Two miles north-west of the famous Interlagos Formula One racing circuit stands a group of offices, laboratories and warehouses that is the centre for one of the most successful family-run, and yet relatively unknown, conglomerates in Latin America’s biggest economy – MCassab Group.
Outside the turnstile at the entrance to the complex, scores of afternoon-shift employees and delivery workers jostle to gain admittance, a process that takes at least 10 minutes. Security at every major Brazilian office is extremely tight. Behind a one-way screen, an invisible woman briskly repeats and confirms appointments via intercom, and the queue inches forward. It is a rare chance to step inside MCassab’s headquarters and to meet the company’s chief executive Fábio Cutait and his son-in-law, Alexandre Vasto.
Cutait, 73, is every inch the successful Brazilian businessman, exuding a purposeful but relaxed charm. Poring over his Bloomberg terminal, Cutait seems as much genial gentleman as business titan. From chemicals to cosmetics, Lego to land holdings, feeds to phosphates or food, MCassab Group is a Brazillian behemoth operating in a broad swathe of sectors. With revenues of $511 million (€370.6 million) last year, and $680 million expected this year, the diversified Brazilian – and increasingly international – group is constantly looking to expand.
“We are traders by inclination. We are always looking for opportunities,” he says. “When we find opportunities, we study them and decide whether to invest or not,” Cutait says.
The third-generation family business today appears as Brazilian as any other domestic conglomerate, but like many others that have made their mark in Latin America it originally hails from a very different part of the world.
Mansur Cassab, and his two brothers João Pedro and Elias, immigrants from Abadieh, near Beirut, Lebanon, set up the company in 1928 to export coffee and cotton to Lebanon and the world. They were part of a Lebanese diaspora, which began in the 1880s and was triggered by frequent outbursts of civil war – their descendents now number around 20 million globally.
The brothers established the company in Morro Grande on what are today the northern outskirts of São Paulo, and later expanded into the municipality of Leme. In 1948, the company transferred its headquarters to the city, and began a new phase – what is now its chemicals and pharmaceutical import-export business.
In the 1950s, the company went into cotton storage and warehousing. In 1969, its animal technology unit was set up, supplying feeds to the poultry, equine and swine industries. Fast forward to today and in the past decade, the group has opened offices in Buenos Aires, Shanghai, Miami and Dubai, set up a new unit, nuNAAT Cosmetics [see page 24] and acquired the exclusive Brazilian distribution rights for Danish family business and iconic toy brand Lego. Already a major presence in Brazil’s major cities, it expects to open two of the toy stores in the north-east of the country soon.
Cutait, a Brazilian whose family hails from Tyre, in southern Lebanon, joined the company in the 1960s and ended up marrying Cassab’s daughter. In the late 1990s, he bought out MCassab’s entire shareholding, and today, he and his family enjoy 100% control of the company. Family control is a common ownership structure in Brazil, accounting for 70% of its largest businesses, according to the Family Firm Institute.
Family remains at the core of MCassab’s operations today, as it did 86 years ago. In 1979, Cutait’s three sons, Mário Sérgio, Victor and André, joined the company, and continue to hold key leadership positions.
“The company benefits from being family run. We have strong relations among family members. It’s a very strong relation between me, my sons and the grandsons,” says Cutait. “[My] sons run different divisions. Mário Sérgio takes care of the animal feeds business and Victor looks after our foods unit. André is looking after consumption, including our chain, Spicy Stores. The stores are for hardware: today we have 35 and by the end of the year we’ll be 40 all over Brazil, from the north-east to the south.” Cutait’s daughter, Angela, helps in the retail stores and her husband, Alexandre Vasto (pictured above with Fábio Cutait), manages nuNAAT, their own cosmetics brand that the company has been exporting since 2006.
Family communication is vital to the company’s success. “One very important reason for the good relations in the family is that nobody gives orders to anyone else,” says Cutait. “I don’t give orders to my sons, and they don’t give orders to each other. We decide everything together. We often lunch together, and discuss issues. We take very quick decisions. We don’t have to wait for big decisions, and everybody knows what decisions others have made.”
This shared leadership model has allowed MCassab Group to keep on top of its diverse interests. It has 15 business units and most of its revenues are domestically generated. Last year, some 70% of them were in the chemicals unit, the second-largest chemicals distributor in Brazil, with a portfolio of over 1,000 products. It has 1,200 employees and almost 2,000 indirect employees.
At the moment Cutait’s number one priority is focussed on a rather unlikely area: fish.
