Ivan Moura

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This is a great article, thanks Erin!

I find very interesting that global CPG players face so many challenges in their supply chains that we cannot even imagine. Scale gains are important and that results in price advantage versus smaller or regional players, but these scale gains come with additional challenges and costs. As Erin pointed out, some large CPG companies are increasingly facing the challenge of sourcing products from different countries, with copackers located somewhere else, and sometimes even having to deal with short shelf life and refrigerated products. Global protein players, such as JBS, have economists and traders on their teams to minimize the impact of commodity prices on their bottom line. Leading global chocolate players are sourcing cacao from several different countries so they can protect themselves against local spikes in prices or lack of supply. There is evidence that these strategies are working and I can see all the benefits for them. Therefore, I agree with Erin’s suggestions on using available financial instruments, such as derivatives and futures, and also focusing on geographic diversification in order to reduce variability or prevent disruptions in these complex supply chains.

I think the point that Bruce raised is very valid, though. Companies have to use derivatives to protect their operations and not to speculate. In the last decade we had to emblematic examples in Brazil of large companies that incurred in huge losses and ended up being sold to competitors because they were using derivatives for speculation and not only for hedging. One of these companies was Sadia, a CPG company focused on ready-to-eat frozen meals. The company lost ~$900m after high variations in the exchange rate.[1] Instead of hedging its exporting business, the company was making directional bets on exchange rates.

[1] https://www.reuters.com/article/sadia/brazils-sadia-has-4th-qtr-loss-on-forex-derivatives-idUSN2728125120090327

On December 1, 2017, Ivan Moura commented on RE/MAX: How to Stay Relevant in the Age of Digitization :

This was a great read. Real estate brokerage is being disrupted from several fronts and I think (or I hope) RE/MAX and other traditional players will not be able to maintain the same level of compensation to the value that they are currently providing to sellers and buyers. The article and previous comments have already mentioned Redfin, Zillow, and Realtor.com as examples of some companies disrupting the space. A few weeks ago I went to a Company Presentation here at HBS and met the founder of REX. It was fascinating to hear more about what they are doing and how fast they are growing.

REX is a real estate broker that uses AI and machine learning to find vendors and buyers. They act as a real estate broker and charge a commission of 2%, instead of the traditional 6% that current brokers do. [1] REX uses a complex software powered by big data and AI to find users on the Internet that could be potentially interested in selling their homes. After this, REX use the same software approach to find potential buyers and close the transaction. It was successfull in some of the first cities that they had operations and now they are expanding aggresivelly. This is just one example of the several companies that are being created to reduce fees in the buying/selling process of houses and properties. Hope that in a few years from now we will look back and be very surprised by how much money we were paying as transaction costs.

[1] https://rexchange.com/

Thank you for the great article, Melissa.

Jeff Bezos is fanatic about customer satisfaction. I think he will do whatever needs to be done to satisfy its customers. There is, however, something that is hard to balance. Customers want low price and small/local products, and this is not possible to co-exist. A local brand simply cannot sell a craft beer at the same price that AB-InBev does because of scale. I can’t see this changing, but these products could perfectly co-exist in the supermarket shelves. Whole Foods could open space to the authentic and local brands, while offering its own 365 brand at low prices in the supermarket. They are already doing this and I bet this is what they will continue to do.

The demand for local and authentic products exists and will continue existing independently of what Amazon chooses to do. A few weeks after the Whole Foods acquisition, Kroger announced that they would support and foster small brands in their supermarket shelves. They are now announcing on their website and stores that “Kroger Loves Local” and “We Are Local”. [1] As an avid consumer of authentic small brands, I am not worried anymore because if Amazon chooses to compete on the low-cost segment and exclude local brands from Whole Food’s shelves, other players such as Kroger will take the lead on that. However, I think Jeff Bezos will do his best to offer both products and satisfy both the cost-conscious through the 365 brand and the millennials who are looking for more expensive local products.

[1] https://www.cnbc.com/2017/09/25/as-amazon-takes-whole-foods-national-kroger-thinks-local.html

On December 1, 2017, Ivan Moura commented on Can Colombia’s one-stop App become profitable? :

Thanks for your article, Daniela.

Rappi seems to be doing an outstanding job and was able to attract high-profile investors. I worked in Venture Capital in the past in Brazil and we looked in 2012 at a few companies that tried to do the same service in the country. Those companies were not able to attract the amount of capital, and therefore the amount of users to generate the minimum network effect needed so the company can operate. Maybe now, five years later, with apparently a very good team and a decent amount of capital, Rappi can become the platform for last-mile delivery in Latin America.

