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Bridging the Digital Divide: Brazil's Grupo Abril
Latin CEO / September 2000

By Larry Luxner

Ophir Toledo's desk is so clutter-free that it's hard not to notice the shiny aluminum caddy off to one side, holding 30 or so yellow, blue, green, black and orange pencils. Each pencil is sharpened to a T, and each bears the name of a different magazine in Grupo Abril's vast stable of periodicals.

Tagging along with Toledo as he shows off the lavish glass atrium of Abril's 24-story headquarters building, it's even harder to imagine that this $800 million multimedia conglomerate -- which produces everything from best-selling newsmagazine Veja to pay-TV programs to the Brazilian edition of Playboy -- traces its origins to a duck.

"This year, we celebrate our 50th anniversary," says Toledo, Grupo Abril's executive president, pointing proudly to a framed comic strip of O Pato Donald, circa 1950. "The point is, how do we make Abril into a successful company for the new economy?"

That's a question the 48-year-old Toledo has been wrestling with ever since being appointed to his post in March by Grupo Abril's owner and chairman, Roberto Civita.

The São Paulo-based empire, founded by Civita's father, Victor Civita, now ranks as Latin America's largest magazine publisher. Its pay-TV venture, TVA, has half a million subscribers, and Universo Online -- the Internet company it jointly owns with Grupo Folha da Manha S.A. -- has quickly become the largest Internet portal and ISP south of the Rio Grande.

Editora Abril, with 70% of the group's total revenues, enjoyed 1999 sales of R$1.28 billion. Last year, 30 million readers bought 192 million copies of Abril's 219 magazine titles. Its market-share figures would make any publisher proud: 64% of Brazil's total magazine circulation and 69% of Brazilian magazine advertising revenues, according to the IVC Circulation Bureau and Intermeios. At present, Abril's titles are sold at 24,000 kiosks and 3,600 other points of sale throughout the country.

But that isn't enough for Toledo, a hard-driving executive who shows up for work at 8:30 every morning, grabs a 30-minute lunch and rarely leaves the office until 8 p.m.

"This is a very interesting job," he told Latin CEO last month. "When you go from one place to another, the basic issues don't change. You still have to make money. What's exciting here is the opportunity to make a very successful Brazilian company even more successful."

That means ensuring Abril is on the cutting edge of Internet-based technology. But in order to do that, Toledo is convinced the closely held company needs outside help.

"If the constitution allows it, we will go public," he says. "Today, we cannot even have outside Brazilian investors, let alone foreign investors. There's a legal impediment."

At the moment, media companies must be controlled by individuals and not anonymous holding companies. Yet a proposal now being considered by Brazil's Congress would permit corporate entities as well as individuals to have a stake in such ventures.

A draft of the pending legislation would let foreign firms own up to 30% and Brazilian entities up to 49% of media enterprises -- a measure Grupo Abril strongly supports, despite opposition from politicians who say the publishing and broadcasting industries are national treasures that must be protected from foreign influence.

"We need to do it, " says Toledo. "In this new era, you need alliances. You cannot do it all yourself. And the best companies in the world are not in Brazil. You see a lot of companies now wanting to invest in TV, and lots of new players coming here. Although we're the largest publishing company in Latin America, in the real world it doesn't mean that much."

Meanwhile, says Abril's treasurer, Marcio Motter, the company has asked Brazil's Comissão de Valores Mobiliários (CVM) for permission to issue a three-year, R$150 million debenture in the local market, with the interest to be reset annually. The idea, he says, is to convert short-term facilities into long-term ones.

However, adds Motter, "if we could go public, it would be an opportunity to develop our business and increase our revenues and the company's market value."

Asked who would fit well with Abril, Toledo named Viacom and AOL-Time Warner as possibilities. "These companies have been talking to us on an ongoing basis," he said, hinting that "we are an attractive company to partner with."

Through the years, Abril and its 9,400 employees have certainly made their mark on Brazil.

Its flagship magazine Veja, published since 1968, became famous in 1992, when it bravely ran a series of cover stories on government corruption under President Fernando Collor de Mello, who eventually resigned. Vej now claims a circulation of nearly 1.2 million, making it the world's fourth-largest weekly magazine after Time, Newsweek and U.S. News & World Report.

The Abril family also includes Exame, Brazil's leading business magazine, and the Portuguese edition of National Geographic. Other titles: Arquitetura & Construção (monthly circulation 115,000); health magazine Saúde! (monthly circulation 105,000) and Caras, a gossip magazine that boasts 335,000 copies a week and is produced in conjunction with Editorial Perfil, Argentina's leading periodicals publisher.

Abril's 52,500-square-meter printing plant in São Paulo, the largest of its kind in Latin America, has the capacity to produce 1.5 million magazines per day using digital and other modern technology. The company is also a leader in the Brazilian textbook market, having purchased the country's two largest textbook publishers in partnership with the French group Havas. A separate division, Abril Entertainment, oversees MTV Brasil (in association with Viacom), record label Abril Music and concert promoter Abril Events.

In the pay-TV market, Abril is clearly losing out to Organizações Globo, which claims a 62% share of the Brazilian market, compared to less than 15% for Abril. On the other hand, Globo doesn't come close to Abril in the publishing market.

Public-relations executive Ricardo Braga, who tracks Brazilian media companies closely, says the traditional rivalry between Abril and Globo is giving way to a "new scenario involving dozens of groups" vying for the pay-TV market.

"There's no polarization like before," he says. "In January 2002, we are expecting the arrival of deregulation, where the telephone companies and other contenders will be able to launch pay-TV services also."

Other units of Abril produce direct-marketing databases, Brazilian travel atlases and educational CD-ROMs.

