Gloria, S.A.

completed

Gloria, S.A. is a Peruvian company with three main business divisions: food, paper products and pharmaceuticals. It also has investments in the cement industry through its subsidiary, Cemento Yura, S.A. In 2000, Gloria reported sales of US$226.6 million. The food division (90% of sales) is primarily involved in the production, sale, and distribution of dairy products including evaporated, condensed, and UHT milk, yogurt, and cheese. The company also distributes canned fish and fruit juices with its Gloria brand name. The pharmaceutical division (5% of sales) produces and distributes a range of drugs and cosmetic products. The paper division (5% of sales) manufactures corrugated board, boxes and liner. Gloria has had a leadership position in the Peruvian dairy industry for 50 years. It was founded in 1941 in Arequipa, Peru, as Leche Gloria, S.A. with majority ownership by General Mills company of the U.S. and subsequently by Nestle. The present shareholders acquired the company in 1986 from both local shareholders and from Nestle, and have since progressively grown the business into its present more diversified profile. In 1998, the company started a strategic investment program (the project) whose main objectives were to (i) consolidate and rationalize its dairy sector operations into a new production facility in Huachipa, near Lima; (ii) build a new UHT plant; (iii) expand domestic milk collection; and (iv) upgrade its paper division with a new plant in Huachipa. The project will allow Gloria to expand northward from its traditional base in Arequipa, southern Peru, bringing it closer to its main consumer markets. Development Impact: IFC’s support of Gloria will have a positive development impact in Peru in three areas: First, the project will support rural farmers serving the Peruvian dairy industry with technical assistance (Gloria assists its suppliers by providing technical assistance including breeding stock improvements, cattle nutrition to improve quality and yields; veterinary services) and reliable market access with guaranteed daily milk collection and regular payments; Second, IFC will support an important Peruvian employer: the company has 1,720 employees and its operations are highly integrated, extending into many remote and rural communities. The company works with 15,000 farmers, most with less than 10 head of cattle; only 5% of Gloria''s suppliers have more than 100 head of cattle; and Third: Gloria''s activities will increase the consumption of safe, quality, pasteurized milk in rural areas in Peru by making available both canned and UHT products (which require no refrigeration and have a long shelf-life) through its extensive distribution network. Peru’s milk consumption has shown an increased trend, but it is currently only 58 liters per capita p.a., compared with the FAO recommended level of 121 liters per capita, p.a. (source: USDA Peru: Dairy situation 2000). Finally, Peru is a milk deficit country. The project will help further develop the Peruvian dairy industry, and the government of Peru is encouraging greater domestic milk collection and dairy production as a way of reducing milk imports. IFC Role: Among its other contributions, IFC will provide Gloria with long-term financing currently not available locally. Gloria embarked on its strategic investment program prior to Peru''s financial distress of 1999 and political crisis of 1999-2001. Due to recession and political uncertainty in Peru, the company approached IFC for long-term financing on terms not available locally. The company requires adequate tenor given that it has entered a consolidation phase in which it will integrate new assets and complete the rationalization of its operations between its traditional southern base in Arequipa and its new plant in Huachipa, Lima.