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- [00:00]
A
Hi, I'm Sean Summers from Mercado Libre. You are listening to the CPG Guys Podcast.
- [00:08]
B
Welcome to the CPG Guys Podcast. Your hosts, Sree Rajagopalan and Peter V. S Bond, explore how brands and retailers engage consumers in an increasingly digitally driven world. And now, here are the CPG Guys. Hello and welcome to the CPT Guys Podcast. I'm your indefatigable co host, pvsp. My daughter is not a pop star, nor is my wife a podcaster on iHeartRadio. But I do my best to hold my ground when compared to the celebrity life my co host lives. He's the patriarch of the Raj family media empire. His daughters Rhea and Lara are legitimate entertainment sensations. And of course, his wife Kavita runs her own podcast, Lights, Camera, Conversation. As for Papa Raj, as his daughter's fans like to refer to him, well, in addition to podcasting, he serves as the Chief Revenue Officer at Think Blue Consulting. He's also the former CCO at General Mills, a company whose stock price hovered around $90 when he departed. And today I think it's sitting around 50. Causal relationship. You be the judge. At this point, despite all of the trades that took place before the MLB deadline, I think he's already moved on to 2026 when it comes to the defending American League champions. Please join me in welcoming my sidekick, the man known as Sri Sri. I am just apoplectic. I read today that AOL is ending its dial up service at the end of September. No more that screechy 96 bod. Horrible noise. But do you know there are literally thousands of rural Americans that still use that? I mean, what do you think? What's going through your head? How are you doing, by the way?
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C
Do you know what, the first job I had after college, I worked for AOL for one day. America Online. One day.
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B
One day. They couldn't. They, they threw you out after one day.
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C
19, 1996. I got the IRI offer one week before and I'd already made up my mind, but I wanted to work one day in Reston, Virginia.
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B
I love that sri. That is a great. I had no idea. You need to add that to your LinkedIn profile.
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C
Now, now, now, hold on, Peter. If I had, If I had stayed with America Online and I hadn't gone to. I. Maybe I never met you, but I think I'd have been bathing in the millions.
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B
Maybe if the, if, if you, if you'd actually. Yes. If you'd cashed out at the right. If you'd cashed out at the right time. I think that's true. But you know what? Their loss. Their loss, my game. That's all I have to say. Sri.
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C
Most people did.
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B
Thank you as always for joining me. I'm looking forward to today's conversation to our audience.
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C
How old are I? We can't leave the general's conversation that easily, right?
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B
Oh. Oh, I was, I was just throwing that out there as a, as a, as a teaser.
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C
Yeah. So. So the stock is definitely. The stock is definitely depressed. It's below 50, by the way. So does it make me feel sad every single day? It just doesn't feel good. I think the way it path forward.
- [03:21]
B
They saw their best years under you, didn't they, sri like in decades when you were there.
- [03:26]
C
The growth, the phenomenal growth we had in Covid due to pricing was a record. I think the whole industry knows that. Can't deny that the way forward is portfolio rediscovery. There's just too much going on in the economy. And IFR1 in the last 18 months haven't seen that portfolio rediscovery, with the exception of investing more in pet. But the food bread, the food segment is the largest segment for General Mills. It outweighs pet like three is to one. So rediscovering that is the way forward. So I'm looking forward to that moment and it'll be a celebratory moment when and if it shows up.
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B
Did you want to say anything about the Yankees before we go on or can we just move on?
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C
Why do we need to talk about the Yankees, man? I mean, I just realized. I just realized it's been 3 minutes and 55 seconds. Sean is here on this podcast and we haven't said a word to him.
- [04:16]
B
I know. Let's move. We'll move on. You know what? We're going to move on to our audience. Make sure you're subscribing to our podcast on your preferred listening platform where you can get our latest episodes and even go back to consume some of the 510 episodes that we've already published. We've been doing this for a while. Stream. We got a lot of content under our belts. Our guest today leads the marketing efforts at Latin America's most explosive retail Marketplace. Founded in 1999 and headquartered in Buenos Aires, Argentina, Mercado Libre is Latin America's leading e commerce technology company. Through its primary platforms, Mercado Libre and Mercado Pago, it provides solutions to individuals and companies buying, selling, advertising and paying for goods. Online. Mercado Libre serves millions of users and creates a market for a wide variety of goods and services in an easy, safe and efficient way. That sounds like something a marketer would have crafted. That's a good line. We'll have to ask him about that. Our guest has been with Mercado libre for nearly 13 years. Wow. He currently serves as head of Mercado Ads, their retail media platform, and as CMO of Mercado Libre. Please join us in welcoming to the podcast Sean Summers. Sean, welcome. How you doing?