When we look at Instacart, Postmates, UberEATs, Amazon and several other players, it is still very unclear which model is going to win here. They may even co-exist successfully. I think Latin America has at least three advantages when compared to this “battle” in the US that may help Rappi succeed in the region.

First is lack of competition. There are much fewer competitors in the space and none has achieved critical mass. In Sao Paulo, Rappi has launched recently and is acquiring users aggressively simply because there was no one doing it with scale (or capital) before.

Second is poor logistics infrastructure. E-commerce companies and even physical companies such as grocers depend on last-mile providers that have much less capabilities and infrastructure than UPS, FedEX, or USPS. Therefore, shipping tends to be more expensive and to take longer in Latin America. As a result, the value proposition of having a player such as Rappi doing real-time delivery increases relatively to other alternatives that a customer may have.

Third is the popularity of motorcycles. Motorcycles are relatively cheap and very popular in the region. They have been used as a way to quickly deliver documents and goods for decades. During rush hours in metropolitan areas, the only cost-effective way to quickly transport goods is by motorcycles. Considering that a sizeable part of the population owes a motorcycle, it makes a lot of sense for Rappi to use these assets in its favor.

Hope Rappi can thrive in Latin America, despite all the challenges it will face.

On December 1, 2017, Ivan Moura commented on El Niño Food Crisis in Southern Africa :

Thank you Yuwa for bringing this article.

The situation is very sad and clearly not easy to solve. I really liked your suggestion on growing draught-resistant crops. The Northeast region of Brazil has been suffering from severe droughts for decades, it is a semi-arid region with very poor population. Government and local associations have tried several programs to alleviate the tough living conditions in that region, and among those were distributing water tanks, minimum pension for farmers, local educational programs on “combating the drought” for farmers, and fostering micro-credit. [1] I understand, however, that many of these initiatives require a minimum amount of investment in either infrastructure or in professionals and that might not be a solution for Malawi right now in the short-term.

The short-term solution of having Government-supported ADMARC as a mediator helps to prevent human deaths and plays an important role in the ecosystem. I would be worried if potential inefficiencies in a government-owned monopolistic player is not resulting in higher overall maze prices in the market. Besides this issue, I am completely in favor of having the Government investing tax-payers money in order to alleviate extreme conditions for this part of Malawi’s population. For the longer-term, I think initiatives focused on providing minimum capital and minimum education for small farmers, so they can not only sustain their families, but also generate income selling to third-parties, is the best solution.

[1] http://www.ipsnews.net/2016/12/no-more-mass-deaths-from-drought-in-northeast-brazil/

On December 1, 2017, Ivan Moura commented on The Beef with Beef :

Thank you for this article, Lisa!

Before getting into the question on beef consumption, I just wanted to bring in more background on JBS. JBS was run by two brothers, who inherited the company from their father. Until pretty recently, these brothers were controlling shareholders and main executives. JBS went from being an unknown and small player in the early 2000’s to becoming the world’s largest beef producer. This huge growth was fostered in part by billions of dollars in loans that the Brazilian development bank lent to JBS. The Batista brothers were growing the company, receiving loans from governmental entities, buying up rivals, and were also buying politicians.[1] In September, JBS CEO Wesley Batista and his brother Joesley Batista were both arrested.[2]

Based on the article and the facts on beef production, I agree with previous comments that sustainable agriculture is bringing incremental improvements to the industry, not radical. Investments in R&D, regulatory changes, energy efficiency, water disposal, and all other initiatives are definitely positive to sustainability and effective in reducing the huge externalities caused by beef production. A more radical impact would be caused by a shift to alternatives to beef protein. Beyond Meat is a company working on producing plant-based meat substitutes, as well as Impossible Burger. Their belief is that by creating tasteful alternatives to meat, consumers will shift demand from beef to their products and, with scale, they will offer a very competitive alternative for consumers. Consumers are more and more educated and there is a seismic shift towards healthier products across consumers of all classes, as long as they can afford it. As long as these new companies can bring scale to their production facilities and bring competitive prices to its consumers, I do think they will help change consumer behavior towards a much more sustainable type of protein. This would result in a radical transformation in the industry.

[1] https://www.economist.com/news/americas/21722696-meat-mongers-whose-testimony-could-end-michel-temers-presidency-brazils-fabulous-batista

[2] http://fortune.com/2017/09/14/jbs-batista-brazil-temer-corruption-insider-trading/