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RISO SCOTTI, AFTER THE DIVERSIFICATION THE NEW CHALLENGE IS EXPORTING “THE MODEL” EASTWARDS
The Riso Scotti company has been around since 1860. It is a piece of rice farming history, of the rice-farming industry and of agriculture in Italy for five generations. Today, the Group features a strong international component (it sells its products in over 50 countries, 23 of which non-European) and has a turnover of approximately 213 million euros, with an export quota around 22%. For over a century, i.e. until 1992, the Italian company produced and sold only rice. The first great innovation - vacuum-packing - goes back to that time. An evolution which was strongly supported by the president and general manager Angelo Dario Scotti.
Your intuition, which in hindsight seems ‘simple’, marked a historic change. At the time, in fact, no manufacturer in the world sold rice in vacuum-packed units.
It looked like a packaging innovation, but in truth it was a real product innovation. Today vacuum-packing exists everywhere, but the first company to impose it on a global industrial scale, in a generalised and exclusive fashion was Riso Scotti. We won the challenge, in which I truly believed, because I trusted that consumers would appreciate a product that is always fresh, which is conserved better when vacuum-packed.
The diversification route that you took at the beginning of the Nineties, soon became a highway. In which year did the Scotti Group – almost half of whose profits today originate from non-traditional products?
The crossroads moment was in 2000: having concluded an experimental phase on small quantities, we took a strategic decision to use rice as a raw material (on its own or mixed with other foods) for a series of products with a strong health and well-being concept. From there we created the ready-made risotto, rice oil, rice milk, rice pasta, crackers, rice sticks, and puffed-rice chocolate. Today the proportion of our profits originating from our diversified products is significant and is constantly growing.
Was it necessary to diversify?
We were not growing any further just by producing rice, or we were breaking even with the risk of eroding our margins, since a commodity’s low margins are destined to become even thinner as a result of distribution dynamics (hard discount), commercial strategies (private labels) and growing competition. Diversification for the Riso Scotti company was necessary: the process yielded a healthy bottom-line which not only absorbed the initial investments but was capable of allowing further ones. We understood that offering high quality, promising products made the price a secondary issue. The concept of good taste, quality and health is rewarding and products that live up to it allow for respectable margins.
The diversified products are therefore the antidote to the loss of margin?
Definitely: makers of quality products can intervene on the price component, which is not crucial for a consumer cohort that is attracted by other product characteristics (quality, use of ‘healthy’ ingredients, attention to detail). Without forgetting a segment of the population suffering from celiac disease or lesser gluten intolerances who might find rice a product that can give them the pleasure of a plate of pasta or a biscuit, or even crackers and cookies without wheat flour.
And consumers seem to appreciate: Riso Scotti exports in over 50 countries, is that right?
52 to be precise, from Russia to the United States, where we hope to set up an active commercial and marketing unit in Los Angeles by the first half of 2008. India and China will follow. It is precisely thanks to our unique and very promising products that we can carry out our internationalisation strategies. We are becoming a company with a specific and potentially strong role, recognised by the consumer, which makes us attractive. A rice producer who remains a company like any other would have greater difficulties in accessing new markets and, assuming the company takes a hold, it would never be able to consolidate its positions through an own commercial and marketing policy. It would end up forever being put into question.
Let’s take a step back: you anticipated the move to India and China. Will you really go and produce rice in the "enemy’s" backyard, where this food has the basis of nutrition for millennia?
The Indian and Chinese markets will certainly serve as a production base, at competitive prices, for the rice consumed in the West - especially exotic varieties such as basmati, for which demand is growing but which cannot be farmed in Italy. In Eastern Europe, on the other hand, we have been running production for the local market for years, with the aim of moving into the neighbouring markets soon. We exported the Scotti model.
When was the “Romania” project born and how did it develop?
What I would not hesitate to call an adventure was decided in the early 2000s and began to be operative in 2003, when the first true investments began. The initiative is articulated between several specialist companies, focused on certain industrial segments: purchasing of fields, cultivation, processing, production of the first diversified products such as rice cakes and puffed rice and the management of the services centre. Each company is independent but connected and complementary to the others. There are 5 entrepreneurs who are not only the companies’ general managers but also partners of the Riso Scotti company, motivated to add value. We are about to close our financial year 2007 as a significant player in Romania. And from next year we will expand into the neighbouring markets, starting with Macedonia and Bulgaria. The word Romania will be banished from Riso Scotti: we will be only be talking about Eastern Europe, which we will treat like an internal market, in which we will produce at lower costs and be able to introduce ourselves into commercial channels which are not yet monopolized by a large and mature distribution network.