"Abril is a media-backed company and they publish six or seven out of Brazil's 10 largest magazines, so they have a lot of content available," says Luciana Hayashi, a São Paulo-based analyst for The Yankee Group. "They're a very solid company."

In fact, after a 7% increase in 1999 net revenues, Abril expects its publishing activities to grow another 9% this year. Despite the January 1999 devaluation that shook Brazil's economy, the company launched three successful titles: Revisa da Web!, Viva! and Minha Novela. In its first four months of existence, Viva!, a glossy magazine aimed at urban women, topped 605,000 copies a week, and is now around the 800,000 mark.

In 1999, Abril reported net profits of R$20 million ($11.2 million) on total consolidated revenues of R$1.42 billion ($800 million) -- a figure Motter says will likely be repeated this year.

Robert Blocker, an investment banker and M&A specialist, says Abril is not only doing well financially but continues to gain market share in all its leading publications.

"I attribute much of this to Roberto Civita," says Blocker, who's also on the board of directors of the American Chamber of Commerce in São Paulo. "He was there practically from the beginning, and was instrumental in making the quality of the publications what they are, especially Veja and Exame."

Blocker adds that Ophir Toledo "is a counterbalance to Roberto, who has a very personal style of management. Ophir is supposed to bring in a more multinational focus."

Yet not everyone is enamored of Grupo Abril's corporate culture.

"Roberto Civita is by far the best publisher in Brazil, but he has a problem in recruiting executives," says a former top Abril executive who left in 1992 to work for one of Abril's leading competitors. "Roberto has such a clear notion of the kind of people he wants to have running his business, that when people show what they are really capable of, they become a disappointment to him. At the same time, he is very proud of his qualities, so it's very difficult for him to give up power to someone else."

The executive, who asked not to be identified, said the second problem is that Abril is a big group, "but it's based only on one pillar. The only big company within the group is Editoria Abril. All the rest is cosmetic. So although Ophir runs the empire, the prime minister that controls the army is Gabriel Ricco. It's not a well-distributed holding company."

Before joining Abril half a year ago, Toledo was president of Philips Components and Systems for North America, and CEO of the Emerging Electronics and Solutions Business Group of Philips International. Before that, Toledo worked for Motorola Brasil and Hewlett-Packard in Brazil, Mexico and the United States.

The talkative, outgoing executive has a degree in electrical engineering from the University of São Paulo and Tulsa University, and a degree in business management from Pennsylvania State University; he was on the board of Abril for two years before Civita asked him to join the company.

"Roberto hired me," Toledo said, "because I have expertise with technology and the ability to change fast. Coming from the high-tech world, I've been exposed to that."

Among other qualities important to the job, says Toledo: "The ability to set the vision, make sure everybody knows what that vision is, make sure we have the best people and support them so they can achieve their objectives."

He and his wife Tereza Cristina have a 32-year-old son, David, who recently graduated from the University of Michigan and now works for Hewlett-Packard; 20-year-old daughter Mariana is a junior at UM, majoring in communications.

Toledo notes that Brazil's magazine circulation of 2.3 periodicals per inhabitant per year is still quite small compared to more developed markets such as Mexico (3.5); Argentina (3.6); Italy (14); United States (21) and France (30). Even if Brazil boosts per-capita circulation to only five copies a year, this would add nearly 400 million more copies to the magazine market.

"We don't say which magazines are the most profitable, but all of them are making money," he says. "Our publishing business is very healthy. There was a slowdown, but this has been a very good year. Internet advertising has been fueling our business."

Over the past six years, Abril has invested R$924 million ($495 million) to position itself as a major player in the Internet, telecom and new media business. A chief component of this new strategy has been Abril's 50-50 ownership, along with Grupo Folha, of an 87.5% chunk of UOL (the remaining 12.5% slice is owned by a consortium led by Morgan Stanley Dean Witter, Credit Suisse First Boston and Deutsche Bank).

Not even four years old, UOL already accounts for a 37% market share of Brazil's Internet surfers, and claims to be the most popular non-English website in the world, with just over one billion page views a month.

"We're very happy with UOL. It has been a good way for us to get our publications out there," says Toledo. "We know how to segment, and the Internet is all about segmentation. At least this gives us a head-start. It's a great opportunity for us to leverage from our successful brick-and-mortar business into an Internet business."

He continues: "The Internet is now slowing down a bit in Brazil, but will pick up again when we start providing wireless services. The problem with the Internet today is that PCs are very expensive here. In Italy, Internet service is based on TVs and cellphones. We believe it'll eventually happen the same way in Brazil."

In order to better develop online content and maximize efficiences with UOL, the company recently created Abril.com, which employs 40 journalists, designers and programmers. "Benefiting from constant updating and high levels of interactivity," says a company press release, "Abril's 27 publications currently available online provide our readers with real-time chat rooms, responsive customer and subscriber services, past issues research capabilities and polling."

And in May, Abril launched an independent company, Idealyze, with $25 million in startup funds and 80 techies working out of an office in Vila Olimpia, 20 minutes from Abril's headquarters. Toledo says Idealyze is a network of several Internet portals that allows users to prioritize areas of interest while receiving highly customized information and services. The startup's two initial portals are Paralela.com.br, aimed at the women's market, and TCInet.com.br, which targets the world of new technologies.

That's certainly a long journey from O Pato Donald, which by the way is still being published by Abril, along with 127 other colorful comic books.

"We don't see magazines disappearing in the short term," says Toledo. "Paper is such a wonderful way of displaying ideas, and the need for people to have their information filtered is still going to exist. But if 10 years from now someone develops something very inexpensive that's also interactive, no problem -- we'll be there."

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