- [05:33]
A
How are you doing? Thanks for the invitation.
- [05:35]
B
Sorry it took us so long to get to you. Sometimes we get on a rant and we just start going and going and we're like, oh, yeah, we're here to talk to a guest and we forget to do it. So thank you for indulging us as we got to you.
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A
I love it and I'm very happy that we didn't get into baseball because that's not my area of expertise.
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B
Now, how about cricket? No, because that's Sri. Sri. La. Sri likes cricket. Sri's all about cricket. He's. He's going to London for the. I think mentioned. He's going to be going to London for an event that his daughter is having, and it's at Wembley Stadium. And he. I reminded him not to dress for a cricket match because that's not what's happening. It's going to be a pop concert. It's not going to be a cricket match. So just dress appropriately.
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C
But Coldplay is playing, Peter.
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B
Yeah, I know, but I'm afraid you're going to. You're going to see Wembley and you're like, ooh, ooh, I've got to go to a cricket match. It's not for cricket.
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C
They don't play cricket at Wembley. There's a Canadian trying to pretend.
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B
Yeah, they do. Yeah, they do. Yes, they do. Now they do play cricket.
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C
It's called the Lords.
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B
Okay.
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C
That's the ground and the oval. Wembley. Wembley is a. Wembley is a football. You people here in North America call it soccer.
- [06:49]
B
Yeah, I know, Sean. I don't know if this.
- [06:51]
C
Because you haven't realized that it's actually football.
- [06:54]
B
Sean. I don't know if this translates. There was an old TV show it was based on.
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C
If you go make fun, man. Get with the program. Do your research.
- [07:03]
A
Chatgpt.
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B
It was based. I know. It's called the Muppet show and it was Kermit the Frog and all those old guys. And in that show, there were these two grouchy old guys that sat up in the balcony. Heckling, everybody that's SRI and me, we're a bunch of grouchy old guys. We just bicker amongst each other. But listen, before we get to the questions, could you just give our audience a brief little overview? What are your primary responsibilities at Mercado Libre?
- [07:32]
A
So Mercado Libre, largest e commerce and fintech ecosystem in Latin America, which is quite unique. There's not an equal company around the world. And I have two roles there which are very complementary. On the one side, I'm an advertiser with my CMO hat. CMO for both the Mercado Libre e commerce business and the Mercado Pao fintech business. And on the other side, I'm a publisher or we're trying to build a very large publishing platform with Mercado Ads, which is the leading retail media platform in the region.
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B
That is outstanding. Thank you for that. We're going to include in the digital show notes of this episode a link to your LinkedIn profile, Mercado Libre's LinkedIn page and your corporate site. Because our audience is very inquisitive. They like to multitask. They'll probably already toggling over to it now to click and learn more as they listen to our conversation. So why don't we get to that prepared a bunch of questions. SRI and I will take turns exploring those with you. And we, you know, we may go if you want to go down some rabbit holes. You know, Sree loves going down rabbit holes. So he's, he just, you take the handcuffs off and he's just crazy. But let me open it up. How is MercadoLibre evolving its marketing strategy to support CPG categories? Digital expansion in Latin America? I mean, that's like at the heart of it. How are brands really leveraging and how are you evolving to help them in that respect?
- [09:05]
A
I have a twofold answer to that. First, how are we helping to develop the online grocery category? Bear in mind, out of all the many online categories or all the categories that we sell in the online world, CPG has been one of the last ones that we've been developing. And I think that's a similar trend in other places in the world. So the first thing after the pandemic and during the pandemic, we started developing the category. So the basics, the assortment, the product experience, the positioning of Mercado Libre as a destination to come and buy your supermarket, and we are making good progress. But having said that, this is still a very small category. It's less than 5% of our total sales Bear in mind, last year was like $50 billion in retail sales, growing this year north of 20%. So still very small as a category. But if you think, you know, fast forward three to five years, we're going to be probably the biggest driver of growth for the CPG category in the region. So that's one of the roles that we have. The second one with our written media sort of solutions, what we have developed is a full, full funnel suit of solutions to help CPG brands, both those that sell in Mercado Libre, but also those that want to reach our 120 million users. So and we are trying to help them in the. I would say that we're still in the stage of evangelizing. I think that in general cpg, you can see that the category has developed, you know, at a slower pace than other categories when it comes to online. And I would say that from a marketing point of view, the adoption of the retail media solutions has also been slower. So we're trying to help, we developed the solutions, we're trying to help now the brands, you know, to adopt these solutions.
