By: Claudia González Brambila, Luis Arciniega y Daniela Ruiz Massieu
Few stories about Mexican garage entrepreneurs are as fascinating as that of Simón Sacal. His interest in becoming a technological entrepreneur began at the beginning of the 21st century when Simón was barely 18 years old. The Young University Student
His parents had returned from a trip with a healthy snack they had bought at the airport. Unlike many of the low fat, low calorie products back then, this cookie tasted good. While trying the new snack, the Sacal family commented on the trend toward eating healthy food and people’s growing concern about watching their weight. The idea about how attractive it could be to market products of this type in shopping centers also emerged. They envisioned a Krispy Kreme- type business model, in which customers could see how the snacks are produced and how the aroma from the preparation of these snacks would attract customers. That family talk, which may have seemed inconsequential at first glance, awakened Simón’s entrepreneurial spirit.
By that time, Simón had studied the first semesters of his industrial engineering career at the Universidad Iberoamericana. There he took advantage of the library resources and began to research the productive processes of snack food. With the help of the director of industrial engineering and a professor of food engineering, Simón was able to understand the basic concepts of the subject and he conducted his first experiments in the production of processed foods in the university laboratory.
Simón’s fascination with understanding how food was processed motivated him to attend every exhibition and conference on the subject.
In less than a year, Simon’s tests had progressed so much that he needed more complex laboratories, so he investigated where the most important research infrastructure in our country in food science and technology was located. The best option was the National Institute of Medical Sciences and Nutrition Salvador Zubirán (Instituto Nacional de Ciencias Médicas y Nutrición Salvador Zubirán) (INN), a research institution of the highest level, which is accountable to the Secretariat of Health.
Not knowing anyone at the INN was not an impediment. The 19-year-old young man met with Josefina Morales de León, head of the Department of Food Science and Technology at the INN. He explained to her that he was researching the production processes to produce low-fat foods and asked her for help in using the institute’s research infrastructure and in testing new productive processes. The young entrepreneur’s enthusiasm convinced Josefina to allow him to use the department’s laboratory one afternoon a week, and not only that, he also received the support of the laboratory researchers.
Within a few weeks, the members of the INN laboratory explained to Simón that what he wanted to achieve had almost insurmountable technological limitations. Until that moment, food production processes faced the dilemma of an inversely proportional relationship between good nutrition and good taste. That is, the more fat and calories are removed from a product, the less flavor it has.
But precisely what distinguishes a technological entrepreneur is his ability to invent a process that is conceptually different. Thus, Simón’s focus was on developing a productive process that would produce tasty, good-textured foods that, at the same time, were low in calories and fat. After many attempts, Simón invented a productive process with which he produced rice cookies that tasted good. With the new technology, by means of pressure and temperature changes, a base of rice and fiber was cooked, without frying and without oils, which could be made in any shape and any flavor could be added. Simon’s innovation seemed interesting, so with the help of his father, Simón hired a law firm to do a global patent search. It was necessary to find out if there was a similar productive process and if there were patents that protected the intellectual property of the process. Patent searches are expensive and time consuming, but Simón believed in his idea and that made him persistent and he did not lose his enthusiasm. Several months later, when the firm confirmed that there was no similar productive process in the world, his enthusiasm grew even more. Encouraged by his father, Simón set up a laboratory in his garage and hired a couple of food researchers to help him once a week in his experiments. With the support of the entire family, he made the necessary equipment to begin the production of the first products. Of course, the results were not good at first. In one of several attempts to make the new equipment, Simón burned the whole electrical installation of his house, but that did not keep his family from continuing to support him.
The Snack Market.
Snack food in Mexico is dominated by a single producer, Sabritas, which dominates more than 70% of the market. Barcel has not been able to increase its market share by more than 20%, despite being part of Grupo Bimbo (the largest bread producer in the world) and having the largest distribution channels in the country.
The figures were not encouraging. Simón was convinced he had developed excellent technology, but he could not find a way to scale the business, so that his business potential could be fully exploited. However, his commitment and enthusiasm continued to grow. He began to consider the possibility of moving to the United States to produce and market his products there. He thought that in that country there was greater appreciation for low fat, low calorie products, so people would pay more for them than in Mexico. In addition, the consumption of snacks per capita in that country is much higher than that of Mexico. He also assumed that marketing would be easier, in the sense that the points of sale do not take so long to pay for the products, there is greater competition and the distribution channels do not belong to the producers, which simplifies the task of marketing the products.