“This is a brand new business for us. It could get very big. There is a huge potential for fish. We invested $10 million in the business,” says Cutait. “At the end of [the] year, we will [process] 800 metric tonnes of tilapia [a freshwater fish] a month. This will be mainly for domestic consumption. We will start exporting in 2016.”
The company owns 35,000 sq m of warehouses in São Paulo. In southern Brazil, more are located in Rio Grande, Paranagua and Recife. A plant in Mato Grosso produces phosphate. Another in Santa Catarina produces animal feed and a third in Paranagua chicken feed. The group has earmarked 143,000 sq m of land for expansion, over a tenth of it devoted to chemical storage. Given the growth, the group is moving to new headquarters 30km from its current location in 2016, to allow for further development.
Finance comes mainly from bank loans, the Brazilian Development Bank (BNDES), which aims to facilitate the expansion of infrastructure and industry in the country, and also from group cash flow. The group invested R$150 million (€48 million) in the past four years on land for distribution, plants, 15 new stores, and equipment, as well as offices for IT and human resources. The company has no plans for an IPO or private equity infusions and is more on “the buyer’s” side today, it says.
As a company so reliant on the efficient movement of goods, Cutait sees the need for a logistics shake up. “Brazil’s main business is agribusiness. This is not going to suffer. But the government has to find a way to improve logistics. Port infrastructure is very poor in Brazil. The government wants to give the ports to the private sector. It is now giving incentives to the private sector to invest in them.”
Change is necessary. Earlier this year, 20km tailbacks choked Santos Port, the main international maritime gateway serving São Paulo. The culprit was the sheer number of soya bean trucks carrying one of Brazil’s main exports into the congested right bank of the port city for loading into bulk vessels that will take Brazil’s main crop to destinations all over the world.
Cutait has other misgivings about the Brazilian economy, among them its shrinking balance of payments surplus. “Today, the Brazilian economy is underperforming. The government of the past 10 years has made no investments in infrastructure. Brazil’s exports are raw materials. We are suffering in exports for this reason. Our international trade surplus is going down. In 2012, it was around $22 to 23 billion. The government expected it to be between $12 to 15 billion last year. It’s falling.”
He says the government has taken the traditional route to stimulate exports—weakening the real. “In 2012, the government began devaluing the Brazilian real. It saw a 20% devaluation against the dollar, falling from between R$1.63 to R$1.65 to R$2.00 by the end of 2012.” This devaluation has continued at pace. It is currently hovering around R$2.20, having been as high as R$2.43 in recent months. At the start of April it sat at R$2.26. But currency weakness is a double-edged sword because despite the benefits, the weakening of the real has also made it more difficult for the company to grow its international business, as its eye is also fixed on imports.
“We’re covered partially with hedge instruments and our raw materials and products are internationally priced in US dollars, so if the dollar rate increases the same happens with prices in real,” says Vasto. “Our export figures are not enough to make a ‘natural’ hedge against our imports.”
Cutait is more optimistic for Brazil’s long-term future. “Consumption in Brazil is going up. The government is giving incentives for consumption. A lot of Brazilians are coming to the market. Today we have 200 million people. Some 80 million are in the market and then you have 120 million coming slowly [into this market]. We believe that in the coming years, the Brazilian economy is going to improve mainly because of consumption levels.”
What then does the future hold for MCassab Group? Despite the integral involvement of the next generation, the question of succession must be looming large. Cutait won’t comment on media reports that the conglomerate will eliminate the chief executive job when he eventually steps down. The reports suggest the replacement will be a board including Cutait, his four sons and Vasto that will be formalised in 2014 and will strategically monitor the businesses.
Cutait is sanguine about the company succession, asserting that there will be little change in day-to-day operations when the day comes for him to retire. “Today, if I’m not here, the business will be run in the same way by the next generation. I imagine they will continue in the same way as we are running the company today,” he says. “New family entrants have to prove their ability to run the business. Together, we are much stronger.”
Still, fourth-generation family members who show an interest in joining MCassab must prove their credentials before they can get a foot in the door. “The next generation don’t come [down] by parachute. They come and talk with us, get to know all the companies and everything that’s happening and then move to a department,” says Cutait. “We have today a good working relationship in the company, and it is open for any of the grandchildren to join. They have to come to the company and decide what they would like to do.”
Like the rest of his countrymen, a twinkle is never far from Cutait’s eye, and, like them, he is quick to extol the opportunities bestowed by Brazil’s abundant natural resources, sheer supply of manpower and irrepressible joie de vivre. “The rest of the Brazilian economy is growing, bit by bit. In time, we will be the world’s fifth largest economy. We have a great future.” MCassab may not remain below the radar for much longer.