San Miguel: Expanding the Amaranth Market

Series:
Global Network for Advanced Management
Overview:

In January of 2014, Reforma, one of Mexico’s most influential publications, featured Dr. Benito Manrique de Lara on the cover of its Sunday magazine (Revista R. Forma y Fondo). The accompanying article described how Benito Manrique, his brother Diego, and Bruno Pagliai founded a small amaranth factory in the out-of-the-way Mexican village of Huixcazdhá. The article detailed how the business sparked the development of the town, transforming the place into a “rural utopia” over the preceding 28 years. The article also outlined the unique nutritional properties of amaranth and its potential to be a major agro-business for Mexico.

The Reforma article was not the first time the popular press had spotlighted amaranth. Every few years since the 1970s, some journalist or government think tank had rediscovered the grain and proclaimed it the next superfood.  Writers noted how amaranth is gluten free and high in protein, containing essential amino acids not present in other vegetative food sources. Given Mexico’s twin problems of obesity and malnutrition, analysts observed that amaranth could be a powerful force to improving the nutritional condition of the country. In spite of these glowing reports, the amaranth market had never really taken off in Mexico or in rest of the world.

However supporters of amaranth hoped that this time would be different. Amaranth, as a food product, might have reached a tipping point, where a small niche market could become a staple crop. Numerous amaranth fields were under production, and if the government took an active interest in expanding the amaranth frontier, popular demand for the product might accelerate rapidly.

Benito Manrique established his amaranth-processing company, San Miguel de Proyectos Agropecuarios, in 1986, largely as a development project to create a sustainable business to employ local residents. Despite the plant’s rural location and unschooled work force, the company had pioneered the processing of amaranth into a number of different and unique products. San Miguel had supplied popped amaranth, amaranth flour, amaranth sweets, amaranth snacks, amaranth drinks, and most importantly, amaranth-based protein supplements. The company’s primary customer had been the governments of Mexican states that used San Miguel’s products in their nutritional programs. But the company had also supplied popped amaranth to large-multinational food companies and sold some of its ready-to-eat products directly to the public.

The focus of the company had been in improving its production process while simultaneously working on all aspects of community development within Huixcazdhá. Benito Manrique had encouraged his work force to continuous improvement and they had responded. San Miguel met or exceeded all international standards for food processing, a considerable achievement for a small plant in rural Mexico where the formal education of the chief engineers ended with the sixth grade. The workers also had engaged in R&D, creating innovative production processes and products. The company itself showed a small but steady profit, but Benito Manrique knew that the plant was operating at only 20 percent of its physical capacity.

As proud as he was of the company’s production, Benito Manrique was the first to admit that the company’s marketing efforts were deficient. San Miguel lacked a coherent communications strategy, clear branding of its products, and eye-catching product labeling. Working with government bureaucrats meant that Benito Manrique had dealt more with the technical requirements of the product rather than the experience of the end user. Furthermore, he also wanted to revisit the mix of products and customers the company engaged to see if he could optimize the company’s offerings and distribution channels.

The stakes to getting the marketing/product mix correct were high. With additional production, San Miguel could offer increased employment to its local work force and provide further improvements to the town of Huixcazdhá. Widespread use of amaranth could have health benefits for the entire country as well as provide an agricultural export market for Mexico at a time the country was increasing its food imports.

However if interest in amaranth had truly reached a tipping point, the increased demand could bring in competitors to San Miguel or create demand/supply imbalances that would force up the farmgate price of amaranth. San Miguel had been a first mover in this market, but that was no guarantee that the company would keep in the race once others entered the fray.

Developed in partnership with EGADE Business School, Tecnológico de Monterrey, Hidalgo

Revised Date:
June 21, 2016
Format:
Raw, online
Teaching Note:
No
Suggested Citation:

 Jaan Elias, Mario Alan González Hernández, Carlos Gil García, Rodrigo Canales,and Kaveh Khoshnood, “San Miguel: Expanding the Amaranth Market,” Yale SOM Case 101-14, March 07,2014

Keywords:
  • Mexico
  • Agriculture
Perspectives:
  • Competitor/Strategy
  • Customer/Marketing
  • Employee/HR
  • Entrepreneurship
  • Innovation & Design
  • Leadership & Teamwork
  • Operations
  • Social Enterprise

Acknowledgement

The Yale School of Management’s work on this Global Network case study has been made possible by the generous support of The Brad Huang ’90 Fund for Innovation in Case Studies.