Slow but sure

Although he continues to sit as chairman and chief executive officer of Concepcion Industries Group, 70-year old Raul Concepcion has already delegated most of the responsibility of running the businesses to his sons and other members of the Concepcion third generation.

The Group’s core business, Concepcion-Carrier Airconditioning Co., is managed by president and chief operating officer Raul Joseph Concepcion. Younger son, Raul Anthony Concepcion, is president and chief operating officer of Contel Communications, which provides trunk radio services. Niece, Renna Hechanova-Angeles, manages the appliance business under Concepcion Industries, Inc.

"In a tough business environment, having focus is crucial. When we talk diversification, we mean putting a third generation Concepcion on top of an entity so he/she can concentrate on that line of business," said Raul Joseph Concepcion.

"In our family business, we are scattered all over the place," said Raul Anthony Concepcion. "We try to look for a niche market, focus on it, then develop and be dominant in that market."

Core business

The younger Concepcions make no apologies for running a family business, albeit a big and profitable one.

Last year, its core air-con business posted P3.4 billion in sales, a growth of 33% from 2000 compared to the 10% average posted by the industry as the tariff wall on imports is slowly dismantled. This year, air-con sales is expected to grow by a lower 10% to 15% as companies delay the construction of buildings which need air-conditioning.

"The handwriting was on the wall 10 years ago. Basically, we are going to have zero tariff," said Concepcion. Next year, the Philippines will reduce the tariff on imports to 5% compared to the 30% to 40% tariff wall imposed by Malaysia and Thailand and 20% by Taiwan.

To compete, the Group brought up product quality and brought down costs. It ran a lean, well-trained organization. It also went into joint ventures such as its 50-50 joint venture with Carrier Air Conditioning Co, a subsidiary of Connecticut-based United Technologies Corp.

"CCAC is one of the best partnerships of Carrier worldwide because it combines the technical know-how of a large multinational firm and the entrepreneurial spirit of a smaller company," said Concepcion.

CCAC controls more than half of the local air-con market. Exports to six countries, including Australia, account for 15% of current production. The long-term plan is to export half of the total production run of the P591-million plant in Cabuyao, Laguna.

Diversification

Because of the steady growth in revenues provided by its core air-con business, the third generation of Concepcions have been able to look into other businesses that they have either tried and know they are good at or that they could enter into through joint ventures.

An example is the trunk radio service, which started out as an in-house application for the air-con business. Spun off as Contel, the company now offers the same service to other companies, particularly the courier companies.

Another example is CII Realty Development Corp. With the Group’s consolidation of its manufacturing operations in Laguna, factory sites in and outside Metro Manila are now idle.

The first project of CII Realty was the 50-50 joint venture last year with Ayala Land Inc. to put up a low-to-middle-market mall on the land owned by the family at the intersection of Taft and EDSA, where the lines of Metro Rail Transit and the Light Railway Transit meet.

The Group is toying with the concept of mini-malls or two-storey complexes that cater to the neighborhood market. Target markets include professionals like lawyers and accountants who provide small services like document notarization to ordinary people.

"I think the time of big shopping centers and huge malls has reached its peak," said Concepcion. "We are already saturated with these big malls. The risk of putting them up now has become too big. I think the trend is towards mini-malls. With the problems of traffic and pollution, people now don’t want to go far from home."

The Group is currently eyeing the development of the 5,000 square-meter property in Bel-Air , Makati which used to house Contel’s operations. Next in line are the properties in Alabang and along Commonwealth Road in Quezon City.

As a clan, the Concepcions has reached its fifth generation, 71 of them all. The fourth generation are in their 20s, just fresh out of college. The youngest is several months old, the first member of the fifth generation.,

"I think going public is one way to keep the family business intact. With the growing clan, I think you must create for them a way to either join the company or set up their own," said Concepcion.

In the meantime, forging joint ventures is a good middle ground.