Cristalerias de Chile S.A. History

Company Perspectives:

Business Strategy. The Company's general business philosophy consists of taking advantage of growth opportunities in the Chilean market by expanding its existing businesses, making controlling long-term investments in undervalued companies and establishing new businesses in areas with high growth potential. The Company typically focuses on each company's core business and seeks to maximize its cash flows and profitability by appointing experienced management and establishing strategic alliances with recognized international leaders. This strategy has resulted in increased operating efficiency and productivity in our companies, and at the same time has maximized long-term growth and value creation for our shareholders.

Key Dates:

1904:

The company is established as Fábrica Nacional de Vidrios to produce glass and glass bottles for the Chilean domestic market.

1975:

Chilean conglomerate Compania Electro Metallurgica buys a controlling stake in the company, now known as Cristalchile.

1977:

Cristalchile signs a Technical Assistance Agreement with Owens-Illinois, the world's leading glass packaging group.

1980:

The company purchases a majority stake in Sociedad Anónima Viña Santa Rita.

1989:

Cristalchile acquires a license to operate 21 television stations across Chile.

1994:

The company lists its stock as ADRs on the New York Stock Exchange, enabling it to expand into cable television.

1999:

The company buys a 40 percent stake in Argentina-based Rayen Cura SAIC.

2000:

The company joins with partner Liberty Media to buy out Metropolis Intercom, gaining a 50 percent stake.

2003:

Cristalchile gains full control of Red Televisiva Megavision, after buying the stake previously held by Televisa.

Company History:

Cristalerias de Chile S.A., or Cristalchile, is that country's leading producer of glass and plastic containers and related packaging. The Santiago-based company produces bottles for the domestic wine sector and also bottles for the country's fast-growing export wine market. The company also develops bottles for the domestic liquor industry, which is focused especially on the local Pisco fortified wine. For Chile's breweries, Cristalchile manufactures refundable and refillable bottles, which is the dominant beer packaging type in the country. The company holds a virtual monopoly in this sector, with the capacity to supply 100 percent of the Chile beer industry's bottle requirement. Cristalchile also has developed a range of bottles for the nonalcoholic beverage segment, including mineral water, fruit juice, and soft drinks, supplying nearly all of the bottles for this area as well. The company develops and produces glass-based packaging for the processed food industry, including jars for baby food, sauces, preserves, oil, and the like, and for the pharmaceutical industry. Cristalchile also has diversified its packaging operations to include plastics, through its 50 percent share of the PET joint venture CMF Envases formed in partnership with Embotelladora Andina S.A. Beyond packaging, Christalchile has built up a diversified portfolio of businesses. The company holds controlling stakes in winemaker Sociedad Anónima Viña Santa Rita and nearly all of Red Televisiva Megavision S.A. through subsidiary CIESCSA, representing the group's Communications, Information, Entertainment and Culture division. Total group sales amounted to nearly CLP 170 billion ($283 million) in 2003. Glass packaging accounts for 42 percent of the group's sales, matched by its wine operations, while Cristalchile's media holdings add 16 percent to its total sales. Listed on the Bolsa de Comercio de Santiago, Cristalchile's shares are also traded on the New York Stock Exchange as ADRs. Compania Electro Metallurgica, through the Elecmetal Group, is Cristalchile's primary shareholder.

Bottling Origins in the Early 1900s

Cristalerias de Chile was established in 1904 as Fábrica Nacional de Vidrios and started producing glass and glass bottles for the domestic market. By the 1930s, the company had outgrown its original facility. Cristalerias de Chile, or Cristalchile, as it came to be called, then opened a new facility on Santiago's Avenue Vicuna Mackenna. That plant's capacity, backed by 15 smelting furnaces, enabled Cristalchile to become the dominant glass packaging producer in the country.

Cristalchile supported its growth by developing an extensive mining and sand washing capacity. The company eventually built up a real estate portfolio based on two primary properties. The first was located in San Sebastian, in the Cartagena region, with an area of some 500,000 square meters providing both mining operations and sand washing capacity. The second focused on mining over a holding of 400 hectares in the El Turco zone of Cartagena.

In the 1970s, Cristalchile also found support through a new majority shareholder. In 1975, Chilean conglomerate Compania Electro Metallurgica bought a controlling stake in Cristalchile, which was placed under the parent's Elecmetal group.

Under Elecmetal, Cristalchile launched a companywide modernization effort. The company not only revamped its marketing and distribution operations, it also began construction of a new, more modern glass production facility. That effort was boosted in 1977 when Cristalchile signed a Technical Assistance Agreement with the United States' Owens-Illinois, then the world's leading glass packaging group. The technology transfer agreement enabled Cristalchile to launch production at a new state-of-the-art facility in Padre Hurtado in 1978.

Built on a property extending more than 325,000 square meters, the Padre Hurtado plant gave Cristalchile an administrative and production headquarters spanning 50,000 square meters. The plant featured four smelting furnaces and 12 IS package forming lines. With its increased capacity, Cristalchile was able to provide 100 percent of the country's beer and soft-drink industry bottling needs.

Until 1980, Cristalchile had focused wholly on its glass bottle production. In that year, however, the company began a diversification effort. Part of the group's expansion strategy kept it close to its historic packaging core, as the company moved into the market for plastic packaging. After establishing a dedicated plastic packaging subsidiary, Crowpla, the company acquired a 50 percent stake in Reicolite. These moves enabled the company to begin production of an extensive line of PET-based plastic bottles, buckets, caps, containers, and buckets.

Diversified Holdings in the 1990s

Yet Cristalchile also sought expansion beyond the packaging sector. For its first effort, the company did not stray too far, however. In 1980, the company made its first move in this direction, with the purchase of a majority stake in Sociedad Anónima Viña Santa Rita.

