Concrete strategy: Colombia's largest business gets ready to compete in global markets

Latin Trade, March, 2006 by Darcy A. Crowe

It doesn't have a Web site, but it's Colombia's largest conglomerate. It doesn't even exist as a legal entity, nor does it have a president or board of directors, but its managers' decisions affect the economy of an entire country. Grupo Empresarial Antioqueno (GEA) doesn't trade as a stock, yet the companies it controls are among the largest on the Colombia Stock Exchange. Subsidiaries of Colombia's biggest company lead in the financial, food and construction industries, all of which spent the last year consolidating at home while expanding abroad. The company's most recent takeover is a clear sign of GEA'S international ambitions: Cementos Argos, the conglomerate's construction business, paid US$257.5 million to acquire two U.S. cement plants.

"All GEA's companies are different and semi-independent," says Carlos Felipe Londono, the rector of the Antioquia Engineering School. Londono, who has conducted several studies of GEA, is nevertheless quick to point out that "the overall objectives are the same for all its companies." Unlike other conglomerates, GEA was born in the 1970s out of a defensive gesture by larger companies in Antioquia, one of Colombia's wealthiest states. At that time, business leaders and wealthy families from other regions in Colombia began showing up in Medellin to buy control of some of the companies in the region. Local businesses--today the vehicles of Colombia's business elite--decided to prepare for the battle. Their main weapon: shareholder agreements. Companies operating in businesses as different as food and insurance became economic allies and shareholding partners, thus suddenly having a say-so in one another's affairs. "GEA, when it was founded, was a small empire of 46 companies," Londono says. That defensive strategy evolved to become a powerful corporate giant.

Throughout the 1980s and 1990s, GEA built itself up as the largest business group in the country. The companies share members on one another's executive boards. Despite being a multi-headed creature, common management allows the organization to operate under a common strategy. The presidents of GEA companies have always been considered the best managers in the Colombian corporate world.

Over the last five years, the group has accelerated on its way to becoming a modern conglomerate. It cleaned house by merging subsidiaries while developing new ones. Inversiones Nacional de Chocolates was born of the merger of more than 34 companies operating in the food industry, following GEA strategy to become one of the largest food companies in Latin America. It's not as well known as its rivals, but it can go toe-to-toe with giants like Mexico's Bimbo, Brazil's Sadia and Argentina's Arcor, says its president, Carlos Enrique Piedrahita. His company is a standard bearer in Colombia's business world and has set an example for others by expanding in international markets. "We export products to 60 countries on five continents," he says.

The company knows where its business opportunities are, too. "Our priority expansion targets are the Andean countries, Central America, the Caribbean, Mexico and the United States" Piedrahita says. "Brazil and the Southern Cone are not in our immediate plans." Once consolidated, Inversiones Nacional de Chocolates will be Colombia's seventh-largest company in terms of assets under management. "GEA's future is globalization," Piedrahita says. "We began some time ago, but the rest of the main companies are also starting to look for other markets."

GEA'S strategy of merging its domestic companies before jumping off to global markets has been its modus operandi on every industrial front. Last year, Bancolombia, Colombia's largest bank, announced a merger with two other GEA financial companies, Conavi and Corfinsura. The new organization--a merger that should close before July--will control more than 22% of Colombia's total banking assets and will rank among Latin America's 15 largest banks.

Bancolombia, however, is up against some big challenges. "We're the biggest bank in Colombia, but we need to be better positioned in Latin America," says Bancolombia's president, Jorge Felipe Londono. Colombia's financial sector is suffering a five-year hangover right now as it undergoes a wave of consolidation. "We had to take command of this new phase," Londono says. For Bancolombia, already established as a domestic leader, the next step will hopefully take it head-to-head with the region's top financial institutions. "We're still studying our global expansion. We will be careful, but it's an inevitable next step," says Jaime Uribe, the bank's economic studies manager.

While Bancolombia is still testing the waters before its overseas expansion, GEA has already taken on global markets in the construction industry. Cementos Argos has been fine-tuning a plan to help itself to a big slice of the U.S. market. GEA's construction business is the fifth-largest cement producer in Latin America, controlling nearly 52% of Colombia's market and exporting 3 million tons of cement, 80% of which goes to its giant northern neighbor. That figure equals 8% of all U.S. cement imports.