Advanced Management Program
Making the Whopper® Feel at Home in Latin America

Latin America is not one region, but many, said Julio Ramirez, President of Burger King — Latin America/Caribbean Region, who offered insights on the region and his company's success during a presentation in Wharton's Advanced Management Program. Ramirez, a Cuban native who grew up in Georgia and has worked for Burger King in Latin America since 1994, described six primary subregions of Latin America and discussed how Burger King has used its understanding of these diverse local markets to create successful businesses.

The Many Faces of Latin America

Latin America is made up of diverse ethnic groups and climates that range from tropical to polar, from jungles to deserts. There are huge extremes between the wealthy and poor. Economies are driven by diverse natural resources, including oil in Venezuela, copper in Chile, and coffee throughout the region. Many of these economies are extremely volatile, with high inflation and unemployment; but here again, there is wide variation.

"Latin America is not one country," Ramirez said. "There are many different Latin Americas."

While the region presents a complex tapestry, it can be better understood from the perspective of several natural subregions. Ramirez described six primary subregions in Latin America:

  • Mexico: Mexico is a member of NAFTA and shares a huge border with the United States. In 1994, the country experienced a sharp devaluation of the peso against the dollar, the so-called "Tequila Effect." But the country recovered and has experienced relative economic and political stability.

  • Caribbean: The island nations of the Caribbean are often not included in descriptions of the region. They are very dependent on U.S. and European tourism, so they were negatively affected by the aftershocks of 9/11. Most are dollar-based economies, and Puerto Rico is an economic powerhouse, as a leading market for U.S. retailers and central tourist destination. These islands are very diverse in their politics and economics, as shown by the experiences of the largest island in the region, Cuba.

  • Central America: The seven nations of Central America have had relative peace and stability in recent years. They have "gotten on with capitalism," said Ramirez. The location within a 2-hour flight from the United States has built strong ties with U.S. cities, which has led to a thriving eco-tourism business, particularly in Costa Rica. Because of its small geographic size, this subregion "often gets ignored." While the countries have diverse languages and cultures, their strong integration means that "you can manage the region almost as one country, very easily."

  • Brazil: Brazil is the largest and most populous country in the region. "It is the world's fifth largest country, like another U.S. or France, taking up almost one half of the continent. It borders 11 of the 13 countries in South America." Its largest city has 17 million people (São Paulo). It is the ninth largest economy in the world and the largest producer of coffee and biggest exporter of sugar. There are huge regional differences across the country. While it has political and economic challenges, "it is a regional powerhouse," Ramirez said.

  • Andean Nations: The five mountainous Andean nations (Venezuela, Colombia, Peru, Bolivia, and Ecuador) have faced difficult economic and political challenges. This is one of the most challenging business areas in the region but often not as bad as its reputation. For example, contrary to popular perception (and Hollywood images), the crime rate in Bogotà is actually lower than in New York City. (Of course, there is a much higher rate of kidnapping of foreign nationals.) While the Concorde flew out of Caracas in the 1970s, four of five Venezuelans live below the poverty line. "It is a tough place to do business," Ramirez said.

  • Southern Cone: The southern countries of Latin America (Argentina, Uruguay, Chile, and Paraguay) often remind visitors of Europe, with a strong German and Italian influence in addition to their Spanish roots. But these countries have faced severe economic crises and political corruption. At one point, "there was so little faith in the Argentine currency that our franchises there were doing business in seven different currencies," he said.

While Latin America has faced political and economic turbulence in the past — which continues into the present in many countries — there are signs of increasing stability, the emergence of subregional trading blocs and other factors that are improving business conditions. There is also wide variation between countries in political and economic risks, ranging from a score of 97 for Argentina (with 100 representing the greatest risk) to scores 43 for Mexico and just 3 for Chile.

Think Local: Serving Gallo Pinto and Putting Whoppers® on Motorcycles

Given this tapestry of Latin American subregions, Burger King has pursued a strategy of "think global/act local," Ramirez said. Since Burger King represents the American fast food experience in these markets, every store offers Whoppers® and other burgers, fries, and soft drinks, but franchisees in each country have defined their own country menus. "This gives us tremendous flexibility when it comes to products or services outside the core offerings," he said. These menu additions have included breakfast products such as the "Plato Tipico" in Costa Rica, based on the popular rice-and-bean dish Gallo Pinto. It now accounts for 50 percent of breakfast sales in the Costa Rican franchise. The innovation was the franchisee's idea. "Listen to people in the restaurants, and they will come up with things you haven't thought of," Ramirez said. Burger King restaurants in Guatemala now serve "Plato Chapin," Honduran stores serve "Bkatracha," Jamaican franchises serve Johnny Cake biscuits, and Argentinean stores offer the sweet and savory snacks"Media Lunas" and "Pan con Membrillo."

Some stores even offer delivery. "In six countries, we deliver our products by motorcycles, cars, or on foot to customers' homes and offices," he said. While this goes against the U.S. restaurant model, it works well in Latin America. It now accounts for 15 to 20 percent of business in some areas.

This strategy of local adaptation has made Burger King the top fast-food restaurant in many countries in the region. In contrast, Ramirez noted that rival Wendy's failed to adapt its U.S. message to the market. He recalled seeing a large billboard featuring Wendy's founder Dave Thomas spread out across a pontoon bridge in El Salvador. It was written in English. "If you market in another country, market in their language, with their products," he said.

 

    

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