p.9

efficiencyt,he restructuringof certainoperations'as acquiring control of, or making sdctnidli c* il
well as long-term growth in Chile, Peru'Argentrna
investmentsin, other companies engagedin lh o
and Brazil. industrial, services,and financial sectors'wift e
In the pasta sector,we will seek to improve geographicfocus on the SouthernCone region and @
l5
oroduction and enhancedistribution efficiencies' Sturit. W. intend to focuson productsand services
,rolrr-" growth in Chile in line with increasing where its existing strengths-such as its manage- -
.o.tro-ption, and volume growth outsideof Chile ment expertise,strategic Partners or distribution
through overallmarketgrowth and increaseisn mar- networks-offer competitive advantages'In addi- 153
tion, we have divestedseveralbusinessesand will
ket shares. evaluatefuture divestitures,particularly when we €=
believethat the opportunity to divest createsmore ,:,
Continue ManagedExpansionin the Southern valuefor shareholdersthan retainingthe business'
ConeRegionand Brazil

We believe that our managementexperience'the
location of our facilitiesand the strengthof our LuccHrrrl
products'servicesand distributionnetworksposition
r.r, to tuk. advantageof growth opportunities else- Lucchetti EmpresasS'A. was founded in the early
where in South America' with a particular emphasis 1900sand waspurchasedby the Luksicgroup in 1965'
on the neighboringcountriesofArgentina' Peru'and With the reorganizationin 1996,it becamea93'7 pet-
cent consolidatedsubsidiary of Quiflenco' Its pasta'
tfiazrL. edible oils, soups,and broths were known for quality'
nutritional value' and competitive prices' Lucchetti
Our approach to international expansion is man- was continuously launching new products under its
household brand names such as Lucchetti' Napoli'
agedand gradual.As it has done in the past ' ' ' we Talliani, Romano,Miraflores, Oro Vegetal'El Dorado'
may first chooseto developan export-basedpres-
enceand, once a customerbase,distribution net- Dofla Sofia,and Naturezza.
work and critical massare establishedt'o construct Lucchetti'sstrategyrevolved around making the
m a n u f a c t u r i nfga c i l i t i e si n t h e f o r e i g nm a r k e t s '
most of its brand nameswith the idea of holding and
Alternatively'asit hasdonein the pastwith CCUI building the strong market shareit had earnedover
in Argentina and Madecoin Argentina and Brazil' the yeais.By 1996,Lucchettireached38 percentof the
we may chooseto establishan immediate foreign Chiiean pastamarket. Carozzt,its main competitor in
presencevia acquisitions of existing local firms' Chile, had a 39 percentmarket share'The balancewas
Given the leading market sharesthat our Chilean spreadamong a number of smallermanufacturersand
businessesalreadyenjoy' we believethat growth in pastaimporters such as Molinas Rio de la Platafrom
neighboringcountrieswill be a key componentof irgenti.ta and Alicorp from Peru' Lucchetti'sprofit
our long-term development'By participating in an -irgi., were relatively high since a number of its
expandedfour-country market, we seekto partici- proJucts were placedin the higher end of the price
paie not only in the growth of theseeconomiesb' ut and quality spectrum.(SeeExhibit 3)'
alsoto make significantgainsin market share'asit
has alreadydone in the beer businessin Argentina With powerful competitionand salesgrowth slow-
and the pastaand metalsmanufacturingbusinesses ing, in 1994Lucchetti managementtealizedthat future
.*f,urr.ion in Chile would stem from growth of the
in Argentina,Brazil and Peru'

Form StrategicAlliances overallmarket rather than from gainsin market share'

We intend to continue, where advantageoust' o The challengewas to find new growth opportunities'
form strategicalliancesin Chile and abroadand to With prior successin distributing and marketingpasta
capitalizeon the benefitsprovided by thesestrate- produ.ts in Argentinabut with little presencein Peru'
gic relationshiPs. expansionin thesetwo marketsappearedmost prom-
ising. Furthermore' with a rise in salesvolume' the
Acquire and Divest Businessesto CreateValue .orripunyultimatelyconsideredthe constructionof pro-

Quiflenco'sstrategyis to createvaluefor sharehold- d u c t i o nf a c i l i t i eisn A r g e n t i n a '
ers through the acquisitionand activemanagement The considerationof enteringPeruwasbuoyedby

of a diversifiedgroup of complementarybusinesses the successof Madeco, another Luksic holding that
through long-term controlling stakesor strategic had successfullyenteredthe Peruvianmarket in 1993
alliances.In pursuing this strategy,the Company by acquiring a controlling interestin Indeco S'A'' the
considers and will consider from time to time largestPeruvianmanufacturerof coppercable'