- [11:03]
B
So a couple of things we'll unpack. I know Sri is going to want to dig into the endemic and non endemic. So I'll leave him to, to explore that for me. I think what's interesting, you talk about the growth of the growth, it's a small part of the portfolio right now. But I think there's, there's a misconception certainly in North America that MercadoLibre is just a third party marketplace. That's not entirely true, is it? You have some there you are in some 1P and is grocery fitting into that as well?
- [11:36]
A
So we are mostly marketplace business and I think we're very proud in general that we've been able to compete with the best in the world with that model. Over the last five years. We developed our first party, our retail business. It is still less than 10%. And I would say that in general we prefer for third party sellers to develop the assortment in our category. When we see that that's not happening and consumers are demanding that or we see that the economics of the value chain in a certain category don't help to have a third party solution. We go with the first party. And I would say today our supermarket category is mostly 3P. But I would say as we grow, definitely we know that one P is going to play a much bigger role because it's natural. You know, I think it's a category that naturally tends to be more of a 1P category.
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C
Sean, first of all, let me welcome you to the CPG guys. It's particularly exciting for us to have you because this is only a third or fourth episode with someone really discussing the Latin America market. Our audience in Latin America is growing very fast, especially after Peter made a trip to Chile last year that I'm so jealous I couldn't make it because of a missed connection flight last year. So it's awesome that you're able to give us time today and do this even though you're traveling out in Europe this week. So I'd love to jump into what role does MercadoLibre play in shaping omnichannel experiences given the world is omnichannel today for CPG brands, whether it's Marketplace, your app and just you just mentioned the media network.
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A
So I would say first when it comes to the marketplace, I would say we're naturally an online more than an omnichannel experience. Having said that, two caveats. First. One, we do have some tests where we are integrating with real world with offline world retailers. We have the case of chedraui, which is a big retailer in Mexico and we, we have a few other negotiations in South America. So as part of the mix, we're trying to help existing retail players in the physical world make that transition. So that's, I think it's part of what we're doing. And then when it comes to Mercado Arts, the one thing that we, we are doing is expanding the reach of our solutions. Historically, Mercado Arts implemented solutions that were focused on inventory. Inside of Mercado Libre, we have started expanding that into over the last couple of quarters. You can now buy inventory in the open Internet, in connected tv, in walled gardens and even do some out of home activities with us. So I think that also from a media point of view, we're trying to help advertisers take what I would say it's an ecosystemic view of their media investments, but the nature of the business, it's more of an online business more than an integrated omnichannel one.
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B
Well Sean, then let's click down into one of your primary responsibilities which is Mercado ads. And you mentioned in your opening that you're focused on full funnel activation on behalf of these brands. How are you supporting cpgs in terms of targeting ad units that address the different parts of the funnel, you know, all, all of the components that that makes them think Mercado ads is a great place for us to in brand to, for us to invest in building brand equity.
- [15:29]
A
So I think we are in the early stages of that journey. If you look at the Mercado ads business, which has been around for over 15 years, still most of our solutions and our business is in the bottom of the funnel for endemic advertisers. So people who sell inside of Mercado Libre and our bottom of the funnel solutions, performance solutions are most of the business nowadays and doing very, very well. Now we started 12, 18 months ago developing mid funnel and top of the funnel solution still for endemic advertisers. And that's for instance, a year ago we did a deal with Disney so you can buy programmatically inventory not just in Mercado Libre, but also video inventory in Disney. And we're expanding that into some other partnerships over the next couple of quarters. Last quarter we started our partnership with the Google Ad Manager network and offering at the first stage access to display inventory outside of Mercado Libre and also now video. So I think what we are trying to do is give brands access to our 120 million regular consumers. And that's a base that grows like 20% year over year. So it's still growing very, very fast. We try to give them and this is a base that we know their behavior not just on online transactions, but also offline because of our payments solutions. And there what we're trying to help CPG's brand is to find the right consumer for the right brand at the right moment with our targeting and our measurement tools. That's sort of we have it very well developed for inside the ecosystem and we are in that journey of expanding that to inventory outside of Mercado diy.
