Fidelisoft y el futuro de Loyalty

Sin caer mucho en la parte técnica, FideliSoft es básicamente una plataforma de transacciones de valor agregado que automatiza todos y cada uno de los aspectos de un programa de fidelización, desde la gestión y generación de reportes en tiempo real, hasta la entrega de premios y promociones via POS (Punto de venta) o a través de internet. Lo mas importante y revolucionario de esta tecnología propietaria es que permite la entrega de premios en el punto de venta versus via catalogo (Reward delivery at POS), a través de la integracion de su plataforma con los sistemas de punto de venta de los comercios. Todo pasa por el POS: acumulación, canje y redención de puntos de fidelización.

Se elimina asi el problema fundamental que enfrentan los programas de fidelización y premios de hoy en dia: la logística y su costo. Es decir la selección, adquisición, estoreo, mantenimiento y entrega de premios. A esto se le suma otro problema. selección limitada de items (las clásicas tostadoras, lapiceras y demás (quien necesita una tostadora anyways?) y el tiempo y costo que lleva entregarlos (2 a 3 semanas promedio). Solución? el comercio (tienda) se convierte en el catalogo (ilimitado y a cero costo adicional) y la entrega se hace en el punto de venta (real time)!

FideliSoft le puede brindar a un procesador de pagos (VISA, First Data - ChasePaymentech) una ventaja estratégica al posibilitar a sus asociados (bancos y comercios) reemplazar el catalogo de premios (y toda la infraestructura que se necesita para operar un sistema de entrega de premios) por la tienda / comercio. Es decir que un miembro de un programa de fidelización podría obtener en el mismo ticket de la tarjeta de crédito (impreso por la terminal o POS) un resumen de su balance de puntos y canjearlos en el instante si deseara y en la misma caja (registradora) por cualquier producto de la tienda o bien aplicarlos contra la compra (se convierte en un descuento).
Seria el equivalente a tener cash en la mano. Este es básicamente el Value Proposition de FideliSoft: Rewards delivery at the Point of Sale. Or may be i should say: Cash like rewards delivery at the point of sale. Porque cuando los puntos acumulados pueden ser canjeados por cualquier producto del comercio adherido, es como si fuera cash.

A esto se le suma el beneficio adicional de poder crear (y dirigir) promociones personalizadas que también son impresas en el mismo ticket. Estas promociones son desarrolladas a partir de la capacidad que brinda el sistema de monitoreo de FideliSoft de obtener (y conservar y minar via DataMining) data acerca del comportamiento y perfil del consumidor, no solo en virtud de su comportamiento respecto del comercio operador del programa sino también de los demás comercios adheridos.

Imaginen que el Faena y Etiqueta Negra podrían hacer cross deals donde por cada traje que te compras en Etiqueta Negra te sale impreso en tu ticket que te ganaste una cena gratis en el Faena!? se imaginan el valor que tiene para el Faena poder atraer a los clientes de Etiqueta Negra, que es su target, sin tener que invertir un peso mas que estar adheridos al mismo programa de fidelización? y asegurarte que a todos los que gastan mas de x les llegue tu promoción? priceless! Este es el futuro de la fidelización. y ni hablar de que el cliente va a volver a Etiqueta Negra (o el Faena) por mas...

Investing in Argentina - Wineries

I have been doing some research lately in the wine industry and here are some of my findings.
1 - The wines and vineyards market is in very high demand in Argentina and it is no small feat to find an operating winery/vineyard with "Brand" and presence in the foreign market for sale. It is possible nevertheless to find vineyards with wineries that need some work (refurbishing) or vineyards without wineries and then invest in the winery.
Adapting a winery to elaborate premium wines can cost close to U$2/lt, thats is to say between U$100,000 and U$150,000 based on your production requirements of 50,000 to 100,000 bottles per year. In addition, you need to add that cost of the Oak Barrels which depending on origin can cost between U$900 and U$1200 for a 225 lt barrel (U$4.5 to U$5.5 per lt). If you would want to park (age) the wine for 2 years, you would need 670 barrels = 600k to 800k, which would be outrageous. This is only done by those who have an established brand in the premium market. If you start from scratch, you have to go slower and sell part of the wine with less aging through a "second brand". Besides there are ways to add the oak flavour without the need for the oak barrel. All this to say that with a little bit of "know how" there is no need to have in advance a fully operating winery  and it is possible to start in the business with a smaller investment.
2 - The size you a lot small investors are looking for (50,000 to 100,000 bottles/year) is a bit small and works only for operations that produce premium wines U$10 per bottle in the local market and U$4 FOB export market).
3 - Well located vineyards (Zone 1 = Agrelo, Perdiel, Lujan de Cuyo, Tupungato) and planted with high quality vines are priced anywhere between U$35,000 and U$50,000 per ha. In San Rafael (you want to start becoming familiar with the different regions) vines planted in areas of good soil and with anti ice pellets net installed are around U$25,000 per ha. If the goal is to produce premium wines, specially if it
includes champagne (sparkling wines) and white wines, San Rafael is an interesting alternative. If the portfolio of products will be focused on super premium red wines, specially Malbec, you need to stay in Zone 1.
4 - For wineries adapted to make premium wines the price is between U$1 - U$3 per ltr of capacity, depending on installed equipment. Large and old wineries, set up for regular (non premium) wines are priced much lower but they also require a lot of (expensive) investment.
5 - With a good vineyard, operated to produce quality wines, the yield is about 9000 to 9500 bottles of premium wine per ha. So in order to reach the goal of 100,000 bottles as per your requirements you do not need a large establishment. 15 - 20 has ought to do it. We need to add to this the cost of the winery.

