Friday , January 27 2023

Capital magazine Cencosud in


On December 14, at the home of Horst Paulmann, located in Quinchamalí, a lunch was held, attended by Cencosud's board of directors and about 50 directors of the first line. It was also an opportunity for company employees to meet Hans Dieter, the fourth son of Cencosud, who was born on June 19th.

Her eyes were shining, and the most humorous part rose. We will all take advantage of the guagamatear that day, "says an executive who attended the event.

However, there was not good news. On the same day, the company announced publicly that two of its managers decided to leave the company. One was Rodrigo Larraín, general manager of the retail sales giant who was with the company for six years, and Rodrigo Hetz, corporate director of Human Resources, who was almost eight years old. Both were part of the team formed by Jaime Soler, the former general manager, who left the company on September 30th.

They were not alone. Carlos Madina, Managing Director of Shopping Centers; René Vuskovic, Regional Operations Manager; Sebastián Valenzuela, the finance director of the area, in addition to Tomás Zavala, Corporate Strategy Director, left the company. Did something happen.

The differences of opinion with HP, as Paulmann says internally, and the rhythms in the decision-making process have begun to worsen relations, to explain those who have followed closely this exodus.

"With Jaime's departure, the other managers started to deal more directly with Mr. Horst, and it became more obvious that the changes he wanted to promote were not fully shared by him," explains an executive close to the company.

Jaime Soler has drafted a roadmap that included a profound transformation of the company. It has been a future growth strategy, ranging from talent management, new retail formats, cultural changes in how it works, etc.

The vision of this roadmap was that retail trade in the world is threatened and that adaptation requires rapid movement and change. "The threat is not just e-commerce and Marketplace, but also initiatives that develop digital activities and act as intermediaries between retailers and customers, and so stores become a winemaking factory," says an executive.

In early 2018, Soler became convinced he had to give up Cencosud. He spoke to Horst Paulmann and tried to hold him back and extend his stay. Soler, then, decided to put it once in departure, what which was released on June 29. Those who know it say the main reason was that the executive felt it was not easy for him to fulfill his promises he made on the market and to have strategic differences with HP that he personally maintained a very good relationship.

The list of resignations was added on December 27 that name of Renato Fernández. The corporate affairs manager and part of the busiest circle of the entrepreneur left the company this week and will be replaced by company lawyer Sebastián Rivera, who will perform the dual function of legal and communications. And finally, last Friday, Eric Basset resigned, who was appointed Director of Home Improvement in October.

landing in Alto Las Condes

In Rodrigo Larraín's environment, it is said that the CFO then made the decision to leave for a while and intended to do so effectively in the first half of 2019. The way the company was running after Jaime Soler's departure, have anxiety.

When CEO's resignation was announced, Paulmann decided to move from the Costanera Center building to the 7th floor of Alto Las Condes, where corporate offices are located. In recent years, the entrepreneur's energies have focused primarily on real estate, remodeling and extension projects, but once installed in the headquarters that has changed: he has begun to participate in many day-to-day decisions. Internally, it was read that this change would be a transition, in order to induce the new general manager. But, tell the people working in the company, they spent a few months, and the company's controller continues to actively participate in everything. "This company has a relevant corporate governance issue in which directors are less and less empowered, and Don Horst is more and more a manager, not a president. And this has been emphasized," says a former collaborator.

"Although Paulmann is the controller, all Chileans have actions in Cencosud through our AFPs, but he believes society is his." What do AFPs think? Because they should be complicated with the operation and corporate governance of the company. Buichi would leave in March, Mario Valcarce would have stayed for three years, how does he protect the interests of minorities? "Asks a retail executive.

"This is a company that sells 16 billion dollars with presence in five countries, and it needs to move fast." Nobody can do it alone, you have to delegate, and confidence in advancing age is terrible, adds a former executive director.

Larrain realized that in the coming months things would not change. "There was a lot of intervention in Soler's time, but Don Horst wanted everything to be done through him." Rodrigo's position involved engaging in the market and required autonomy, and then to be able to execute these decisions, "says one close to the company.

Cencosud had tried to cut the debt for four years. Larrain's main priority was to execute a plan to resolve it so that the company can resume growth. In August 2017, a $ 1 billion asset sale plan was approved, which involved the elimination of non-strategic assets over a period of 12 to 18 months. In a year, only a hundred million dollars were handled. Inside the company, it says the administration has put more options to the board of directors, from selling properties and land that have not been exploited, dropping smaller shopping malls, and leaving Brazilian businesses that are deficient, selling the business with cards credit in Peru and Argentina, just as the company did in Colombia, Brazil and Chile. But it all comes in Stand up. "This has generated frustration for executives. They felt they had all the weapons to solve the debt problem years ago, and nothing has ever been reached," explains a retailer's connoisseur.