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C
Awesome, Sean. So as you've grown the platform, by the way, I've been checking out the platform while we've been having this discussion and I'm about to buy a T shirt from Argentina, believe it or not. And it's a very special one that I will show you all at the end of the show. While I continue to do that, it's actually for my Coldplay visit. While I continue to do that, I want to go back a few years. Pandemic post pandemic pre Pandemic Digital while it was taking off in Latin America, obviously the pandemic resulted in a change in behavior where consumers realized for many months online is the only way to go. And with that change in behavior in the CPG space in Latam, have y' all really taken advantage of the moment, prepared yourself for the moment for the consumer? And do you feel Mercado Libre as a marketplace is positioned to win with these behavioral shifts. First, if you can tell us, am I right, that there's been a behavioral shift and then can you focus on what have you done to adapt?
- [18:42]
A
Absolutely. There's been a behavioral shift since the pandemic. I think that we saw for a long time, ever since we started the company, we've seen systematic growth at a very nice pace. The pandemic, the way we Describe it, particularly 2020, it was we had three years of growth in one year. But after the end, for reasons that I'm going to explain, we were able to take advantage of that. But after that, we were one of the very few companies in the world that maintained a significant growth rate ever since. So why were we able to take advantage of the pandemic? Well, because. Take advantage, if you know what I mean. We were forced to face the pandemic and we were ready for that because two years before that we decided to start building our own logistics network because we were competing with the big giant from the north. And we said, if we want to survive, it's not good enough to be reliant on third party operators. We have to build our own logistics network. So by the time that the pandemic hit, even though it had been only two years, we were down that road. And the pandemic helped us prove that we could accelerate. That logistics network expanded massively. During the pandemic. We were able to serve and surprise not only our existing consumer base, but a lot of new consumers who came into Mercado Libre because of the pandemic and who were pleasantly surprised, not just in CPG but in almost any other category that we were able to deliver very, very fast what they needed, cpg. Probably that was the moment in which they discovered that they could buy cpg. Until that moment, we hadn't been that proactive. We had a little bit of assortment, but not that much. So it was an accelerator. Now, after the pandemic, the experience has been so good and we kept investing in the logistics network. So we've been reducing cost and time to deliver. So what that means is that all those consumers got used to buying online during the pandemic. They stayed with us. Our retention rates have been improving ever since. But the other surprising factor is if you look at the growth of our new buyers base over the last three or four quarters, we have had the highest growth rate, even higher than during the pandemic. So we still discover today a big part of the population who hasn't bought online yet. And because we are lowering the barriers to entry by offering a lot of free shipping to our user base. They are discovering through CPG and other categories that there's something in this, you know, online worlds, and they're staying with us.
- [21:30]
C
So. So one of the things I do want to hear from you is CPG brands. You kind of started addressing it, right? That they've realized that they need to be more digitally savvy overall and participate in the marketplace. Do you find that they've kept up with like digital content? The advertising they're creating is more for today's consumer, not one minute TV spot versus the five, six seconds of attention as well as the digital content they put on. Mercado Libre is made for today's times. The product shots are classy. You get if they sell food, it's about ingredient information. If they're selling a T shirt, you can see all size of it. The sizing is accurately portrayed. I'm just curious if the digital content is kept pace.
- [22:13]
A
I think that the honest answer is no. I think in general, we have seen very big improvements since the pandemic. But if I go specifically to the CPG industry, which I know very well, because before this life in Mercado Libre, I was in the CPG industry. So my heart is still there. I would say, I think that there's been a slow adoption in general of the channel, of the media solutions, of even adapting, you know, the ways that we communicate with consumers. So, no, when I started in CPG 30 years ago, in a sense, CPG was the place where things were happening before they happened in other categories. And I don't think that that's the case nowadays. I think that the sector as a whole, it's more of a laggard when it comes to adopting new technologies and changing the way we market to consumers. That's my controversial point of view, but I think I have facts to show it.
- [23:16]
B
I don't think that's controversial. I think that's.
- [23:20]
C
I don't see it as controversial either. I think it's important that brands keep up because at the end of the day, they come to the marketplace to buy a product.
- [23:28]
B
You know, Sean, what's interesting to me is, and it kind of plays off of this, you know, you made reference to it. It's not just about you have a commerce platform, you have a very large ecosystem that you've created. You said, how do we get people who haven't bought online to buy online more? And it's about enabling things. It's not just about the free shipping. I mean, by my account you probably have about 30 components to your ecosystem. From the commerce platform, retail, media, cloud, computing, logistics, financial services, technology, local services, choice, social, connected, life, entertainment, you are building out an ecosystem and that's how you get, that's how you get your business to be sticky with consumers. I mean it becomes the primary place where they go to do things, not just buy a product.