The business in wines today is to produce premium (vs regular or intermediate) wines. Based on all the above info, find below the opportunities i have been able to find, to wit:
- A vineyard in Tupungato, 80 ha total, 60 ha planted 5 to 6o years ago (Cabernet, Merlot, and some Malbec), drip and furrow irrigation system, U$33,000/ha.
- A vineyard in Tupungato, 294 ha all planted, U$43,000 ha.
- 60 /120 ha in Alto Agrelo (excellent for Malbec, next to well know wineries Septima and Ruca Melen), at U$14000 / U$16000 ha. no plants and with wells and irrigation systems in place.
- A winery looking for equity partners, but not sure you are interested in equity investment instead of acquisition.

As per my experience, the most difficult task is to adequate the initial requirements of most small investments to the reality of the local wine and real estate market (one is inexorably affected by the other one) and to the logic and time frames of this business activity and the business cycle. I think that if you
believe that the project is feasible (given your own assessment), even if you might not start with a turn key project there is still a lot of opportunity because there are many properties available.

Cattle Industry update

Even though the ban has indeed been partially lifted, there are still 4 or 5 other measure the government took during the last 12 months that continue to keep the prices depressed about 40% for cattle that is not being exported (our case).
From March 06 until now mainly 5 measures where taken by the government that went in direct detriment of our investments: raised export duties by 10% and remove a subsidy (reimbursement) of 5%, exports ban, imposed a minimum slaughtering weight of 280 kilos that then was changed to 300 kilos (i will come back to this later because it was very impactful) and finally they simply intervened the spot market with a list of maximum prices. Last but not least the price of corn (thanks to ethanol, bad
weather in the Midwest of the US and who knows what else) increased exponentially
(corn was the main input). all this happened in the span of just 6 months. In an industry where you need time to plan, where the minimum fattening time is at least three months if intensive and 8 -12 months if extensive (which is the stage where your cattle was at the time of the measures) the way these events took place makes it impossible to predict said events which would have allowed an investor to have enough timely information to make decisions.

The slaughtering weight limit changed the business model almost completely. the whole model was based in fattening cattle up to about 260 kilos. The market for this category called "bolita (little ball)" which was between 240 and 260 kilos approx was eliminated overnight with the strike of a (presidential) pen. This meant that the feedlot model (intensive corral corn fattening) which is based in a "conversion rate formula" suddenly was no longer possible because that conversion rate (of 8 kilos of corn per each kilo of beef gained) is only profitable up to around 260 (+-) kilos. beyond that the animals start eating more corn to produce the same kilo of beef but the costs of the extra corn eats away the margins.  So all the plans now had to be rewritten and figure out a way to make the best out of this situation. The operators (Ganadera Mallin y Piedra) then decided to take all the animals to the
open range for extensive breeding which takes at least eight months but can last for up to 3 years depending on the age of the cattle but it needs no feed except for the grass. In the meantime the prices in the market have collapsed and the expensive (now sunk) costs that were incurred to feed them (corn and concentrate and the like) can not be recuperated at these price level. While all this was happening and while
everybody involved in the industry was hoping that this was the last intervening measure, new measures would come into play and would make things worse. Should operators have informed investors while all this was happening? probably, but nobody expected this to unfold like this and so fast.

So what happens now? it appears the storm has passed and now its time to rebuild. A couple of weeks ago the Agriculture Minister was sacked (due to the conflict between the government and the producers) This is the first good news in almost a year and a sign that there is political will to change the situation, may be because it is election year and they don't wont the farmers against them?. There have been attempts to re-establish the talks and they announced some measures that if and when
implemented they should have some positive impact in the cattle industry. Said measures have to do with increasing subsidies and reducing intervention in the Liniers spot market (price controls and such) but have not addressed neither the export ban issue nor the high retentions (export duty) just yet, which means that we have to wait an see how much will this changes really impact on the prices. For now they are still very depressed and there have been very little change. not enough to justify selling anything yet. It could take a year before prices accommodate again. But it is also true that these whole ordeal has been a disincentive for a lot of farmers and those who could have switched from cattle to grain, which in the long term should mean lower supply of beef and higher prices.

In my opinion there has been no negligence from the part of the operators but rather a very unexpected and unusual set of measures (war like) from the government against a sector of the economy that has (unfortunately) a high impact on inflation. The whole industry has seen their profitability gone this year due to this very adverse conjuncture.

I nevertheless agree and empathize with investors opinion with regards to this entire ordeal. I am not going to repeat in this report the plethora of attacks the Industry has had to endure in the last 12 months because i have gone in great detail in previous reports about it and at this point i think you are fully aware of the complexities of this entire industry wide situation (operative words are: industry wide). This is not a problem exclusive to one investment in particular.

The life cycle of cattle growing is at least 3 years (from the moment they are born) if you want to eat young steer and can go up to 5 years if what you are selling are cows. This means that the cattle can still remain in the farm for quite some time before it needs to be sold.

Before these set of events cattle fattening was indeed a great opportunity and nobody in his right mind could have ever predicted that the government would start a war against it. This is to say that investments have been lost. it will just require a bit of time and patience to get it back.

For now it appears investors will have to wait a few months before the cattle can be sold at least at close to break even prices.