News Column

Fast Change for Lopez Foods

January/February 2004, HISPANIC BUSINESS Magazine
Eduardo Sanchez (left)
Eduardo Sanchez (left)

In December, John Lopez announced he would step down as CEO of his namesake company, Lopez Foods. The producer of meat products for McDonald's and Wal-Mart currently ranks No. 13 on the Hispanic Business 500 with revenues of $307 million. Mr. Lopez, a former McDonald's franchisee, named Eduardo Sanchez as his successor.

Mr. Sanchez comes to his new job from a successful career at McDonald's, most recently as president of McDonald's Latin America and Canada. He also has served as chairman of the Hispanic Steering Committee and as an advisory director to the McDonald's board.

Hispanic Business Vice-President Thomas Rojas and Senior Editor Joel Russell interviewed Mr. Sanchez via cellular phone from Culiacan, Mexico. Excerpts from the interview appear here.

Hispanic Business: Tell us how this career change came about.
Eduardo Sanchez: I'd been with McDonald's for about 27 years, and for the last 15 years I spent a lot of time on the road, traveling as much as 30 to 32 weeks per year. My kids are getting to an age where I need to be at home. So the personal side drove a lot of this decision. At the same time, John Lopez was talking to me about changes he wanted to make at his business. We kept on talking and things worked out.

HB: Your superiors at McDonald's didn't propose this?
ES: No, absolutely not. When I first informed them, they told me outright no, this deal could not happen. They didn't think it was a good idea for me to leave the company. But after awhile I got their support and it worked out.

HB: Now you're switching from retail to the purchasing side of the business.
ES: My intention is to learn the business during this first year. I want to start at the base [level], which is at the plant, and learn the process. Once I learn that, I can get a clear picture of the management side.

HB: Will this leadership change involve any ownership change?
ES: It still will be Hispanic owned by far. I'm a principal of the business now, so it involves some movement of the stock. It's not significant.

HB: But you do have an equity stake in the company?
ES: Yes, I do.

HB: Tell us about growing the customer base. To be honest, most entrepreneurs would be wary of a business that has two big customers.
ES: We have about a dozen customers, albeit small ones. We have two large ones: McDonald's and Wal-Mart. Then we have some small ones like Applebee's and Sonic. You're right, you can't be … 100-percent or 50-percent dependent on any one customer long-term. But they're pretty good customers, too. I know the McDonald's system well, so I have a certain comfort level.

HB: Lopez Foods has a plant in Oklahoma and Guatemala. With your international background, where do you see the company expanding in foreign markets?
ES: The international business, especially in Latin America, is very volatile. So I'm not looking at venturing into Latin America anytime soon. In the last few years in Brazil and Argentina, their currency has devalued over 200 percent. For a midsize company like ourselves, I don't think that's something strategically that we want to pursue. There are other venues like Western Europe and some Pacific-Rim countries that have potential. I'll look at that, but first we have to exhaust the largest market in the world, the U.S.

HB: How do you see Lopez Foods following McDonald's and Wal-Mart into Western Europe?
ES: I'm not sure what the interest [is] of McDonald's and Wal-Mart as far as Lopez Foods goes. [McDonald's] has an established supply system in Western Europe … [and] in Asia, although the one in Asia, I think we can move in there and be competitive. I'm not familiar with the Wal-Mart supply system in either of those areas of the world. I would think that Asia would be a good opportunity because Wal-Mart just got there.

HB: The recent signing of the CAFTA (Central American Free Trade Agreement), minus Costa Rica, seems to point that there might be good opportunities in Central America.
ES: That plant in Guatemala is a very small one-line production. It's exclusively for McDonald's. We are at a capacity situation. [So] we're stuck, and we go back to the risk of one customer. I'm not sure that long-term it's in our best interest to stay there. If I were to pick a place to put a plant today, it would be in Mexico [not] Central America.

HB: The career path you've chosen is working for a large corporation for a good length of time and then jumping to something entrepreneurial. What would be your advice to other Hispanic professionals who are getting restless at a big company?
ES: First, figure out what you want. The other thing is going into business for yourself versus [buying] an established business that has little problems and a big opportunity to grow. If you can find that business, make the change. I would not have started a business from scratch. If you want to make a change, find an existing business that's running well that you can add something to.


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