Saturday, November 26, 2005

"Spanish firms are on a conquest of Texas."

Spain moves into Texas

Businesses make purchases, expand into U.S. market

Nov. 26, 2005

Houston Chronicle
Copyright 2005

Spanish firms are on a conquest of Texas, buying up everything from banks to food makers in the Lone Star state.

In the past two years, a handful of multinational Spanish companies have expanded their empires into Texas with food company Grupo SOS Cuetara purchasing American Rice, BBVA Bancomer acquiring Laredo National Bank and rice giant Grupo Ebro Puleva snatching up counterpart Houston-based Riviana Foods.

The most recent Spanish acquisition was of Houston construction company Webber Group by Madrid-based Ferrovial in September.

The $220 million investment is Ferrovial's second foray into the state after its subsidiary, Cintra, began to partner with the Texas Department of Transportation in March to design the Trans-Texas Corridor, linking the state's borders with Mexico and Oklahoma.

Trade ties between Texas and Spain also have been on the rise in recent years, totaling $1.2 billion last year, up from $847.5 million in 2003. Most of that business was conducted by Houston companies.

Spanish-owned businesses still number far fewer than those owned by other Hispanics in Houston, but they generate lots of cash. The 661 Spanish-owned firms in Houston, for example, had $5.2 billion in sales in 1997, according to the latest census data available.

In comparison, the greatest number of Hispanic-owned firms are run by Mexicans, who own 25,407 businesses but make just $3.9 billion in sales.

The bond between Texas and Spain has grown so rapidly that earlier this month the Spanish government hosted a trade conference here, and next week the Spanish ambassador will visit the Bayou City to boost business between the two regions.

Spanish companies like international banking giant BBVA are attracted to the U.S. market and the Texas market in particular because of the growing Hispanic population, especially the large Mexican market, which often wires money to Mexico.

Hoping to target that market, BBVA acquired the Laredo-based bank in September last year and operates 44 branches, including locations in largely Hispanic areas such as along Harrisburg Boulevard, Bellaire Boulevard and Long Point.

"The United States is a great market for growth because of the growth of the Hispanic market," said Sebastian Royo, a Spaniard and associate professor of government at Suffolk University in Boston.

However, he warned that Spanish companies shouldn't view the U.S. Hispanic market as homogenous: they should consider cultural differences when marketing to Hispanics.

A vast territory

Some consumer goods companies like SOS Cuetara and Ebro Puleva aren't concentrating on the Hispanic market but the entire U.S. market, a vast territory for them.

For rice company Ebro Puleva, 2004 was an appropriate time to enter the U.S. market as the Atkins diet craze was winding down and consumption of Riviana rice brands Success and Mahatma increased, Jaime Carbó, managing director at Ebro Puleva, said. Now, the company is starting to sell a microwaveable brand of rice to the rushed American consumer.

And SOS Cuetara, the makers of Spanish rice, olive oil and cookies, bought American Rice in December 2003 as olive oil was becoming a healthy cooking option in U.S. households.

"It's the ideal moment to enter," said Eugenio Gisbert, media manager for Madrid-based SOS Cuetara. "The United States is absolutely strategic for us in that market."

Other Spanish companies are choosing to enter the Texas market not by acquisition but by expansion. Almeria-based Cosentino teamed up with Houston partner Roberto Contreras to open the company's U.S. headquarters in Stafford in 1999. From its Stafford offices, the maker of Silestone, which is used for kitchen and bathroom countertops, works with its North American network of distributors, fabricators and installers.

Intimidating market

Entering the U.S. market was fundamental for the Silestone maker because builders and homeowners spend $11 billion a year on kitchen countertops, said Isabel Martinez, vice president of Cosentino North America.

Although Spaniards have long made quality products such as olive oils and marble, few Spanish companies have penetrated the U.S. market until recently, she said.

"In Spain, there's a lot of fear about entering the U.S. market because it's so large," said Martinez, whose company uses quartz to make 54 colors of countertops.

But as Spanish companies have grown and prospered domestically, she expects more firms will expand into the U.S.

"You need to know how to do things first at home," she said.

There was a boom of Latin American countries expanding into the 1990s, said Royo, with Spanish firms buying banks, telecommunications businesses and utilities in South America and Mexico.

"Latin America converted into a new frontier for European countries," Royo said.

But then economic and political crises hit Latin America, especially Argentina, and there was a "disenchantment" with the region and even a backlash by South Americans. Now many Spanish firms are diversifying into the U. S. but holding on to their Latin American investments for the long term, he said.

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