Mario Argüello
Director General
Blue Side
View from the Top

Specialization Paves Road to Success

Fri, 09/01/2017 - 10:58

Q: How are Blue Side’s different business lines distributed geographically to best integrate its projects?

A: Blue Side started by focusing on cooling system components for light vehicle applications with the K’nadian brand. Previously, clients imported cooling components separately and there was no company that offered a specialized approach for this system. I started offering this integration at another company and eventually I created Blue Side in 2007 as a specialized brand. Blue Side has become a holding company managing five different businesses in the automotive segment, three of which are in Mexico. Blue Side retained its focus on cooling components for light vehicles while Blue Side Manufacturing and Trade Solutions has a cooling portfolio for heavy vehicles with the K’nadian Heavy brand. Our KND Germany business manages other system’s spare parts components for popular models in the domestic market.

Our other two companies are in the US. Blue Side USA in Florida manages our exports to South America, Florida and the Caribbean, and Sunflower in Texas focuses on the digital US aftermarket through eBay and Amazon. Blue Side USA started a year ago and we are now exporting our products to Colombia, Ecuador, Peru, Dominican Republic, Puerto Rico and Florida. We chose to manage our international operations from the US because it made our logistics more efficient and accessible for clients. It also gave us an opening to target the US market. A new project will be finalized in the first half of 2017 that will integrate KND Germany’s operations. This new venture will focus on manufacturing activities and the development of a small industrial park.

Q: Where do you see the biggest areas of opportunity for Blue Side?

A: We see the biggest growth opportunities in Blue Side and Blue Side Manufacturing and Trade Solutions. There are 18 lines of components that we could manage for cooling systems and we currently offer only 10, which leaves enough room for development. We have gradually added new product lines to our portfolio, ensuring that existing lines are already mature before introducing a new one.

Q: What role does your distribution network play in Blue Side’s development strategy?

A: Approximately 90 percent of our products are imported and the rest are manufactured in Mexico so distribution is crucial for the company’s growth. Our direct clients are large wholesalers and regional distributors and our main collaboration in Mexico is with Autozone. We started our relationship in 2011 and we have learned a lot from it. Autozone has brought professionalism to the sector and has taught companies to rely on the quality of their products and service. This collaboration also led us to explore the option of manufacturing our own products. When we started the pulley business, we approached a plastic injection factory in Mexico to help us develop our own molds. Thanks to our relationship in Mexico, we are now in the early stages of negotiating with Autozone US.

Q: What are your expectations regarding Blue Side’s digital presence?

A: The digital market is emerging as a dominant trend. The industry has changed radically from small distributors to large wholesalers and digital platforms will be the next big transformation. In the short term, 80 percent of the industry will be managed digitally, so now is the time to explore our options. The internet is an excellent platform to target market segments in which we have little participation or have faced entry obstacles.

Mexico is still new and inexperienced in these matters but some of our clients are now delving into digital applications. We are supporting them with a complete catalog and rapid service. Riding the digital wave, we recently launched a new application that allows clients to consult our catalogue on their cellphones. We do not yet manage sales through the app in Mexico but would like to use it to create a stronger relationship between our wholesalers and the final customer.

Q: What is K’nadian’s position in the Mexican market and how does it compete with other imported brands?

A: As Blue Side grew as an importer for third-party brands, our value proposition became to offer a build-to-suit solution for distributors to distribute imported products under their own brand or with the K’nadian label. But we were slow to develop the K’nadian brand, so we have worked hard since 2014 to build our reputation in the domestic market. Today, several distributors commercialize our products under the K’nadian brand with excellent results. We work closely with our distributors and offer them our full support, regardless of whether they market our products under their own name or ours. We want these players to view us as their purchasing department for cooling system components.

Q: How has your strategy as an importer evolved and impacted your products?

A: Our main advantage is that we offer near-premium products at competitive prices. The gap between the premium and the volume market has narrowed in quality and price, which means that clients do not choose based on a product’s origins, as long as they are certified. When we started the company, 40 percent of the components were imported from Taiwan, 40 percent from China and the remaining 20 percent came from the US, Canada and South Korea. Our portfolio has gradually evolved in line with the Mexican aftermarket’s development and now Chinese products represent the bulk of our portfolio. We have always made sure we import quality components from certified equipment manufacturers. We now have a commercial office in Taiwan that follows the development of new products and manufacturing quality standards.

Q: How has exchange rate volatility affected Blue Side’s activities?

A: As an importer, it has certainly impacted us, even our manufacturing operations. Although only 10 percent of our products are made in Mexico, raw materials and components are imported. This impact is similar for all industry participants, so we have worked to find a way to minimize it and remain competitive. Many of our Asian suppliers have benefited from the exchange rate volatility. We have reached agreements with clients to keep prices stable to affect our clients as little as possible.

Q: What are your growth expectations based on 2016’s results?

A: Our growth has been constant thanks to our expertise in the market. In 2015, we grew 35 percent and in 2016 we grew 34 percent. We believe 2017 will be a difficult year as we start approaching Mexican elections in 2018 but Blue Side was born in times of crisis, so we know how to manage our growth in tough conditions. We will face new challenges developing our network, so we must especially try to integrate new product lines. Our goal is to grow at least 20 percent by the end of 2017.