The somersault of Estrella Galicia

The somersault is a test of acrobatic skill where balance plays an essential role. Brewing good beer is also a game of precision and balance that, until now, Hijos de Rivera has been able to combine in Estrella Galicia.

Sitting in front of a beer in his beer museum in A Coruña and with a few minutes to go, Ignacio Rivera, who has held the executive presidency of the family group since December (he is the great-grandson of the founder and had been CEO since 2012), talks about a complex present and a seductive future. “The second half of this year is going to be tough, the market is not for many parties, rates are going to rise…”. The group that owns brands such as Cabreiroá, Maeloc cider, Agua de Cuevas, Ponte da Boga, Fontarel or Auara has just closed a very good 2021, with profits of 94.9 million (growth 79%), and with a turnover that for the first time it exceeds 600 million (there were 610, with an advance of 27%). The workforce has also increased by 16%, to 1,448 people.

They have been like this for years, increasing their capacities from one hundred to one hundred million liters, inaugurating cookers that soon became too small, and reaching regional fiefdoms dominated by other national champions. Until now they had always defended Galician water as one of the secrets of their recipe, which is why they never wanted to open factories far from the A Grela industrial estate in A Coruña, no matter how much transport made their bottles more expensive. But that will change soon.

8,300 kilometers from there, in Araraquara, in the State of São Paulo, they have just begun to build a brewery —which will cost them around 160 million— with which they hope to make a jump in turnover to the round figure of 1,000 million. “Whenever I have dreamed, it has turned out well. I’ll give myself some, I’ve given myself some…”, reviews Rivera. He knows that setbacks can be more painful now. But he does not expect them in Brazil, where he has reached a ten-year agreement with Coca-Cola distributors, who after breaking up with Heineken want to build a new catalog of independent beers in which Estrella Galicia will fit in, in addition to distributing their refreshments. “Brazil has been on our roadmap for a long time. It is a country where the great world leaders are, a very difficult but very curious market, where there was no one who had an alternative like ours. Last year we had significant sales of our (imported) beers.”

The window, although rebound, has opened (Heineken broke with Coca-Cola after buying the Brazilian brand Schin and aspires to become the second group in the country), and Rivera believes that they should seize the moment. “It is a brutal change: we are talking about people who have a whopping million points of sale, crazy. We are working on how we transmit the values ​​of our product”.

The consumption of Brazilian premium brands is highly focused on certain geographical areas and is quantified at 2,600 million liters (for comparison, the entire Spanish beer market is estimated at 3,000 million). “Brazil is the second largest market in the world.” If everything goes as expected, the first beers will come out of the new factory at the end of next year.

He knows in depth all the sides of the coin.

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Their investment plan goes further: they build another factory for 150 million in the Morás industrial estate (Arteixo, A Coruña) and almost 300 million will go to new offices, more machines, better capacities. Where will so much money come from? “We will do it through leverage. Now we have no debt and we have defined the maximum leverage as twice the EBITDA (which was 174 million). It’s very moderate.” And all without “San Dividendo”, as he likes to call the glue that unites the founding family, suffer.

What will suffer is its enviable operating income (28% of sales in the last year), if, as promised, prices will not rise. “The margin deteriorates, that does not stop anyone. We are trying to find more competitive raw materials, contributing from R+D+i, we will have to reduce spending on marketing… we are tightening our belts” because, as she admits, her beers are already more expensive than those of the competition and if stretch the rope it could break. “The first quarter of this year has been good, Easter too… now that summer is coming, the deterioration of the gross margin is going to start to tighten our shoes.”

Barnacles and turnip tops

Be it barnacles, turnip greens, made with orange, paprika or in its basic version, Estrella Galicia is not by far the best-selling beer in Spain (its national share is around 14%), but as Rivera often says, it aspires to be “ the dearest.” “We have a wonderful product, simmered, without additives, in a pure form. People like it, if not, we were dead. We are happy to sell in Madrid, Andalusia, Levante, the Canary Islands, in the North… really, our strategy was not to attack Cruzcampo, Damm or Mahou. Young people have adopted beer, we transmit the brand’s values ​​to people very well”, he reflects.

A bold sports and music sponsorship policy has made it possible. In 2012, when it had not even reached Formula 1, they partnered with Carlos Sainz and are now one of the three Spanish brands present in the championship. With the eight-time world champion Marc Márquez they started from scratch; They support Dépor in A Coruña, Racing de Ferrol or FC Valladolid. His beer is spilled by series like The Money Heist and accompanies pilgrims on the Camino de Santiago. “You are looking for allies who understand your brand positioning, it is a puzzle that you put together,” summarizes Rivera, who would sign right now if they told him that this year will be as good as last year.

He, instead of moving away from management (as owners often do in growing family businesses), moves closer. “This has changed my life. We are modernizing the corporation, getting outsiders to join the board, encouraging more real debates… The mutation is not mine, the family already had that vision”. With many new business units, he plans to give himself another couple of years of hard work. “It’s the wildest plan we’re going to do in our life.” At the end of the jump he hopes to land on his feet.

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