Tuesday 28 September 2021

Grupo Lala to close operations in Costa Rica to focus on markets in Nicaragua and Guatemala

The closing will see the layoff of 120 direct employes, 250 indirect jobs and leaves 70 milk producers in San Ramon without a buyer. The company will close operations in Costa Rica on December 11.

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QCOSTARICA – The Mexican company, Grupo Lala, announced this Tuesday, December 1, the definitive closure of its operations in Costa Rica as of next Friday, December 11, to focus on what it considers key markets in Central America: Nicaragua and Guatemala.

Grupo Lala will stop operating in Costa Rica on December 11, the Mexican company announced on December 1

According to the company’s website for Costa Rica, they have at least 120 direct employees at its production plant in San Ramon and generates more than 250 indirect jobs, purchasing raw material from a group of 70 Costa Rican milk producers from the western and northern part of the country, affiliated with Coopeleche

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The Mexican company reported that the decision is made “as a result of an evaluation of the geographic footprint, performance and compatibility within the future strategy.”

“After having carried out a detailed analysis and review of LALA’s operation in Costa Rica, we determined that the related resources have more solid allocation alternatives within the Company to generate profitability and value for shareholders,” said Arquímedes Celis, CEO of Lala.

Celis added that the released capital will be reallocated to businesses in Nicaragua and Guatemala “where there is more potential to achieve sustainable and profitable growth.”

Lala entered the Costa Rican market in 2016, and did so under an alliance with Coopeleche for the purchase of milk for the production and marketing of dairy products.

The Mexican company emphasized that Costa Rica represents 0.4% of the group’s annual sales.

When Grupo Lala decided to enter the Costa Rican market it was clear that conquering the national consumer would be an arduous task due to the great attachment to Dos Pinos products. However, as the days went by, other inconveniences cropped up, such as the difficulty to register products.

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Dos Pinos, the leader of the dairy market in Costa Rica, indicated to El Financiero in February of this year, that its participation in the market did not affect other competitors such as Lala and, on the contrary, is preparing for the arrival of more players and to face the tariff reduction starting in 2025, date in which this type of products will have a 0% rate, according to the Free Trade Agreement (FTA) with the United States and Central America.

Lala entry into Costa Rica was through an agreement with Florida Bebidas (a subsidiatry of Florida Ice & Farm – FIFCO) and Coopeleche, with the aim of developing a new business scheme.

The original agreement established that Grupo Lala would produce both its own line of products and the Mú! (belonging to Florida Bebidas), with the supply of producers affiliated to Coopeleche.

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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

“Costa Rica is a country that, for no one is a secret, 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.

Asked if they were beating Dos Pinos, Arroyo replied that “they were doing the job and complying with the strategic axes”.

In addition to the Grupo Lala employees at the San Ramon plant, affected are the 70 producers affiliated with the Coopeleche cooperative supplying 36,000 liters of milk per day.

The manager of Coopeleche, Ivannia Quesada, assured she learned of the decision at about 3:30 pm this Tuesday, a surprise decision given that the dairy had asked for more volume a few weeks ago, “because supposedly they were doing well,” she added.

“In all honesty, I am shocked at this moment,” she emphasized.

Quesada preferred not to expand on the matter, explaining that their immediate goal was to finding an outlet for the production of the 70 affiliated producers.

“Milk is a highly perishable product, even if it is kept refrigerated,” added Quesada.

The producers are from western and northern areas, such as Guayabo de Bagaces, San Ramón, Tilarán, Esparza, Miramar and Guatuso.

The related assets will be put up for sale or reallocated within the region, according to the statement by Grupo Lala.

Ana María Orozco, general manager of Grupo Lala for Central America, assured that the closure of the plant went through an exhaustive process of analysis that included the possibility of other alternatives to continue operating, and it was a complex decision.

The spokesperson added that the layoffs of the workers will be in accordance with Costa Rican legislation.

“We know that decisions like this impact not only our employees and their families, but also the communities where we operate,” Orozco said.

 

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