Mexican food company Grupo Lala specializes in nutritious foods, producing and marketing innovative milk and dairy products for more than 65 years. It operates 32 production plants and 176 distribution centers in Mexico, Brazil, the US and Central America.
Grupo Lala’s total revenue increased by 26.1% in Q2 to just over 18,870 million pesos ($1bn), while comparable sales grew 5.1%.
Comparable earnings before interest, taxes, depreciation, and amortization (EBITDA) decreased by 17.6% when compared to 2017. Grupo Lala cited several challenges it faced in Latin America that affected its bottom line.
Nicaraguan political unrest that began in April hurt numbers as it typically accounts for 3% of Grupo Lala’s sales. There was also a nationwide trucking strike in Brazil during May that resulted in a loss of one-third of sales while affecting eight total production days.
Grupo Lala has been attempting to expand its reach with a better global presence, and its US business posted a 5% increase in sales during Q2 with a total of 856 million pesos ($46.1m).
The most profitable aspects of the company’s US market are its Promised Land specialty milk, bottled milk varieties that come in eight flavors, and its Lala Yogurt Smoothies, a drinkable yogurt sold in 17 flavors.
Lala Yogurt Smoothies are sold in sold in grocery chains across the country and make up 72% of Grupo Lala’s net sales in the US.
Alberto A. Arellana Garcia, Grupo Lala CFO, said, “We are disappointed with the results reported in the this quarter. That said, we’re confident that our [business] will continue to be strong and that we have the components needed to sustain profitable growth.”
Turning a new tide
Grupo Lala also announced the appointment of a new CEO last week, effective September 1, 2018. Mauricio Leyva Arboleda spent more than 13 years working at AB InBev, including as president of the Middle Americas Zone and CEO of Grupo Modelo.
He has more than 25 years of experience managing global consumer, commercial and communications companies in countries around the world.
The release did not mention a direct connection to the announcement and the unfavorable second quarter report, but said Arboleda was named to the position to help Grupo Lala “resume its growth and reactivate its profitability.”
Eduardo Tricio, chairman of Grupo Lala, said, "The appointment of Mauricio Leyva confirms the confidence we have in the beginning of a next chapter that will allow us to capitalize on the investments we have been making in recent years, resume growth and reactivate Lala's profitability. Mauricio is a leader with vast experience in consolidating and profitably growing businesses."
Current CEO Scot Rank will step down on August 31. He came to Grupo LaLa in 2015 from Walmart.
At the time of the financial report, Rank said, “Q2 was a quarter with sales growth versus the previous quarter in all regions, but disappointing results in profitability. We faced challenges derived from higher expenses in Mexico, the political situation in Nicaragua, and a nationwide trucking strike in Brazil that stopped our operations for ten days. I remain confident that solid business and operating fundamentals will enable us to quickly return to profitable growth.”