- [24:21]
A
Absolutely. The way we started, we started as a, as the EVA of Latin America. So I think this is a company that has been in constant evolution over the last 26 years. We realized very quickly that the auction model, used products, consumer to consumer model, wouldn't work. We evolved into fixed price new products from individual sellers and then we went for the SMBs and then we went for the big brands. When we started, less than five years after starting, we realized that if we didn't develop an online payment solution, the incumbent players wouldn't do it. And we developed Macao. Paul became the people of Latin America and we could have stayed there. But then over the years we discovered more and more pain points. So as we looked at the, I remember around 10 years ago we stopped looking at the US as the north and we started looking at China and we looked at what was happening in China, we visited China, we said, oh my God, the opportunity is significantly bigger. So suddenly we discovered that our payment solution, we discovered the concept of fintech, this could be much bigger than just a payments solution. So first thing we went from the market is online payments to. Well, actually it's online payments and it could be offline payments if we develop these terminals like Square did in the US So we went and developed that and we developed the QR code and now we have a massive acquiring business that provides payment solutions to small merchants, to small and medium, some of the big retailers. But then we also discovered the concept of credits. We have a lot of information on our merchant and our consumers and a lot of them don't have access to consumer credits to credit cards. Well, if we were to come, you know, be new to the industry, we were to come and develop the solutions, how would we do it? We launched a merchant credits business that then evolved into a consumer credits business. Long story short, today, you know, we have a portfolio of $10 billion in crates and we're just getting started and all of that. There's a massive integration between every part of that ecosystem that you mentioned. Why? Because we're able to develop our own scoring models because we know how consumers transact with us in the online and offline world we know what merchants are selling. For many of these merchants, Macau leave is the main sales channel. So there's a deep integration there. We develop the consumer products where it started with consumer credits and then credit card that improves the conversion rates because we are offering installments and more consumer loans. So there's a flywheel that's actually and by the way the customer acquisition cost for the fintech business is zero because we're selling new products to our existing user base. And then the next iteration of that has been our insurtech business. We identified that consumers needed many different kinds of insurance products. We developed insurance products in a different way to the incumbent players. So that also generated a flyway and and then something similar with the distribution of content for the big platform. So definitely we are, we try to touch multiple parts of the daily life of our consumers as I say, try to fix very small parts of their daily life. Nothing is rocket science but we do it in a huge scale and in many different aspects and clearly everything retrofits the other parts of the ecosystem and that's a secret sauce of Mercado Libre.
- [27:59]
C
So let me jump to now getting into the depth of value proposition and what people get back. By the way it's fabulous to hear you all went to China and mastered the fintech game because that the level of loyalty unlock you get by getting into fintech and having your own payment system is next level. So now let's wear a CPG brand's hat. When a CPG brand starts distributing on work, Auto Libre starts doing advertising et cetera, they expect measurement back. So what measurement frameworks do you use to assess CPG campaign effectiveness especially conversion, lower funnel, getting it in the basket and actually being checked out. And how transparent can a brand expect you to be?
- [28:42]
A
Full transparency because we for bottom of the funnel campaigns we follow the industry standards. So we do Last Click Attribution 14 days and that works really, really, really well. And as we are moving up in the funnel we are developing our own sort of tools. So obviously measuring the reach and frequency in the CPMs but also doing the brand lift test methodologies and eventually where we want to get as we develop the top of the funnel is that we're going to be able to show you how your top of the funnel investments have a downstream impact in your sales. We are not there, we're building the products to get there and we're also building not just the product but the reach and the frequency because that's something that marketeers So I would Say that marketeers who sell in Mercado Libre, they feel very comfortable with our performance solution and they are starting to test our top of the final solutions. One of the things is bear in mind with my double hat, we are the biggest advertiser, particularly when it comes to online world in Latin America. We're the biggest client for Google and Meta and TikTok and Pinterest. So the way we think about it is we try to turn all those tools that we have developed to get there and we try to turn them into products that our advertiser base can use. So as an advertiser we have our own attribution models, we do our own measurement, we do our mmm, our incrementality test. So we don't rely on third parties. That took us many, many years. For many years we were using the black boxes of our big partners. At some stage we say no, no, we want to measure absolutely everything using our own signals. And now we have a very sophisticated and very efficient, what I call demand generation engine. From a marketing point of view, we are in that process of turning all of that into tools that our advertisers can use, buying inventory inside Mercado Libre and outside. And I would say that we are halfway there. I wouldn't say that we are in the early stages because we spent a big chunk of the last two years trying to make that transition. So I think that we're starting to show all the potential of this extended network, what we call the Mercado Arts extended network. But there's more to come.
