumers to buy exactly the amount they wanted. The savings that came from eliminating packaging, sometimes the single-largest cost component in small formats, was passed on to the end-user. The company’s innovative approach was widely recognized, both locally and internationally.
In 2018, Moller was invited to join a prestigious NGO focused on the role of the private sector, which led to an invitation by Unilever Chile’s CEO to join forces to meet a corporate-wide Unilever commitment: a 25% reduction by 2025 of the plastics it put out into the world. One of the most efficient ways of doing so was the replacement of single-use plastic packaging by reusable containers, but the challenge was to make consumers remember to take their empty containers with them when shopping. With the insight that people never forget to take their wallets, Moller’s response was Packaging-as-a-Wallet (PaaW), a reusable plastic container imbedded with a Radio Frequency Identification (RFID) chip that, through Algramo’s smartphone app, could also become a digital wallet. At the same time, the app allowed the user to order the exact amount desired and have it home-delivered by electric tricycle. In January 2020, following a successful pilot test, Unilever Chile and Algramo rolled out PaaW across Santiago, Chile’s capital. With plastic pollution a highly visible global issue, Algramo’s efforts attracted wide international attention and recognition. Several leading FMCG multinationals and environmental NGOs approached Algramo to explore potential partnerships.
For many years, Algramo’s financing came through awards and prizes, friends and family and benefactors. At the end of 2019, Algramo completed its first institutional capital-raise in a round led by New York-based impact investor Closed Loop Partners. That relationship opened the doors to projects that would take the Algramo model to New York City.
In March 2020, Algramo’s board approved a joint venture with a Dutch NGO to deploy Algramo in Indonesia, the world’s second-largest source of plastic leakage into the oceans. That same month, Chile registered its first Covid-19 case. By the end of May, the number of Covid-19 cases in Chile surpassed the official number of cases recorded in China. This came on top of a deep social turmoil that had rocked the country since October 2019, with street riots shattering Chile’s long-standing image of stability and development. In the face of this grave crisis that would surely get worse, one of Moeller’s close advisors advocated setting aside the company’s international commitments and to focus Algramo’s efforts solely on Chile. Moeller must decide what to do.

Keywords: Packaging-as-a-Wallet; Plastic Waste; business at the base of the pyramid; reusable packaging; Alliances with FMCGs to meet ESG goals; Social Entrepreneurship; Environmental Sustainability; Strategy; Value Creation; Goals and Objectives; Business Model; Consumer Products Industry; Latin America; South America; Chile;

Citation:

Chu, Michael, Monica Silva, and Mariana Cal. "Algramo." Harvard Business School Case 321-079, September 2020. View Details

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Nubank, a wholly-digital solution created to disrupt Brazilian banking, with 6 million clients and a $4 billion valuation after five years, must decide whether to expand to Mexico. The company was founded in Sāo Paulo in 2013 by Colombian-born David Vélez to seize what he saw as the opportunity latent in a banking system long dominated by five large incumbents with what he considered low value products and deficient customer service. The answer for Vélez was through technology. Backed by foreign venture capitalists and recruiting a top team, Vélez launched a credit card available solely through a smartphone app, with quick approval and no annual fee, with credit and payments totally online and transparent, friendly customer service, completely up-ending the traditional terms of the market. Nubank’s credit card became viral among the Brazilian urban middle-class and by the end of 2018, the company was the fifth credit card issuer in Brazil with over 6 million cardholders. A second product, a digital banking account, also changed market terms by offering services at no fees and yielding higher interest rates. By 2018, Nubank had $628.8 million in deposits. With success, a multitude of opportunities were now open and Nubank and its board must define strategic priorities. Within Brazil, Nubank’s market share was still minor compared to the incumbents, and there were many other financial products that could be launched. In addition, 30% of Brazilians remained unbanked. Yet Vélez and his team were convinced that the whole of Latin America had the same banking pain points as Brazil and was ripe for Nubank products. For Vélez, the gateway to unlocking that potential was through Mexico.

The case also examines the challenges in an emerging market of financing and developing a new business concept based on cutting-edge technology, the nature and sustainability of the difference between a fintech startup and leading incumbents, and the role of regulators in the development of fintech.

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Surviving Venezuela’s Hyperinflation: Automercados Plaza’s

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