Buttoning up the profits

Artículo en Columbia Business School - Chazen Global Insights / Article published by Columbia Business School - Chazen Global Insights

February 28, 2017

 

Inspiration for branding a company can come from anywhere. For Rocio González, owner of a Argentinian home décor and jewelry company, an epiphany struck when she toured the Mumbai slum of Dharavi as part of Columbia Business School’s Entrepreneurship and Competitiveness in Latin America program.

“I saw everything that happened inside this community, how discards were not only collected but transformed to new objects. I thought that something similar could be done in Buenos Aires,” she said. In renaming Greca, her eight-year-old company, González dropped the “h” since “dar” translates as “give back,” in Spanish, a key aspect of her business model.

From its beginnings, Greca has embraced “the triple bottom line”: honoring the environment by recycling material into its product designs, serving communities by hiring local workers, and creating profits. Of those three credos that earned Greca Corporation B status in 2012, “the one that moved me most personally was the social aspect,” of hiring meaningful numbers of workers – especially women.

The Dharavi visit helped convince González that “we need to scale up to make a difference.” To do that, she realized, she had to give equal emphasis to the business aspects of her company.

In December, the company was officially renamed, and Greca, as well as a sister line, Totebag, became brands under its corporate umbrella. Despite Argentina’s difficult economic environment, González expects a new focus on efficiency and growth will push revenues up from about $250,000 in 2016 to $400,000 this year. Total units sold will more than triple from 28,500 to 89,700.

Growing Pains

Greca started as a hobby when a friend suggested González create artwork using discarded buttons from the factory in which he worked. Educated as an architect and artist, González suspended some buttons in resin to create whimsical animal figurines and jewelry, which she initially sold to family and friends.

She and the friend soon incorporated the business as Greca. As word of mouth spread, they hired some local women (including some just out of jail and individuals with disabilities) to handcraft items, especially a new line of more useful, simpler designs, such as soap dishes and planters. At the end of the first year, retailers started placing orders, and one large customer commissioned Greca to produce a batch of animal figurines as corporate gifts.

The company barreled along, growing a website consumer business and opening a shop in Buenos Aires’ Palermo district, catering mostly to tourists. Still, corporate and retail orders, including a number from Argentinean museum shops, formed the backbone of the business.

Raw materials had been no problem since the button factory was happy to donate discards, until, in the fourth year of business, a customer placed an order for 20,000 units. “This was a huge challenge because we thought of ourselves as a boutique brand,” González recalled. Unwilling to turn down such a lucrative contract, they agreed to a delivery schedule that required Greca to operate at full capacity just when the button factory slowed for summer vacation. “We couldn’t get enough supply, so we didn’t deliver on time,” she said. “The company did not reorder. We learned a valuable lesson: When to say ‘no.’”

Dreaming Big

The experience served as a reality check. After buying out her original partner in 2014, “I started to dream big,” said González. She began calling on additional companies to ask for discards beyond buttons and stepping up efforts to sign on retail clients.

The raw materials still come as donations. For example, “the PepsiCo Foundation asked what we were doing for Argentina’s women,” she said. “We told them of our employment practices,” which draw from the country’s poorest. Materials from recycled bottles are now part of Greca’s jewelry line.

In 2015, Greca also partnered with Totebag, an Argentinian manufacturer of textile products that shared Greca’s social and environmental values. That company’s founder, Lorena Nuñez, joined with Greca to set up Papastudio to test new recycled materials and provide designs and tools for other entrepreneurs.

After enrolling in the ECLA program in 2016, González has learned to be more selective. Rather than stock large quantities of inventory, the company identified the 25 top sellers, vowing to make the rest of the items on demand. 

Still, something was missing, and González called her visit to Dharavi her “aha moment.” In December Daravi moved its factory to Garrote, a slum in Argentina’s Tigre Sur District, to bring the work closer to employees. Rather than contract with cooperative organizations, as it had done in the past, the company now hires individuals, a move to achieve better quality control. González is currently interviewing candidates for a training and production leader. “This year has been about understanding our production process,” said the entrepreneur.

Startup costs for the factory’s molds and other equipment run $60,000 to $80,000, but González admitted she still isn’t certain what maintenance costs will be. Once she gets a handle on operating expenses and procedures and is convinced that the model is sustainable, she plans to open additional factories in other Argentinean slums. “We want to generate a replicable model of factories using discards to give work throughout Argentina and Mercosur,” she said.

In addition to cash flow, Daravi will draw on government support and corporate grants to reach the scale González thinks is crucial, and she is busy lining up meetings with possible sponsors. “Both sectors are interested in recycling and employment,” she said, “but the public never thinks of the commercial side and private business is not so invested in the public interest.”

By shoring up Daravi’s corporate side, González hopes, Argentina’s slums will bring some beauty and whimsy to the world — and empower its women.

Columbia Business School Professors Mark Cohen and Medini Singh were the company’s advisors during the Entrepreneurship and Competitiveness in Latin America program.

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