Peru
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Alicorp is one of the largest consumer goods companies in Peru. It has an important presence in Latin American countries. Alicorp is a domestic market leader in various product categories in the following business segments: consumer goods, B2B and aquaculture. It dominates the Peruvian oils and fats sector, and is the major buyer of palm oil for domestic use in Peru. Grupo Romero, one of the leading family-owned company groups in Peru, owns 45.7 percent of Alicorp.

This article was published by Chain Reaction Research and written by Gabriel Thoumi, CFA, FRM, Climate Advisers,Bruna Tomaidis Lima, Profundo and Tim Steinweg, Aidenvironment Gabriel Thoumi, CFA, FRM, Climate Advisers.

Key Findings

  • Between 2000 and 2015, an estimated 40,000 hectares (ha) of primary forest have been cleared for palm oil plantations in Peru. While this represents a minor share of overall deforestation in Peru, it also corresponds to 52 percent of the cultivated area for oil palm in Peru. Alicorp is a major buyer of Peruvian palm oil. But it does not yet have a public No Deforestation, No Peat, No Exploitation (NDPE) commitment in place.
  • The lack of a NDPE policy poses business risks for Alicorp. Zero-deforestation is rapidly becoming a requirement to access international buyers. An important and increasing number of domestic consumers value sustainability initiatives.
  • Four percent of Alicorp’s revenue may be at risk due to increased demand for zero-deforestation products. For the consumer goods segment, changing consumer behavior could put three percent of revenue-at-risk. Additionally, the B2B segment may add one percent revenue-at-risk. This could mean a 12 percent equity price decline.
  • Financial institutions increasingly recognize deforestation as a material financial risk. The lack of a public zero-deforestation commitment could prevent Alicorp’s access to finance from international markets, reduce enthusiasm for future bond or share issuance and raise their cost of debt. BlackRock has recognized deforestation as a material climate-change related risk.
  • A strict cross-commodity NDPE policy could make Alicorp Peru’s frontrunner in the drive to halt deforestation and expand its competitive advantage into international markets. It could align the company with efforts by the Peruvian government and other stakeholders, which could increase the company’s market value.
  • Alicorp’s adoption of an NDPE policy would reduce the Peruvian market for palm oil linked to deforestation. Alicorp is 45.7 percent owned by Grupo Romero. Grupo Romero wholly owns Alicorp’s competitor Grupo Palmas, which is Peru’s largest palm oil producer. Alicorp’s board overlaps with Grupo Palmas’ board, although they directly compete against each other in the B2B segment. With Grupo Palmas, an Alicorp NDPE policy that applies to all affiliated companies would cover nearly the entire Peruvian palm oil value chain.

Business Lines and Segments

Alicorp is one of the largest consumer goods companies in Peru. It is listed on the Bolsa de Valores de Lima. Alicorp’s largest shareholder, with 45.7 percent, is Grupo Romero. Alicorp has more than 7,000 employees and 25 factories across 13 Latin American countries. Alicorp has three business segments:

  • Consumer Goods: This segment encompasses packaged goods, home care and personal care products. It includes edible oils, laundry care, pastas, sauces, cookies and crackers. These represent 56 percent of Alicorp’s total revenues. Peru generates 65 percent of Alicorp’s consumer goods revenues, while the remainder comes from other Latin American countries.
  • Business-to-Business (B2B): This segment includes bakeries, industrial goods and food services. It provides 22 percent of the company’s revenue. The entirety of Allicorp’s B2B revenues are generated inside Peru. This segment produces and markets industrial baking flour, shortenings, margarines and industrial sauces.
  • Aquaculture: The Aquaculture segment’s primary activities are in Ecuador. This segment produces fish and shrimp feed and represents 22 percent of Alicorp’s revenues.

Alicorp’s total FY2016 revenues were USD 1,915 million (PEN 6,629 million). In this period, Alicorp had operating incomes of USD 183 million (PEN 632 million) and net profits of USD 87 million (PEN 302 million). Its operating income margin is 9.5 percent and its net profit margin 4.6 percent.

Of Allicorp’s international markets, Ecuador generates 12 percent of revenue, Brazil 8 creates percent of the revenue, Argentina produces 7.3 percent of the revenue and Chile provides 7.4 percent of the revenue.

The consumer goods segment has a 9.8 percent operating margin, while the B2B segment has a 8.9 percent operating margin. The aquaculture segment has a 11 percent operating margin. The company also reports that 1 percent of its revenue is sales to affiliated companies including Panificadora Bimbo del Perú S.A., Industrias del Espino S.A. and Industrias del Aceite S.A.

In Peru, Alicorp has a leading market share in various consumer goods products categories. These range from laundry detergents and soaps to cooking oil and mayonnaise. Alicorp has a leading 43 percent market share of the oils and fats sector in Peru. It also owns the leading pasta brand in Brazil.

In the B2B segment, the company has the highest market share in Peru for industrial baking flours, shortenings and Industrial margarines. Alicorp’s main competitor for the last two products is Grupo Palmas, a wholly owned subsidiary of Grupo Romero.

Alicorp’s aquaculture segment leads the Peruvian market, as well as the market for shrimp feed in Ecuador.

Shareholders and Board Composition

Alicorp’s largest shareholder, Grupo Romero, is one of the largest privately-owned conglomerates in Peru. The group is active in the following industries:

  • Consumer goods: Alicorp, Fino and Grupo Palmas
  • Agribusiness: Caña Brava, Grupo Palmas and Grupo Ransa
  • Energy: Primax and Caña Brava
  • Fisheries: Pesquera Centinela
  • Logistics: Grupo Ransa, Tisur and Tramarsa
  • Business services: Wigo and Limtek
  • Financial services: Credicorp

Grupo Romero is the largest shareholder of Credicorp. Credicorp is the Peruvian financial conglomerate that owns Banco de Credito del Peru (BCP). Credicorp trades as BAP on the NYSE.

The majority of the board seats of Alicorp are held by members of the Romero family. These interlocking board seats provide for a business advantage between Alicorp and other Grupo Romero owned companies. Alicorp’s board overlaps with Grupo Palmas’ board, although they directly compete against each other in the B2B segment. For example, some interlocks include:

  • Dionisio Romero Paoletti, the president of Grupo Romero, is also chairman of the board of both Alicorp and Grupo Palmas.
  • Jose Antonio Onrubia and Calixto Romero hold director positions at both Alicorp and Grupo Palmas.

Alicorp’s interlocking board seats with its direct competitors present material governance risks regarding executives’ loyalty to shareholders and raises broader legal concerns regarding Peruvian anti-monopoly laws.

ESG Risks and Opportunities

Alicorp is the largest buyer of palm oil for domestic use in Peru. Alicorp’s market position means it is exposed to material financial risks from deforestation. This is because it manufacturers palm oil products. Since 2014, there has been global recognition that palm oil buyers, traders and refiners are exposed to material risks related to deforestation and human rights practices in their supply chains as international buyers become increasingly unwilling to do business with these companies. Currently, at least 450 corporations globally have NDPE policies that prohibit procurement of products linked to deforestation.

Alicorp primarily purchases

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