The debt of the company was deepened at the end of 2012 with the acquisition of Carrefour in Colombia, for which Cencosud signed a loan with JPMorgan Chase Bank for $ 2.5 billion. The following period was negative for the markets in Latin America and caught the company very indebted and depressed. Prior to Colombia, the price was 2,600 pesos. It is currently half its value. "The downturn has been sharpened in recent months because Cencosud has not made clear steps on how to solve the financial problem, adding to the complicated situation of the Argentinean and Brazilian markets, which are half of the company's business." The cherry on the cake was the departure of the directors of the first line "explains an industry expert.

On August 31, Cencosud announced that it would uproot the opening of its real estate division and that the initial public offering of English shares would be completed between March and April 2019.


Larrain's departure in December put the market on the alert. It was the one who led the IPO process in the Shopping Cencosud Center area, which is why investors have not seen their decision with good eyes. Immediately, fears that the company decided to let the operation in suspense, something that had already happened in 2015, began to spread. The share fell by 5.83% in the days that followed and began rumors about the reasons for his resignation. "At the end of 2018, there was uncertainty as to whether the IPO was to be carried out or not. The company is very pressurized and if it fails to reduce its indebtedness, it may lose its investment," explains the bank's analyst investments following Cencosud's action.

The AFP has also set its alarms. In the days that followed, the company announced that the position of financial director would fall before Matías Videla, the Argentinean who was just over three months as Director of the Shopping Center division. With his reserved and direct style, he was then the one who met pension funds and other investors to try to calm things down. The message: that the operation would go anyway and that they continued to work according to the proposal to become final in April.

The market seemed to listen; In the last few days, the company's shares have grown strongly, and at the end of this year they were 1,370 pesos, compared to the 1,162 pesos that came after Larrain's resignation.

However, there are still doubts, especially with regard to deadlines. "Between February and April, risk rating agencies make their reports so that any postponement will reopen fears about the company's lower investment," an analyst explains.

There is also no clarity on the market as to which assets will be included in the package. Although at first it was said that strip centers would have gone, today they are already deciding to go to the perimeter as well as the shopping centers in Chile, Peru and Colombia. It would be outside of Argentina and a single, such as Jumbo Bilbao, the supermarket that sells most in South America.

Today, a group of ten people are working exclusively to continue the IPO launch. As the company says, none of them will take holidays. "The division of companies has already been made, the perimeter is defined, for these days we are working on registering in the CMF Financial Markets Commission Registry and we just define the percentage and the price," explains a source. of the company.

Although the company said its plan was to sell between 20% and 30%, the market is believed to be closer to 35%, although at home it ensures it is eliminated and is believed to be 20%.

"Horst Paulmann did very good things but he quickly paid for the sins of buying Brazil, which today is a good that can not be repaid. The company was worth 18 billion dollars in 2013 and today it amounts to 5, $ 8 billion, according to Bloomberg. However, what is happening is not serious, everyone knows that Cencosud is on a break, has entered a plateau and that when Paulmann leaves, the action will increase by 20%, "says a senior executive of the local investment bank.

Gebhardt's hand

"It was love at first glance," Horst Paulmann said of Soler's successor. The businessman met with Andreas Gebhardt's parents at the age of 22 and worked at the Crillon Hotel, so he barely heard about him, called him on the phone and interviewed him. Argentina was the general manager of Enel Distribución and is currently negotiating the general leadership of Enel Chile. In two days, Paulmann convinced him to go to work at Cencosud.

In his appointment, the Human Resources Director, Rodrigo Hetz, did not attend. Nearly the former executive says the fact that it was not taken into account in the decision would have influenced his resignation.

Since Gebhardt landed in the retailer, on October 1 he was always accompanied by HP. Those who work with him describe him as "beautiful" and "calm." Although he has tried to promote certain things, in general, his answer is "to see him with Don Horst." Unlike previous executives who had a career in the company and knew about tissue and its management, the current executive does not know much about retail, so they say they still do not show autonomy in making decisions.

"This is a company where there has always been a CEO who orders and delegates downstairs." So did Laurence Golborne, Daniel Fernández, Pablo Castillo and Jaime Soler, and Andreas, "what is your proposal?" When going out in the yard, , provides a high source of retail.

Where he saw his hand was to take over directly the digital area that previously reported to Zavala and who was headless for more than six months, and from there was in talks with Rappi to make an alliance in the office desks Jumbo; apart from the appointment of Antonio Ureta in the corporate management of supermarkets, a position that until then did not exist. During these three months, he met with AFPs, investment banks and the market and stressed that the IPO is part of his mandate.

