Beira Rio, the footwear giant with 26,000 resellers that Brazil knows little about

RIO DE JANEIRO, BRAZIL – If the market is leading large Brazilian retailers to embrace digitalization and strengthen e-commerce, Beira Rio, a footwear company from Rio Grande do Sul, is going against the grain.

With 8 brands, including Vizzano and Moleca, the company is growing by employing the same strategy it has always used to sell shoes: supplying thousands of shoe stores all over Brazil. With no online sales – and no immediate intention of setting up this channel -, the company’s brands are close to consumers in other ways: in neighborhood stores.

The almost symbiotic relationship with retailers – there are 26,000 in Brazil and abroad – is pointed out by many experts in the footwear sector as Beira Rio’s greatest advantage.

It is common for shoe stores in the countryside to sell almost exclusively Beira Rio’s products, as the company manufactures everything from sandals to sneakers, from flip-flops to high heels, for adults and children. Instead of investing in TV network campaigns with famous celebrities, it tries to help small retailers sell more, with point-of-sale products.

Ultimately, Beira Rio’s strategy with retailers can be summed up in one word: deadline. By boosting this business, the manufacturer is able to protect itself from two forces in the sector: Chinese shoes, which are much cheaper but must be paid upon ordering, and also to keep local competitors at bay, who cannot wait that long to be paid.

Shopkeepers have up to 100 days to pay for Beira Rio’s orders, according to company founder Roberto Argenta. In other words: for small businesses with no working capital, it is often possible to sell the shoes before the invoice for paying the company is due. “We try to provide a good service to retailers by showing them that when they buy our product they will get a good deal,” Argenta said.

Beira Rio barely stopped during the pandemic: its 8 plants in Rio Grande do Sul, with a total of 7,000 employees continued production, with the required care to prevent the spread of Covid-19, which resulted in a comfortable stock.

Therefore, quickly attending retailers in case they are short of some product is possible, Argenta says – market sources estimate that the company’s stock reaches about 20 million pairs for prompt delivery. This supply capacity, which prevents shoe stores from seeking other suppliers, has been solidified in recent years, according to Luciano Pires Cerveira, a consultant specialized in the footwear sector.

Once associated with women’s shoes, the company has expanded its product range to include sneakers, men’s shoes, and anatomical models, thus dominating virtually all niches in the segment.

“Beira Rio does not work with franchises, but it is possible to open a store exclusively with its products,” Cerveira says. The specialist points out that in addition, the company always works with costs in mind. “They manage to offer sneakers in retail at R$49.90 (US$9.60), with a good cost-benefit ratio for low-income consumers. Thus, they build loyalty with any small store in the countryside.”

GAINS

The company was founded in 1975 in what Argenta describes as a “shack on the riverbank” and with its strategy it manages to beat the profitability of much better known and celebrated brands, both in business and in the financial market.

Last year, Beira Rio, a limited liability company, posted R$377 million in profits on sales of a little over R$2 billion in full pandemic. The company’s earnings are well ahead of Arezzo (R$87 million) and Vulcabrás (R$31 million) in the period, and are not far behind those posted by Grendene (R$405 million).

The secret to its success, according to Argenta, is the reinvestment of about 70% of all profits it generates in the business. Thus, the company expands its production lines to serve a wider public and is able to finance customers without having to resort to external financing.

The entrepreneur said he had already been approached by private equity funds (which buy stakes in companies), but talks never evolved. An IPO is also not on the horizon – by ensuring that its “ecosystem” operates with no intervention, Beira Rio has managed to grow while remaining off the radar.

However, competitors have their eye on the company’s secret for producing so much and at such low cost. So much so that entrepreneur Alexandre Grendene, controller of the footwear giant of the same name, is a partner of Beira Rio, with about 12% of the capital.

Although he is a minority shareholder, Grendene clashed publicly with Argenta – owner of over half the company – in one of the few events that brought Beira Rio’s name to the media in the recent past.

ONTOPSYCHOLOGY

The entrepreneurs reached an agreement in the dispute, which involved Argenta donating a portion of the company to the Antonio Meneghetti Foundation, which honors the founder of the so-called ontopsychology, a line of study to which Beira Rio’s founder is an enthusiastic supporter. A source from the sector defined the entrepreneur’s dedication to ontopsychology as “a religion.”

Argenta described ontopsychology as “the law of life science, the natural and eternal laws of the universe.” He says that most of Beira Rio’s executives take an MBA course at the Antonio Meneghetti College, in which he is an investor. In recent years, the project has grown and began to offer new courses, prompting Argenta to move beyond footwear.

To boost Antonio Meneghetti’s courses in agronomy and gastronomy, he is working on two new projects: an olive oil mill, currently in its experimental phase, and a resort that will open to guests this weekend. The entrepreneur says that part of the motivation behind these businesses is to offer hands-on training opportunities to students.

Since he launched the Recanto Maestro brand, Argenta says he has started to take a spoonful of olive oil every morning – a habit that, he says, has improved his health. But beyond his own project, Argenta is enthusiastic about the potential of olive trees for the Rio Grande do Sul economy, particularly for the state’s central region, still dependent on tobacco cultivation.

The guaranteed purchase of the fruit by olive oil mills beginning to emerge in the region could be an alternative for the development of Rio Grande do Sul, Argenta says.

POLITICAL STRIDES

This concern with the economy as a whole is a reflection of the entrepreneur’s connection with politics. Argenta has been Mayor of Igrejinha, a city of 37,000 inhabitants some 80 km from Porto Alegre, where Beira Rio’s headquarters are located, and has also been a federal deputy for the state between 1999 and 2003. He has since retired from politics.

However, rumors are beginning to emerge that the owner of Beira Rio is planning a comeback. Cars driving around the state with stickers promoting Argenta’s pre-candidacy for state governor next year are beginning to be seen. When asked about the subject he denies it.

But he says he is working to convince governors, legislators, and even the president of the country to sign a national pact. “The moment has come for us to sit down and see what is best for Brazil, because the majority wants this.”