Managing Growth
When Simon was planning to leave for the US, the Conacyt-Nafin Fund for entrepreneurs injected capital in order to build a plant to manufacture the snacks. However, the business proposal not only intended to expand the business, but also to change the business model so that Mexican children would benefit from the HIS (International Healthy Snacks) technology. Therefore, the plant manufactured low-fat, protein-rich and iron-rich snacks, which really contribute to a kid’s good health. Obesity, together with child malnutrition, is one of the most important public health problems in Mexico. Simon was aware of that, and he was really satisfied with the idea of using his technology to help overcome such problem.
A few months after the plant in Naucalpan was built, thousands of Fit-Bits bags, in metallic packaging, were being produced and distributed in schools, in Centers for the Integral Development of the Family (day care centers funded by the government), and in Social Development Ministries. The state of Hidalgo was the first one to be pleased and convinced with the technology. The products were also massively distributed in the states of Quintana Roo, México, Nuevo León, Morelos, and in Mexico City.
Moreover, distribution of the products was extended to other points of sales; products were sold at convenience stores and supermarkets.
In 2007, mass production began. The growth was exponential, and in the next couple of years another two production plants were built, one of 1,600 m2 and another of 1,500 m2. Managing the rapid growth was the achievement of Simon’s father. Gabriel Sacal, Simón’s brother, managed and controlled the production of the three plants, which together totaled more than 3,300 m2.
But Simón’s entrepreneurial spirit could not concentrate solely on running a large business. In 2009, he became interested in the development of technologies for the production of the raw materials, primarily rice. In order to improve the technology of snacks, it was essential to produce better raw materials that would allow the vertical integration of the production of healthy snacks. Thus, in that same year, 2009, the construction of a pilot plant for the production of raw materials began.
In 2010, five years after having participated on the Board of Directors of International Healthy Snacks (IHS), the Conacyt-Nafin Entrepreneurs Fund had to conclude its participation in that governing body. As with virtually all investment funds, after a period of five to seven years, the funds sell their shares, either to another investor or to the entrepreneur himself. In this case, the Conacyt-Nafin Entrepreneurs Fund sold its shares to the rest of the other IHS shareholders. A few months after Conacyt-Nafin’s departure from the Board of Directors, Carlyle Group, one of the world’s largest investments funds, became interested in IHS.
There was no greater indicator of the company’s potential. Carlyle Group is not a fund specializing in food technology. On the contrary, it has focused its investment mainly in the aerospace industry, transportation, generation and distribution of energy, and telecommunications and the media. In addition, unlike the endless negotiations between entrepreneurs and investment funds that are typical in this type of agreements, after a few months of negotiation an agreement was reached.
The entry of Carlyle Group in late 2010 had three main purposes.
A production plant was built in the State of Mexico with state-of-the-art technology. This allowed the Sacal family to manage the plant from its corporate offices in Bosques de las Lomas.
An administrative team of the highest level was hired. In particular, the new director of marketing implemented new product designs and a much more complex and targeted advertising campaign.
A new product, Ser O Chips, was designed with more solid production technology, whose intellectual property is even more protected than the previous technology. This new product has zero fat, has fewer calories than low fat and low calorie cereals, such as Special K and, best of all, it tastes like potato chips!
The Future of the Company
The challenge of International Healthy Snacks is to further position the brand, especially in strategic locations, so people know where to buy Ser O Chips and the nutritional benefits it offers. In Mexico, few people consult the tables of the nutritional value of food, and even less of snacks. Consumers who are concerned about their weight and health normally consume products labeled “light” even though they only have 10% fewer calories than the traditional product.
Another important challenge for the company is the internationalization of the brand and the products. In this point, new managers and the new group of investors will have a strategic role.
For Simón, it is clear that the value of IHS is not in marketing or in distribution, as is the case of the leading competitors in this sector. IHS is a technology company and as such it will continue investing in technological innovations. Simón recognizes the role of Conacyt in promoting an ecosystem so that it can be innovated in Mexico.
The Sacal family knows that the applications of IHS technology have a global reach. The next steps are to expand the technology in several ways: to install plants in other countries, to create new products with flavors that correspond to the tastes of each region, to continue elaborating fortified products to combat malnutrition and to make strategic alliances with governments and distributors so that more and more people enjoy and benefit from delicious and healthy snacks with technology made in Mexico.