- [31:12]
C
I'm curious to learn if connected TV and streaming TV has become a viable advertising ecosystem yet in Latin America. Is it too early and premature?
- [31:23]
A
Too small? Too small. One of the things is that's why we were partnering with most of the connected TV platforms because as much as each of them wants to build their own direct to brands sort of distribution model, none of the streaming platforms today is big enough to offer the reach and frequency and the CPM that my media buying director would require my media buying or any other media buying director. So I think that what we're trying to do is being a third party. We're trying to bring together all the inventory, both of the open Internet and different connected TV players combining with our first party data and try to offer something that can be competitive with the the other big choices that brands have out there, but none of the players today, I would say streaming. Our estimate is that connected TV is less than 10% of the consumption today. It's not the 30% plus that you have in the US but we're going to get there eventually. Usually Latin America is a few years behind, but we're going to get there.
- [32:31]
B
So Sean, the buzzword of the day. No, it's not Metaverse, that's a couple years ago. It's, it's certainly AI. So we'd be remiss if we didn't kind of dig into the, the AI aspect of business. Can you share with us how emerging capabilities coming from things like generative or agentic AI are or even on your roadmap, how, how they're being embedded into your media offerings to optimize the ability to do targeting of audiences and dynamic creative?
- [33:06]
A
Yeah, absolutely. I think we are in the, in the early stages. Having said that, as a company we've been using traditional AI or machine learning for over 10 years. The entire company is built on AI. You look at our distribution, our warehouse management system, our credits business, our advertising business, the marketplace. Every single tool has been built over the last 10 years and it operates on over AI. So for us moving into this gen AI world feels like a natural transition. I would say using some examples in Mercado ads for targeting we have AI models that identify the best ad for each customer in every single context with automatic bidding so that it optimizes the value for advertisers. That's for targeting. When it comes to creatives, we have products like brand ads or display ads where creatives are AI generated. You know, we automatically, we talk with the catalog and we create, you know, the best possible ad. We are starting to experiment. We, we are doing it in very small scale but the idea over the next two quarters to expand it with video generated AI generated. So taking you know, a few shots from here and there from the product listings and, and we are creating 15, 20 seconds ads that you can then use inside our media. So I would say starting to make sure that, I would say every single aspect of our product offering it's operating, leveraging gen AI and then for optimization we already have and obviously the first version of an AI, the agent that evaluates the campaign performances and automatically generates recommendations for the brands and for the advertisers. And the next step of that development is going to be that that agent makes decisions today is making recommendations. At some point it's going to work so well that the idea is that it's going to run the campaign for our advertisers. So we started that journey. It's interesting. Mercado Oliver started the journey on Genai 18 months ago but for the first year most of the focus was on internal use. How do we make our internal processes more efficient, be it code generation, how our legal department processes the different claims, how our customer experience team resolves disputes, know after sales disputes, how gen can improve the quality of our catalog, the quality of our recommendations. So we saw a lot of improvements and impact last year when we use it for internal purposes. And it's been this year that we started focusing on okay, how do we make our external focused products Genai first and the way we're thinking about it, we want to rebuild the company. It's interesting, it's a very successful company delivering fantastic results. But we're in that process of how do we reimagine everything about the product offering and our internal processes for a gen world? So exciting and scary times ahead.
- [36:35]
C
Exciting and scary easy. So I'll bring us back to ground earth and the simple question is, you know, a lot of business for you is done in partnership with agencies like Flywheel Commerce Network. Do brands come to you directly and how does that partnership work?
- [36:51]
A
Each brand has a different operating model and I think it has to do with the level of maturity we try to adapt. We work with both brands who are ready to work directly with us, but many of them, they come through with agencies. I think that that model works for us and for us and for them. It's very hard to build a capability inside. This is a complex. Both the performance solutions and the branding solutions are quite difficult to manage and understand from a technical point of view. So I think that brands need to have a certain scale and when you take that into different countries, it's very hard in Latin America to build the internal capability. So I think that many brands, they rely on external agencies, although some of them, some of the pioneers like L', Oreal, who have been doing this for 10 years, they have also built internal capability. But if anything, we try to help both agencies and brands go through this journey. Interesting. And going back to my comment about ICCPG brands in the very early stages, we're still helping them make sure that the conversation between, in a sense using the old language, when we talk about performance, we talk with the trade marketing team, when we talk about branding, we talk with the branding team. And many times or most of the times those teams are disconnected internally. So we are trying to help navigate that and make those conversations more natural, which for us is something very natural. So that happens inside the brands and when you bring the agencies on board, imagine how complex the ecosystem gets. But we're in that process, I think that brands and agencies, they go where demand is and the demand is going in this direction and that's inevitable. So some are going to be, some are going to go faster, some are going to go slower, but I have no doubts that we're moving in this direction.
