Juan Rodríguez: How Telepizza Went Public

Juan Rodríguez, CEO of Camaloon, talks about his experience as Marketing Director of Telepizza and how the company went public. Juan is one of the key characters within the Itnig ecosystem, not only because of his great experience in the business world but also because he’s led Camaloon to grow and he is also one of the partners of the Itnig Fund.

Let’s start at the beginning of everything. You were born in the Basque Country, but you went to study business in the United States. Why?

I come from a very humble family and I also had the misfortune that my father died when I was very young, which made the situation even worse. I am a person who has been very self-taught, I was on my own. I remember a stage in high school that I practically did not go, but I always read a lot of books and I liked economics. I really liked to understand how the economies of the countries worked, because there were countries that were very rich and very prosperous, where there was a lot of innovation. And for me, the benchmark was always the United States. So from a very young age, being self-taught, I had a great idyllic love for that society that was capable of generating that wealth and above all that development. Everything new came from the United States, movies, computers, technology. At seventeen I started programming at a library because we didn’t have a computer at home. The United States was my reference for a society model. And that is the reason why, in my madness, I applied to go to study in the United States.

I also had the difficulty that I went to a public high school, they taught me a bit of French, but I did not speak English, so I bought some tapes and books to learn English on my own. So I passed an English exam and an entrance exam in the United States. And I came out within 1% of the best grades in the world and that allowed me to study in the United States. That also allowed me to go there with a scholarship that covered a small part of my expenses and I managed to support myself taking jobs.

It is a bit the beginning of my story. I studied Economics at the University of Michigan. Then I studied Business at Harvard. And for me it was seeing a totally different world, it changed me on an intellectual level. And also in class, I learned a lot from my classmates and my teachers, who were magnificent. For example, at the University of Michigan, I had Chan Kim, who is the founder of the Blue Ocean Strategy, as a professor. That kind of person marks you, your colleagues also mark you, they were people who worked really hard. Education was highly valued and the expectations were high. And that makes you give the best of yourself too. And there also your personal side. Because of course, you are very young and you grow up in that country and you live in that society, at that level of freedom. It was a totally different society, very meritocratic, where people are valued not for their surnames or origin, but what they are capable of doing.

Maybe studying Business gave me the methodology and tools, while Economics shaped me very well to ask myself questions and being able to see that everything has a consequence. So I think that as for intellectual training, it was very good for me to study Economics first. And studying Business allowed me to know that you are going to take different methodologies at different times to analyze problems.

So, I finished school and I came back to Spain. I was 22 years old and I was going to work at Mahou, the beer company. The Marketing Director was retiring and they wanted me to work with him and then be his replacement. However, I don’t remember how I ended up meeting Leopoldo Fernández Pujals. And I went from working Mahou, a huge company, to an ordinary flat on Guatemala Street in Madrid, with a guy smoking a cigar, with his leg crossed, and speaking between English and Cuban. I think I’ve never met a guy like that, he’s one of those guys that makes an impression. Leo sold me a new project and told me why he needed me. And I saw someone from whom I could learn a lot and he told me at that moment that we were going to do something great. I believed it. Leopoldo told me that he wanted to open 10,000 Telepizza stores, which at that time had two stores and was opening a third. Evidently, Leopoldo had a capacity for communication, for enthusiasm, for transmitting to his team and his executive committee that level of ambition.

What was the winning strategy that made Telepizza keep 63 percent of the market share?

It’s a combination.
1. There has to be a market because if there is no market it is very difficult.
2. There has to be a team and, in my experience at least, you don’t need the whole company to be top, but you need a core that is really good.
3. You need to have a strategy and execute it. And you have to execute it quickly because the market is not waiting for you and there will be another one that will execute it as fast or faster than you.

When Leopoldo joined Telepizza, his strategy was to enter the teenage market, because he saw Dominos Pizza succeeding in that market in the US, which emerged by selling pizza to university students. However, that was not the case in the Spanish market. One of the great virtues Leopoldo has is that when he trusts you and he thinks you have talent, he lets you do things.

I was able to convince him to pivot and that our market was the family, that the family unit was the key. That was the change in strategy at Telepizza. If someone sees our campaigns from the 90s, the protagonist was the mother and the child. On the contrary, the Pizza Hut strategy was putting the teenagers as protagonists. Why did that work in the United States and not in Spain? Because they’re two different societies. In American society, people become independent earlier, even before university everyone starts having jobs to make their own money. In Spain, however, you still see 30-year-olds doing their second master’s degree and living with their parents, they don’t have money. In Spain, Friday nights became a time for pizza and movies. This was created by Telepizza.

