Search in web contents

Reports

Exports enable Palacios to expertly weather the crisis

Carmen Llorente

Palacios started out in the 1960s as a small family-owned butcher, and today it's one of Spain's leading food companies. Every day, at Palacios Alimentación headquarters, in the Riojan town of Albelda de Iregua, 100,000 units of chorizo are prepared, to be sent all over the world. In fact, Palacios was the first Spanish company to obtain a license to sell chorizo and other pork products to the US, and it currently exports to more than 30 countries.

But although chorizo (sweet, spicy, white, semi-cured, cream, low-fat, etc.) remains its most popular product, Palacios is currently much more than the leading charcuterie company. In the last 15 years, it has undergone a sweeping transformation, diversification and globalization process, and today it's one of Spain's top food groups. Palacios produces frozen desserts, as well as Spanish omelet, prepared foods, pizzas, pies, roasted products and hamburgers. As a result, chorizo now accounts for less than 50% of the total, compared with 100% in 1998, when the company first obtained authorization to sell its goods to the demanding US market.

The financial crisis didn't hinder growth; in fact, Palacios strengthened its efforts to become a global food company. It easily weathered the negative economic environment and plummeting consumer spending in Spain. It set out with an unwavering commitment to internationalize and diversify, constantly launching new and innovative products.

In the last six years, the company has increased sales by more than 15%, from 135 million euros in 2008; additionally, instead of laying off employees like the rest of the food industry, Palacios grew its workforce by 40%. The company currently has a staff of 700, compared with 500 in 2008.

Internationalization

The company has described 2014 as a "record" year, driven by the slight improvement in consumer spending in Spain, growth in sales in the foodservice sector, and to the increase in revenues from other countries. During the financial crisis, marked by falling consumer spending, aggressive price wars on supermarket shelves, and the shrinking population due to the outflow of young people from Spain—major buyers of the type of low-cost products Palacios sells—the company focused on internationalization and is now a leading exporter. Sales abroad accounted for just 8% of the total five years ago, while today they account for one-third, according to the company.

Palacios Alimentación operates on the five continents. It also has sales offices in France, and exports its products to the main European countries: Germany, Belgium, Italy, Poland, England, Ireland, Portugal, Switzerland, Austria, Hungry, Slovakia and the Czech Republic. In America, Palacios products are available in the US, Canada, Mexico, Colombia, Chile and Brazil. In Africa, they can be found in Morocco, Algeria, Tunisia, Libya and Egypt, and in the Middle East, in Saudi Arabia, Kuwait, and the United Arab Emirates. They are also sold in Australia and Japan.

"We don't distinguish between in and outside Spain. We're in a global market, and our objective is to sell worldwide", say company sources, which also note that internationalization will remain a primary feature of the company in 2015.

The group's other big commitment this year is to strengthen its presence in the foodservice segment, which is in the midst of a transformation (due to the growth of chains and large franchises) and is starting to recover following years in continuous decline.

The company will continue to apply the same strategies as in previous years: improve efficiency, continue innovating and launching new products on the market, and maintain the same policy vis-à-vis possible buyers, giving them what they want: private label or branded products. "We're on all the store shelves", say company sources.

In fact, one of the group's strengths is the excellent positioning of its private label brand, which accounts for more than 60% of production. “The private label brand is, and will continue to be, a main focus of the group".

A shake-up within the family-owned company

Major changes to Palacios began in 1999, when it started making frozen pizzas. Since then, the company has experienced intense growth, expansion and diversification. Following its move into pizzas, it also added Spanish omelets to its portfolio. Later, in 2003, it entered the frozen cake market, and one year later it included prepared foods under the "A Fuego Lento" brand. It also started making fresh cakes under the Tentadore label. In 2005, it entered the world of roscas (cakes shaped like doughnuts): it bought pastry company Delidor and its factory in Taradel (Barcelona) in 2006 and opened the Extremiana-Palacios bread-making factory in 2007.

But Palacios' great transformation had only just begun and, two years later, the third generation took the reins of the family-owned business. In July 2009, venture capital firm ProA Capital, founded in 2007, led the acquisition of Grupo Palacios for 100 million euros, according to market sources. ProA acquired 60% of the company, international investment manager Partners Group 20%, and venture capital firm Talde 15%; the food group's executive team maintained 5%.

The VC firms found Palacios group attractive because of its high efficiency ratio, fast pace of growth, and notable capacity to sell low-cost products in supermarkets. These were strengths that the new owners have reinforced in the last few years, while also establishing strategic priorities such as internationalization and diversification with a view to making Palacios a global company. To that end, the company committed to organic growth through acquisitions, mergers and strategic alliances.

The first operation in the new era of Palacios Alimentación, after the family relinquished control, soon followed. In 2010, the group merged with Cárnicas Floristán, a market leader in cold storage products, such as Spanish omelet, migas (bread soaked in water with garlic, paprika and olive oil) and chistorra (a type of sausage). One year later, it acquired the frozen pizza company Dealsa.

In January 2013, Alinaco, a leader in frozen Spanish omelets with a factory in Buñuel (Navarra) merged with Grupo Palacios through an agreement joining the two companies' omelet businesses. A deal was signed a few months later with Industrias Granderroble, which specializes in frozen cakes and ice cream, by which their common businesses were merged to create one of the largest industrial baked goods groups in Spain. The resulting company has become a leader in Spain's baked goods and dessert sector. A few weeks later, the company acquired Pascual's omelet business.

<< Back

MORE Reports

01/08/2017