52
A FAMILY AFFAIR
EMB
In emerging markets, family is big business. According to McKinsey
& Company, approximately 60 percent of emerging economy private-
sector companies with revenues of US$1 billion or more were owned
by founders or families in 2010, and all indications point to their
continued significance to national economies looking ahead.
Analysis from the global management consultancy suggests that
an additional 4,000 family or founder-owned companies could hit
US$1 billion in sales in the years from 2010 to 2025, and if that happens,
then such firms will represent nearly 40 percent of the world’s large
enterprises in 2025, up from roughly 15 percent in 2010.
In this section, we look at a family business in crisis through the latest
EMB case study, and learn from a Saudi company that transformed from
a family business to a private equity-owned firm that recently became
the first of its kind to list on Saudi Arabia’s stock exchange, Tadawul.
A FAMILY
AFFAIR
EMERGING MARKETS BUSINESS
SUMMER 2017
ISSUE NO. 3
53
AT A GLANCE
When brothers Ernesto and Raul González established their fruit exporting business
in Chile back in 1911, they could never have predicted how the family firm—and with it,
the family strife—would grow. More than a century on, the fourth generation CEO of
Paraíso Verde, Claudio González, grapples with family rivalry and professionalization.
CASE STUDY:
TROUBLE IN PARADISE
n 1911, my great grandfather
Ernesto González, and his
brother Raul, opened up
a small fruit exporting
operation in our family’s
native town of Valparaíso, Chile. A coastal
city, Valparaíso’s port was the lifeline
of the local economy for centuries and
supported the livelihoods of many
families, just like mine. Ernesto and
Raul’s parents had owned a farm in
Valparaíso’s fertile agricultural region,
growing a host of native produce from
prickly pears to Chilean strawberries.
So, eager to start a venture of their
own, fruit exporting seemed like the
logical choice for the two brothers.
Establishing their company as a joint
50-50 partnership under the name
Paraíso Verde, the brothers set to work.
Having grown up in the city, they already
had a strong network of contacts both
in the fruit industry and at the port,
which eased their entry into the world of
exporting and earned them an admirable
profit after only 12 months of operations.
Just three years later, however, their
fortunes changed. The opening of the
Panama Canal and the reduction in ship
traffic that resulted, dealt a harsh blow
to the local port-based economy and to
the brothers’ new company. The years
that followed were tough. As the life
was drained out of Valparaíso’s port,
the business faced total ruin. Yet, Ernesto
and Raul were determined to continue—
not out of pride, but out of necessity; both
had young families to consider, with four
children between them.
With failure not an option, the brothers
diversified the business, opening a shop
that offered quality fruit at an affordable
price. The brothers paid particular
attention to customer service, always
making people feel welcome and even
offering home delivery —a move
welcomed by residents living on the
steep slopes, characteristic of the city.
Demand for the brothers’ produce was
high and the opportunity to open a second
and then a third shop in other parts of
town soon emerged.
Over time, as both the business and
the family grew, Ernesto and Raul offered
equal shares in Paraíso Verde to their
children, with five of their grandchildren—
my father included—later expanding the
company into several profitable lines of
business, essentially controlling the value
chain from agriculture and packing, to
retail and export. A family-only board was
also established to oversee the growing
firm. The port of Valparaíso was not what
it had been, but it was receiving growing
attention from tourists that visited during
the South American summer, and the city
was transforming into an educational hub,
with universities and colleges making
their mark. These developments created
new consumer bases that the business
savvy family was ready to tap.
THE END OF AN ERA
For decades, business remained strong
and despite the company comprising
three generations of the González family,
management and decision-making was,
for the most part, smooth and harmonious.
Ernesto and Raul were growing elderly
but they still ran a tight ship and remained
firmly at the helm, providing stability and
direction. Then, in 1981 at the age of 90,
my great grandfather Ernesto passed
away, with his brother Raul following in
1984. The loss of the company founders,
not to mention the family patriarchs, was
a tragedy and, with the anchor provided »
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