The slogan “the secret is in the dough” came out with this strategy. Everyone can deliver in 30 minutes and have good prices, but not everyone has a secret. And the secret is the magic formula that gives a different, special dough, and that makes the mother feel safe. We had a lot of mothers calling and sending letters asking for the secret formula of the Telepizza dough.

And so, we started growing fast. All this strategic part is important. But then you have to run. Alfredo Martínez joins the company as our Director of Operations. And he is the one who got the stores to work well, to provide products and service, and for the pizza to arrive in 30 minutes. That was achieved by this man, a model that worked and was applicable. Leo’s obsession was to build a model and, if it worked well, duplicate that model. We were the pioneers in mail-boxing as a guerrilla-marketing strategy, and we managed to scale it. In numbers, we went from having two stores to having 600 after three years in Spain and then we scaled it to more countries. We achieved a very good position in Mexico, Chile, and Colombia.

How much did building a store cost? And where did the capital to open those 600 stores come from?

It cost about 180,000 euros to open a new store. As for the capital, it came in various ways. Many stores were owned, others were franchised. Madrid, Seville, and Catalonia were all owned, for example. Then we had some franchises in Galicia, and the Basque Country was a mixed model. We had very high profitability and we had good bank financing, the profitability of a store was around 20%. Some stores were even above 30%.

We had a mix of delivery and in-store. In-store there were basically two types of sales: one was related to birthdays and school visits, and the second one was the 2×1 promotion, which is very profitable because we only offered it in medium and family-sized pizzas. We were pioneers in the 2×1 promotion, in Spain, and pioneers in mail-boxing and delivery.

I also believe that Leo was a pioneer in understanding that businesses are about growth and volume. What is most exciting is growth. And when you go through stages where you don’t grow so much, it is more difficult to maintain that illusion. Growing up is the biggest drug there is. And if a business doesn’t grow, something is not working.

Why did Telepizza go public? How was the process?

It went public because of the cap-table, because of how the shareholding was structured, which was basically between the two brothers, Leo and his brother Eduardo. Leo was expelled and Eduardo took control of the company. To say that he took control of the company is just a saying. Then, the IPO was arranged with Merrill Lynch in the international section, and with BBVA in the national section. Investors were blown away by our market share and our dominance of the market. At that time we had a turnover of 400 million, something like that, with enormous growth and profitability. We controlled the entire value chain, from the manufacture of dough to the manufacturer of cheeses. So that gave you total control. I think only three or four people know the secret formula (laughs).

We went public on the Madrid Stock Exchange. Leo had always had the illusion of going out to the United States. I think we could’ve gone public in the United States and I think that if all that hadn’t happened (in 2000), we would’ve had 10,000 stores and we could’ve conquered the world. Everything was very hasty, very fast, it was necessary to give an exit to the cap-table. It was a way to get out very quickly from the problem that the shareholder structure had generated for us and that we thought it would never generate, but it did.

The company grew in value on the stock market and, in a short time, it was placed on the Ibex35, 35 companies with the largest capitalization in Spain.

When we went public, I remember a meeting I had at the CNMV in Madrid, and this guy told me that we didn’t have a product and a company to go public, that we didn’t have the potential for it. It was evident that we were going to be on the Ibex35, BBVA, Merrill Lynch told us, they all told us. And of course, we entered the Ibex 35, we were within a few months. Telepizza was a gem.

So, what happened? Who screwed up the gem?

Well, Alfredo left. In the end, companies, even if they are gems, people run them. Companies are what people make out of them. And that’s what happened at Telepizza. It stopped growing when the whole team left. You stop growing, you stop having ideas, you stop having projects, you stop dominating the market, you stop having ambition. Currently, as Telepizza is, I prefer not to see it.

What did you do when you left Telepizza?

I changed course, I started working in strategic consulting, I was in the way to become partner. I carried out the FMCG practice. But that wasn’t my thing. And it was a point in life where I had to decide. I decided to quit and went into the concrete business. I joined a business that wasn’t very sexy but the job seemed sexy to me. My job was to carry the entire strategy of a cement group for southern Europe.

In this company, I made a document that said that, before 2006, we had to divest in Spain and southern Europe, we had to close factories and sell them. There was an artificial boom in the sale of concrete and in construction. If we’ve opened factories of millions of dollars because we believed that we were selling more than ever, then when 2008 arrived and the market fell from selling 50 million tons of concrete to selling 4 or 5, the concrete factories would’ve gone from being a money machine to have to throw everyone into the streets. So the decision of closing and selling before 2006 was a wise decision.

The resilience capacity that the entrepreneurship world requires is super important. You have to differentiate resistance from stubbornness. When there is no business or no market, it is different. But resistance is important in business and life.

Full interview in Spanish

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This post is also available in: Español (Spanish)

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