- [39:00]
C
One follow up therefore is do you feel the reason why it takes so long and there's a dependency on external agencies is a skill set issue or still the belief that since my business is 95% coming from in store, that's what I got to focus on?
- [39:14]
A
I think it's a little bit of the first point. There's building capabilities, but let's forget about Latin America for a moment. In general, let's say in the US that shouldn't be because you have the scale and the maturity, the building capability shouldn't be a problem. I do think that there's a problem in the category that has to do with there's no growth in general in the mature markets, there's no population growth and our categories have grown over the last six decades based on population growth, which fortunately in Latin America we have. But most mature markets they don't have. So you've lost that lever then. In terms of category penetration, there isn't a lot of many of these categories because of the success of all the work that has been done, there isn't a lot of category penetration to be gained and something similar with frequency. So we end up with a perfect storm of having a lot of headwinds in terms of category growth and that combines them with, okay, we have to work harder, our dollars have to work harder in order to generate that demand. And then do brands, do companies have the incentives and the organizational designs and the culture and the processes to make these bold moves? Yes or no. And in general, I would say no. So we're stuck in this situation where there's no growth who I think that whoever is willing to take some risks is going to be the winner. But the problem is that, yeah, it sounds great, but if I measure just by the next quarter, probably I'm not going to be around long enough to show the early results. So I think that the industry as a whole, it's in a tough spot. Having said that, I do believe that there is a way out. Definitely has to do with taking risks and being the first to go into some of these growth channels even though they might be small today, that's where the growth is coming. Sorry, but no. We are small in the sector, but I have no doubt that we're going to be the biggest driver of growth for CPG in Latin America. It's inevitable. And then as marketeers, we have to make tough choices. We pin bad in this environment on making tough choices. It's almost like if we do many things, I'm hedging my bets. I'm a big believer of no, you have to actually get rid of all the noise, focus the resources behind two or three big bets, make sure that you're driving short term results. That's the best way to defend your marketing budgets. And then as you gain traction, you are able to invest in some crazy ideas that bring long term growth. But again, there are no safe routes out of this situation. And I think that everyone is looking for those safe routes or the, the, the shortcuts. And there are no shortcuts. And that's why I love the Qatari and that's why I'm so vocal because I think that there's no safety in looking for safe solutions.
- [42:29]
B
Yeah, I'll make one comment and then ask the last question. My comment is just that I think you're right that if there's no growth, you have to look at the pockets of your business where there is growth. And while for a lot of these manufacturers, they're still focused on the physical world, it's in digital commerce where there is growth. And you need to be stepping on the gas, not, not slowing down to refocus your efforts on where there is no growth. You want to, you want to accelerate the growth even more.
- [43:02]
A
But in order to do that, you still have to implement, you know, really well in the physical world. But given that you've been doing it for many, many decades, you should run that much more efficiently. You should get rid of many sacred cows and say we're going to focus on these big things so that you create the environment or the flexibility in the budget to go and over invest in the growth channels. The thing is that you go to your cfo, your CFO doesn't have more money. So you have to create those pockets out of making tough choices, out of driving some efficiencies. And I think as marketeers we should own that. And we could do that and not depend on someone taking a gamble on us and buying our strategic initiative. And yeah, trust me, we are going to come back in two or three years time and show you that the growth is there. No, we have to start showing the results in the next quarter and the following quarter, creating that reserve and then being super smart about what are the one or two big Bets that I'm going to do on growth channels. I think that that's how you rebalance this growth algorithm. Clearly it's not pricing. SRI was mentioning it worked during Pandemic. Great. The industry overdid it and now consumers are saying like, come on guys, the level of inflation in some of my products is insane. So there's no more pricing power. The industry has already gone over the edge on that. There's no volume growth. What I love about this is that for brave marketeers, this is a moment where you can show the value of marketing. I'm convinced that the way forward is through fantastic marketing. There's no other way forward.
