When President Luiz Inacio Lula da Silva left office in January 2011, Brazil was widely regarded as Latin America’s gold standard for economic development and social progress. As the B in the famous BRICS* acronym, the country was in the vanguard of fast-growing emerging economies like China and India, benefitting from skyrocketing demand for commodities and a high oil price.
Shortly after his departure, however, the shine started to wear off. Tempted to spend freely during the boom, the world’s ninth-largest economy stumbled almost straight into recession as oil prices plunged, and has since remained trapped in a quicksand of political dysfunction, economic informality and rampant inflation.
Even though a June assessment by the Organisation for Economic Co-operation and Development (OECD) found that the severe and protracted recession that has been engulfing Brazil for years could finally come to an end in 2018, it made sure to highlight that the recovery would be a slow and obscure process.
Amid that ambiguity, Brazilian manufacturing giant, Randon, is preparing itself for a future where certainty is a scarce resource and flexibility the new currency. And yet, embracing the new flex economy, as COO Alexandre Gazzi calls it, doesn’t mean giving up on a business model that has stood firm for decades.
To him, running a successful manufacturing operation in an environment as volatile as Brazil is not a question of reinventing the wheel, but of strengthening the foundation it was built upon so there may be sufficient “breathing space” for new ideas and a contingency for failure – especially in times of economic pressure.
While Gazzi is acutely aware of his edgy, Silicon Valley-esque vocabulary, he says on a micro-level, the philosophy behind it is more akin to a good marriage. If the foundation is strong, it will last through good times and bad, he shares, “you just need to accept the fact that not everything will work all the time.”
A realist by nature, Gazzi has long understood that the Brazilian trailer market is “inherently dynamic and subject to sudden variations in volumes and design characteristics” – be it due to economic pressure, regulatory change or customer preference. Paradoxically, however, there is a degree of steadiness to it too, which firmly sets it apart from the rest of the heavy manufacturing community.
“The trailer business is still a regional one, unlike the truck and automotive markets, which are a lot more globally connected,” he explains. “For the perpetuation of a brand in the trailer segment, solidity, tradition and trust are key – our customers need to know we will be there to support them in the good moments and in the challenging ones.”
He elaborates, “diversification, constant innovation and scale are fundamental to the success of a manufacturing business in a time like today, but the basic, instinctual trust in the brand must stand above all else. That’s why Randon has evolved into a business that is as flexible as it is stable. It’s a little ironic, but it’s why we survived the recession and will continue to survive.”
Going forward, Gazzi is planning conservatively, saying any plan is only as good as the market it’s meant to serve. “We believe that 2016 was the ‘bottom of the pit’ with view to overall demand, and we expect the recovery to pick up speed toward the end of 2017,” he says. “But we’re trying to be realistic and plan with a 10 to 20 per cent rise in volume only. The historic peak we’ve seen in 2013 won’t come back any time soon, but the 2016 slump, when we lost almost two thirds of our production volume, must be seen as an extreme, too. The market will find a healthy medium in the end.”
According to Gazzi, Randon will be the main beneficiary of the upswing, saying he is “curious to see” just how prepared the competition is to face the long-standing juggernaut running at full speed. “Everyone is vulnerable as markets contract, but we stood our ground and didn’t take any shortcuts, which is why we’re feeling well prepared for the next stage,” he says.
“We can’t necessarily say the same about the competition. There has been a spike in the number of brands operating in Brazil that have no connection to the client, and I am confident a healthy market will soon realise that only solid, sustainable companies like Randon make for a good long-term investment.”
He adds, “You see, the trailer business is not transactional. It’s not an occasion, it’s an alliance between partners that has to be built up over time. Starting with the sale, it has to be solidified by providing strong customer service and renewed through innovation. Only by always focusing on the productivity of your clientele – with respect to the norms and laws in force – will you make it in the trailer business.”
