Pepita Disco PPM:
Margins and Elasticity
One morning in January 2012 Carolina Araujo walked across the factory floor, through the curing room, and into the executive offices at Pepita Disco PPM (Productos Para Mascotas)
SRL,1 Uruguay’s second-largest producer of beef-based dog food, treats, and toys. She had recently taken over the family business after her father’s retirement, and while she respected the company’s nearly eighty-year history, she felt that Pepita Disco had grown complacent with its market share and was basically preserving the status quo. Carolina planned to re-energize the employee base and grow Pepita Disco’s business faster than the overall market.
Pet Products Market in Uruguay
Uruguay’s pet products industry grew in direct proportion to the country’s emergence as a global beef producer in 1995, when the World Organization for Animal Health declared its cattle free of foot-and-mouth disease. Combined with certain political developments in neighboring
Argentina that had hampered the exportation of Argentine beef, this certification launched more than a decade of explosive growth in the Uruguayan beef market, which had until the late 1970s been under heavy governmental control. Uruguay’s 3 million residents were outnumbered nearly four-to-one by its cattle, and the country enjoyed a strong reputation in the higher-end organic and grass-fed beef segment. Total beef production in 2011 was 380 million metric tons of carcass weight, 75% of which was exported for a total exportation value of approximately UYU 14.1 billion.2 After a cow was slaughtered, those parts not exported in carcass form were sold to—among other buyers—pet product manufacturers such as Pepita Disco, which separated them into component parts and rendered them (i.e., heated them to melt the fat they contained) to produce pet treats. Uruguayan pet product manufacturing totaled UYU 700 million in 2011, with the