References
González Brambila, C., Arciniega, L., Ruiz Massieu, D., 2015, Un camino a la innovación tecnológica en México: Quince casos de éxito. Cengage Learning.
Garage Entrepreneurs in Mexico: A Story to Inspire
Few stories about Mexican garage entrepreneurs are as fascinating as that of Simón Sacal. His interest in becoming a technological entrepreneur began at the beginning of the 21st century when Simón was barely 18 years old.
The Young University Student
His parents had returned from a trip with a healthy snack they had bought at the airport. Unlike many of the low fat, low calorie products back then, this cookie tasted good. While trying the new snack, the Sacal family commented on the trend toward eating healthy food and people’s growing concern about watching their weight. The idea about how attractive it could be to market products of this type in shopping centers also emerged. They envisioned a Krispy Kreme- type business model, in which customers could see how the snacks are produced and how the aroma from the preparation of these snacks would attract customers. That family talk, which may have seemed inconsequential at first glance, awakened Simón’s entrepreneurial spirit.
By that time, Simón had studied the first semesters of his industrial engineering career at the Universidad Iberoamericana. There he took advantage of the library resources and began to research the productive processes of snack food. With the help of the director of industrial engineering and a professor of food engineering, Simón was able to understand the basic concepts of the subject and he conducted his first experiments in the production of processed foods in the university laboratory.
Simón’s fascination with understanding how food was processed motivated him to attend every exhibition and conference on the subject.
In less than a year, Simon’s tests had progressed so much that he needed more complex laboratories, so he investigated where the most important research infrastructure in our country in food science and technology was located. The best option was the National Institute of Medical Sciences and Nutrition Salvador Zubirán (Instituto Nacional de Ciencias Médicas y Nutrición Salvador Zubirán) (INN), a research institution of the highest level, which is accountable to the Secretariat of Health.
Not knowing anyone at the INN was not an impediment. The 19-year-old young man met with Josefina Morales de León, head of the Department of Food Science and Technology at the INN. He explained to her that he was researching the production processes to produce low-fat foods and asked her for help in using the institute’s research infrastructure and in testing new productive processes. The young entrepreneur’s enthusiasm convinced Josefina to allow him to use the department’s laboratory one afternoon a week, and not only that, he also received the support of the laboratory researchers.
Within a few weeks, the members of the INN laboratory explained to Simón that what he wanted to achieve had almost insurmountable technological limitations. Until that moment, food production processes faced the dilemma of an inversely proportional relationship between good nutrition and good taste. That is, the more fat and calories are removed from a product, the less flavor it has.
But precisely what distinguishes a technological entrepreneur is his ability to invent a process that is conceptually different. Thus, Simón’s focus was on developing a productive process that would produce tasty, good-textured foods that, at the same time, were low in calories and fat. After many attempts, Simón invented a productive process with which he produced rice cookies that tasted good. With the new technology, by means of pressure and temperature changes, a base of rice and fiber was cooked, without frying and without oils, which could be made in any shape and any flavor could be added. Simon’s innovation seemed interesting, so with the help of his father, Simón hired a law firm to do a global patent search. It was necessary to find out if there was a similar productive process and if there were patents that protected the intellectual property of the process. Patent searches are expensive and time consuming, but Simón believed in his idea and that made him persistent and he did not lose his enthusiasm. Several months later, when the firm confirmed that there was no similar productive process in the world, his enthusiasm grew even more. Encouraged by his father, Simón set up a laboratory in his garage and hired a couple of food researchers to help him once a week in his experiments. With the support of the entire family, he made the necessary equipment to begin the production of the first products. Of course, the results were not good at first. In one of several attempts to make the new equipment, Simón burned the whole electrical installation of his house, but that did not keep his family from continuing to support him.
The Snack Market.
Snack food in Mexico is dominated by a single producer, Sabritas, which dominates more than 70% of the market. Barcel has not been able to increase its market share by more than 20%, despite being part of Grupo Bimbo (the largest bread producer in the world) and having the largest distribution channels in the country.
The figures were not encouraging. Simón was convinced he had developed excellent technology, but he could not find a way to scale the business, so that his business potential could be fully exploited. However, his commitment and enthusiasm continued to grow. He began to consider the possibility of moving to the United States to produce and market his products there. He thought that in that country there was greater appreciation for low fat, low calorie products, so people would pay more for them than in Mexico. In addition, the consumption of snacks per capita in that country is much higher than that of Mexico. He also assumed that marketing would be easier, in the sense that the points of sale do not take so long to pay for the products, there is greater competition and the distribution channels do not belong to the producers, which simplifies the task of marketing the products.