Despite his faith in the local market, however, Gazzi says the ongoing internationalisation of the Randon brand will be an important strategic focus going forward. The company’s global aftermarket brand, Fras-Le, has proven especially resilient during the crisis, prompting the management team to apply some of the lessons learned to the parent entity, too. One of them, he says, is to diversify internationally.
“Randon has had an international presence since the 1970s, when we started exporting equipment to more than 100 countries – mainly to Latin America, Africa and the Middle East,” he explains. “Fras-Le’s success has shown that we need to build on that heritage and pursue the company’s globalisation more strategically – be it by establishing our own plants, entering into joint ventures with local OEMs or via simple assembly agreements. Whatever model suits a market, we’re open to it.”
Importantly, Gazzi reiterates, Randon’s newfound fondness for selling outside of Brazil is not just a “cheap response” to the depreciating Brazilian real. “It’s not an act of defiance, it’s a strategic move. Naturally we also try to absorb part of the depreciation of the real by exporting more, but nearly all international markets have seen their local currencies depreciated against the US dollar in recent history, so it would be naïve to just gamble like that.
“At Randon, we don’t gamble. Our internationalisation strategy is based on establishing a constant presence in each market, with a strong distribution network and ongoing technical assistance – both in times of high and low currency.”
To Gazzi, expanding overseas is a learning exercise first and foremost, a strategic aid to help Randon evolve as a business. “What we’ve seen is that operating internationally, as challenging as it is, has inspired our R&D team and led to new innovations that benefitted our product range as a whole. By understanding new markets, we also learn more about our own product.
“Due to the nature of our product and our location, that applies mostly to Latin America, Africa and the Middle East. But we could also see ourselves expand beyond these markets if we see a business case for it.”
Most recently, Randon entered into a joint venture with Peruvian company Epysa that led to the construction of a new assembly plant in Lima, he says. “Epysa has been a Randon dealer in the Chilean market for more than three decades, so it made sense to build on that relationship when exploring what we can do in Peru – a market where we still have some work to do. The Lima facility was specifically designed to serve the local market and will produce customised equipment in close proximity to the market, starting with flat beds and tippers.”
Across the Atlantic, Gazzi and his team have also just signed an “agreement of commercialisation and assembly” with Ethiopian company Mesfin Industrial Engineering. Randon will supply the company with Completely Knocked Down (CKD) kits for local assembly, stating the “IKEA” approach is the most feasible logistically.
“We see a lot of potential in Africa, which is why we are glad to have Mesfin on board as a partner that is well connected,” he says. “Our products are already present in markets like Angola, Algeria, Kenya, Mozambique, Congo, Morocco, Nigeria or Egypt, but there is a lot more potential for a company like Randon. We only ever move step by step, though, to ensure we can provide the kind of customer service our brand stands for globally.”
By 2020, Gazzi says, Randon hopes to have made significant progress in Africa and beyond, with the Brazilian market providing a stable base to build upon.
“Come 2020, Brazil will have recovered, a new cycle of product modernisation will have commenced, new markets will have opened up, and new models will have been launched worldwide. But Randon will still be the company you have come to trust and appreciate, with a strong network designed to support our customers where they need us. It’s a lesson instilled in us by our founders, brothers Hercílio and Raul Randon, and it has helped us survive more than one crisis.”
Some 68 years ago, Randon started out building basic flat bed trailers for the Brazilian market, but quickly took on more complex and diversified designs, too. By 1970, the company produced full-fledged off-road trucks for use across Latin America, for example, before venturing into the global aftermarket business during the 1980s and 1990s. Today, the OEM manufactures a wide variety of trailers and non-motorised transport equipment.
The Randon portfolio has seen extensive updates over the course of 2016 and 2017, ranging from new tipper side plates made from a composite polymer mix through to a full-scale reboot of the company’s tanker range to reduce tare weight and increase payload. For added flexibility, a modular design concept has been introduced across the flat bed and low loader ranges, while new building materials and load restraint systems helped improve the tilt tray and curtain-sider segments.