Resistance to change

From 17 to 18 December, two thousand Cencosud employees met at Estadio Palestino. As he did in a similar event the company had in his days in Buenos Aires, Horst Paulmann took the stage and began to speak. "We are food agents," he told his employees in a speech, that those present said he was very nostalgic for the past. "He talked about returning to the roots, what I was," says one member of the company.

First-line executives who are accustomed to the founder of the company, listening to their stories and understanding their language, say that what the businessman wanted was to ask for the company's identity to stay – something that is part of the differentiation it has with its competitors – always placing the customer at the center of the business. However, some of those present have criticized the lack of vision for the future.

Paulmann will turn 84 in March. It still has an impetus but faces a complex situation in immediate challenges such as digital and long-term digital imprint, unlike the past where it has always been clear about how things have been done, says a former collaborator.

The most obvious example and one that is constantly heard on the market is that while Walmart paid $ 225 million for Cornershop and Falabella, inaugurated a new robotics distribution center and bought Linio, Cencosud seems to fall asleep on lauri in digital matters.

"HP totally declined to make an alliance with Cornershop," says a prominent executive. For this reason, the company focused on developing an internal platform (Jumbo Ahora), which has the same goal: to make acquisitions in 90 minutes. According to company data, the project has grown steadily. Last year, online supermarket sales increased by 33%, and shop stores grew by 30%. Today, about 8% of sales in this area are through this channel, while in supermarkets it reaches 3%.

The digital machine that led Zavala, which was reported in the areas of digital transformation, consultancy, data analysis, strategic planning and Cencosud points were approved by the CEO. "Soler has made a lot of decisions, which made HP nervous because it felt like losing control over the company," says a company close.

Factor Piñera

The innovation team is headed by Cristóbal Piñera Morel. The youngest of the president's sons joined the company in 2017, two years after Boston, where he did an MBA at MIT. Although, before working alone, at the end of the year, they added five more people who depend on it for their team and who are working on developing "disruptive proposals" related to technology. Piñera, on the other hand, reports to the digital transformation manager Alejandro D'Andrea.

"In retail, the impact of automation is enormous, as you put the artificial intelligence of processes so that decision-making is more effective." Before decisions are more intuitive, but today there are data that allow you to handle much better stocks, how prices are set, how choices are chosen, how you communicate with customers and often embedded that require very strong cultural changes, "says a former executive director. He added, "Everything here was supposed to go through Horst Paulmann, and not only him, but an important line of the company that acted on this criterion. You can try to minimize these things, online supermarket sales are low and there are still people who and I think the important thing is the store.

When you talk about Amazon in the company, there is a repeated discourse: the threat to Cencosud is much lower than for its competitors, because only 7% of sales come from stores. 72% of the profit comes from supermarket activity. That being said, in the first line are aware that they are being debited in this matter. "The impetus for digital transformation when you do not have the president's permission is not easy. And Horst Paulmann continues to talk about selling yoghurt and chips," explains a former collaborator.

Peter's role

The second of Horst Paulmann's four children, Peter (48), has assumed an increasingly dominant role in the company's commercial centers. Although he does not have a position in managing the company, in his role as director of Cencosud, he is particularly interested in the area that is becoming more and more relevant due to the announced IPO announcement, which has been happening since 2002 when he was incorporated into the government corporate body. Department of Shopping Centers. He is currently running the Commerce Center Committee, which analyzes operations, analyzes contracts, among others. Those who know him say he has a commercial nose like his father, but he's more reflective. In addition, he owns the Genial toy chain.

Her sister Heike, the only female descendant Paulmann, is also the director of Cencosud and is mainly interested in sustainability issues. Meanwhile, the oldest of the children, Manfred, does not attend the director.

The new iron circle

• Andreas Gebhardt. Cencosud's CEO has worked for 25 years in the electricity sector, and before taking over the retailer he was the general manager of Enel Distribución Chile.

• Matías Videla. The new CFO is one of Horst Paulmann's closest directors these days. He has been with the company for 24 years and has known the businessman since he lived in Argentina. Prior to taking control of the Shopping Center division in October last year, a position he spent less than three months, he was the supermarket manager in Argentina.

• German Cerrato. In December last year, he took over the director of the Shopping Center division to replace Videla. He worked with the company for 11 years and was former Director of the Argentine Commercial Centers.

• Antonio Ureta. He came to the Supermarket Division in October last year. Before that, he was the head of the Home Improvement division. It was formed under the direction of Jaime Soler.

• Ricardo Bennett. General Manager of the department store by Cencosud. Before that, he was Corporate Business Manager.

• Carlos Mechetti. He was Cencosud's legal director since 1994.

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