Managing Growth
When Simon was planning to leave for the US, the Conacyt-Nafin Fund for entrepreneurs injected capital in order to build a plant to manufacture the snacks. However, the business proposal not only intended to expand the business, but also to change the business model so that Mexican children would benefit from the HIS (International Healthy Snacks) technology. Therefore, the plant manufactured low-fat, protein-rich and iron-rich snacks, which really contribute to a kid’s good health. Obesity, together with child malnutrition, is one of the most important public health problems in Mexico. Simon was aware of that, and he was really satisfied with the idea of using his technology to help overcome such problem.
A few months after the plant in Naucalpan was built, thousands of Fit-Bits bags, in metallic packaging, were being produced and distributed in schools, in Centers for the Integral Development of the Family (day care centers funded by the government), and in Social Development Ministries. The state of Hidalgo was the first one to be pleased and convinced with the technology. The products were also massively distributed in the states of Quintana Roo, México, Nuevo León, Morelos, and in Mexico City.
Moreover, distribution of the products was extended to other points of sales; products were sold at convenience stores and supermarkets.
In 2007, mass production began. The growth was exponential, and in the next couple of years another two production plants were built, one of 1,600 m2 and another of 1,500 m2. Managing the rapid growth was the achievement of Simon’s father. Gabriel Sacal, Simón’s brother, managed and controlled the production of the three plants, which together totaled more than 3,300 m2.
But Simón’s entrepreneurial spirit could not concentrate solely on running a large business. In 2009, he became interested in the development of technologies for the production of the raw materials, primarily rice. In order to improve the technology of snacks, it was essential to produce better raw materials that would allow the vertical integration of the production of healthy snacks. Thus, in that same year, 2009, the construction of a pilot plant for the production of raw materials began.
In 2010, five years after having participated on the Board of Directors of International Healthy Snacks (IHS), the Conacyt-Nafin Entrepreneurs Fund had to conclude its participation in that governing body. As with virtually all investment funds, after a period of five to seven years, the funds sell their shares, either to another investor or to the entrepreneur himself. In this case, the Conacyt-Nafin Entrepreneurs Fund sold its shares to the rest of the other IHS shareholders. A few months after Conacyt-Nafin’s departure from the Board of Directors, Carlyle Group, one of the world’s largest investments funds, became interested in IHS.
There was no greater indicator of the company’s potential. Carlyle Group is not a fund specializing in food technology. On the contrary, it has focused its investment mainly in the aerospace industry, transportation, generation and distribution of energy, and telecommunications and the media. In addition, unlike the endless negotiations between entrepreneurs and investment funds that are typical in this type of agreements, after a few months of negotiation an agreement was reached.
The entry of Carlyle Group in late 2010 had three main purposes.
A production plant was built in the State of Mexico with state-of-the-art technology. This allowed the Sacal family to manage the plant from its corporate offices in Bosques de las Lomas.
An administrative team of the highest level was hired. In particular, the new director of marketing implemented new product designs and a much more complex and targeted advertising campaign.
A new product, Ser O Chips, was designed with more solid production technology, whose intellectual property is even more protected than the previous technology. This new product has zero fat, has fewer calories than low fat and low calorie cereals, such as Special K and, best of all, it tastes like potato chips!
The Future of the Company
The challenge of International Healthy Snacks is to further position the brand, especially in strategic locations, so people know where to buy Ser O Chips and the nutritional benefits it offers. In Mexico, few people consult the tables of the nutritional value of food, and even less of snacks. Consumers who are concerned about their weight and health normally consume products labeled “light” even though they only have 10% fewer calories than the traditional product.
Another important challenge for the company is the internationalization of the brand and the products. In this point, new managers and the new group of investors will have a strategic role.
For Simón, it is clear that the value of IHS is not in marketing or in distribution, as is the case of the leading competitors in this sector. IHS is a technology company and as such it will continue investing in technological innovations. Simón recognizes the role of Conacyt in promoting an ecosystem so that it can be innovated in Mexico.
The Sacal family knows that the applications of IHS technology have a global reach. The next steps are to expand the technology in several ways: to install plants in other countries, to create new products with flavors that correspond to the tastes of each region, to continue elaborating fortified products to combat malnutrition and to make strategic alliances with governments and distributors so that more and more people enjoy and benefit from delicious and healthy snacks with technology made in Mexico.
References