Santa Rita played an important part in establishing the worldwide reputation for Chilean wines. Chile had long been a fixture on the global winemaking map; the first vines were planted in the country in the mid-16th century, making Chile the first American state to develop its own wine industry. The area was later planted with French vine stock, including the Cabernet Sauvignon variety, considered to be superior to Chile's local grapes.

In the second half of the 19th century, while French and Californian vineyards were devastated by the phylloxera plague, Chile remained free of the virus. The country, and the Santa Rita region in particular, emerged as a principal supplier of Cabernet Sauvignon vine stock to the rest of the world. The region's wines also began winning international recognition, with exports starting as early as 1877. By 1880, the Santa Rita winery was officially founded by Don Domingo Fernandez. Under Fernandez, the vineyard brought in French wine experts to help it develop its technological expertise.

By 1980, Santa Rita had emerged as Chile's leading domestic producer of wine. The company also held the number three spot among the ranks of Chile's fast-growing wine exporters. Cristalchile joined a group of investors, including Don Ricardo Claro Valdes, which acquired a 50 percent stake in the company. In 1988, the group acquired the remaining 50 percent. Cristalchile stepped up its own stake in the wine company. At the end of 2003, Cristalchile's holding in Santa Rita topped 54 percent.

With the close of the 1980s, Cristalchile sought new growth opportunities. In 1989, its attention turned toward the communications industry. In that year, Cristalchile acquired the license to operate 21 television stations across Chile. Shortly after, the company created a new subsidiary, Red Televisiva Megavision S.A., in a partnership with Mexico's Televisa S.A. de C.V. Red Televisiva was placed under a new subsidiary, CIECSA, the acronym for the company's Communications, Information, Entertainment, and Culture division. CIECSA was soon expanded to include other media as well, such as Ediciones Financerias S.A., publisher of the Diario Financiero, and Editorial Zig-Zag S.A.

In the early 1990s, Cristalchile sought to step up its media interests and in 1994 the company listed its stock as ADRs on the New York Stock Exchange. The share offering fueled the group's expansion into cable television, which Cristalchile entered in 1994, through an association with TCI-Bresnan (later Liberty Media Corporation). The new company was called Cordillera Comunicaciones Ltd., and took Metropolis as its brand name. The following year, however, Cristalchile reached an agreement with rival Intercom--owned by Telefonica CTC Chile--to merge Metropolis into a new company, Metropolis Intercom. That company then began to explore expansion into other communications areas, notably Internet access services.

Triple Focus for the New Century

Cristalchile stepped up its holding in its Crowpla and Reicolite plastics operations in 1996. With 99.99 percent control of each, Cristalchile engineered their merger in 1996. The combined Crowpla-Reicolite's production operations were then transferred to a new central production plant, in Santiago's Pudahuel district.

Meanwhile, the company moved to boost its core glass-making business. In 1999, the company bought a 40 percent stake in Rayen Cura SAIC, based in Argentina and held by Saint-Gobain-owned Vicasa. This acquisition marked Cristalchile's first international acquisition.

As it entered the new century, Cristalchile moved to reduce its focus to just three core operations--Glass Packaging, Wine, and Media. As part of this strategy, the company agreed to merge Crowpla-Reicolite with Evases Multipack, the PET packaging operation of Embotelladora Andina S.A., creating the new CMF Envases. Cristalchile's stake in that business, created in 2001, stood at 50 percent.

Cristalchile also moved to consolidate its media interests. In 2000, the company firmed up its control of Metropolis Intercom, joining with partner Liberty Media to buy out the company from Telefonica CTC Chile. Cristalchile then took a 50 percent stake in the new Metropolis Intercom. In 2003, Cristalchile also took full control of Red Televisiva Megavision, buying out the stake previously held by Televisa. At the end of that year, Cristalchile's Media holdings represented 16 percent of its consolidated group sales of nearly CLP 170 billion. Balancing out that business were the group's Glass and Wine divisions, both of which represented 42 percent of the company's consolidated sales. Cristalchile then looked forward to celebrating its 100th anniversary, marking the occasion with the launch of plans to build a new production plant for the new century.

Principal Subsidiaries: Cristalchile Inversiones S.A.; Ciecsa S.A.; Constructora Apoger S.A.; Cordillera Comunicaciones Holding Limitada; Cristalchile Comunicaciones S.A.; Sociedad Anónima Viña Santa Rita; Red Televisiva Megavision S.A.

Principal Competitors: Ball Plastic Container Div.; Schott Glas; Owens-Illinois Inc.; OSRAM GmbH; Saint-Gobain Container Inc.; Rexam Beverage Packaging AB; Arc International; Nipro Corporation; BSN GLASSPACK S.A.; Nueva Fabrica Nacional de Vidrio S.A.; Belopal AD; Turkiye Sise ve Cam Fabrikalari A.S.; Villeroy und Boch AG; Vitrocrisa S.A. de C.V.

Further Reading:

• "Cristalerias de Chile Approves US$210 Investment Plan," South American Business Information, June 24, 2004.
• "Cristalerias de Chile Filed Environmental Impact Study for New Plant," South American Business Information, September 22, 2004.
• "Cristalerias de Chile to Buy Control of Megavision," South American Business Information, September 2, 2002.
• "Cristalerias de Chile Took Out US$100mil Loan," South American Business Information, September 6, 2000.
• "Sales of Cristalerias de Chile Rise by 10.2%," South American Business Information, March 24, 2003.

Source: International Directory of Company Histories, Vol.67. St. James Press, 2005.

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