- [44:42]
B
Wow. That's that. I, I absolutely agree with you on that. I'm going to close this out with a, with a simple question. Sean. Maybe not so much, but Shree and I both believe that curiosity in, in, in someone's personality ultimately fosters a lot of success. So to that end, how do you keep your team and your partners aligned with fast moving trends in omnichannel commerce and retail media, particularly in cpg so that you guys are always riding the wave. You haven't missed the wave.
- [45:17]
A
We are, we love the phrase, you know Andy Grove's phrase, only the paranoid survive. No matter how successful we are for 26 years, we remind everyone in the team we are as successful as whatever we delivered last week. So let's not fall in love with our success at the same time. Part of that success is having some defeats and let's make sure that those defeats, they don't carry very heavy in our hearts. It's like we try to learn from those defeats behind that is so because we are obsessed that someone is going to come and disrupt us. A big player, an international player, a small startup. We always assume that someone is going to come and eat our lunch. So what that means is that we challenge ourselves to change constantly everything that we do. So not just the things that we do, you know, badly or not that well, which it's obvious to try to change that, but even the things that we do really well. We say, guys, assume that this is disadvantage is going to last more than six or 12 months. So every six or 12 months we have to rethink even the stuff that is working really well for us under the assumption. So when it comes to marketing, it's like the message to my team is guys, we need to reinvent the entire marketing engine every 12, 18 months at a maximum. I would say every year we are reinventing what we are doing and also Coming up with new solutions like now, we are very focused on building a new affiliates and creative creators program, but at scale, something that works at scale for brands. That's something that for many years we said, no, we're not good, we're not going to do. While doing that, we're still working with Google and Meta and TikTok on optimizing and improving every single strategy, our promotional strategies. So that's a mindset and people get excited. I always say that what gets me excited after 13 years is that my learning curve in Mercado libre, it's still 90 degrees even today. And I think it's going to be 90 degrees until the last day that I'm here in this company and that obsession with someone is going to come and eat our lunch. We always believe that we are not as good as our results and that someone is there planning how to disrupt us. And this is an industry, technology is an industry where if you sleep on your victories and you take them, you know, as a given, you can get kicked out of the. Of the round, you know, of the ring in two years. And this is an industry that doesn't allow you to come back on the ring. So I think that's what we do. And the last thing is we look, we're super curious to your point, every single night, we're looking at what's happening around the world, not just in our industry, in other sectors, who is doing interesting stuff. And then we say, how could this, does it apply to Mercado Libre? How would it apply? So always taking a very humble look to what our competitors or other players are doing in the outside world. And that never stops. It's 24 7.
- [48:26]
B
Well, if podcasting is a way that you can learn, I think SRI and I can probably recommend one or two that can help your team stay abreast of all sorts of things relative to our industry. I love that your plan there is. Don't assume that you're at the. If you're at the top of the food chain right now, don't assume you're going to be there in 12 months. Someone can eat you. You could be going down on the rung. So anyhow, Sean, this has been a phenomenal conversation. Thank you for taking time out of your day. You know, you're across the pond in London to connect with SRI and me. We've, we've thoroughly enjoyed our conversation with you. Thank you, thank you.
- [49:07]
A
It's been an absolute pleasure. And as I said, I love this industry. So I hope that in our next conversation, we start seeing some pockets of brands, segments being ahead of the curve compared to other categories. We have a lot of smart people in the industry.
- [49:23]
B
You have an open invitation. You have an open invitation to come back and talk as you've got new things to share with us. We're really excited. Sri here's my biggest big takeaway. You want to make a business that will grow, that will stick. That's part of a consumer's life. It's not just about the core business. It's about solving their problems that are adjacent. If you do that, if you build an ecosystem, you can build a sustainable business that people will gravitate to and that will lead to your growth. What about you?
- [49:59]
C
A future T shirt that says Sean Summers on it and it says the quote is you need to be paranoid and that's what will keep you relevant.
- [50:07]
B
I think I see us creating that T shirt that will be something we're going to create. We've been known to do that.
- [50:15]
C
And what that creates is the hunger for learning adaptation. We spoke about AI earlier in this episode. Sean referred to it that hunger is what will create the understanding and create the outcomes. That that's my biggest takeaway. Be hungry, but be paranoid.
- [50:32]
B
Sree as always, thanks for joining me on this journey to our audience. We're really appreciative that you take time out of your week to listen to us ramble on and share in the conversation we have with terrific guests like Sean. I look forward to doing this with you again on our next episode, Shree and to our audience. We look forward to speaking with you on the next episode of the CPG Guys podcast.
- [50:55]
C
Goodbye.
- [51:07]
B
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