KUA MEX FOODS S.A.P.I. de C.V. (“KUA”)

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Project Number: 
ME4073A-01
Expected Consideration Date by the Board: 
06/24/2014
Date Posted: 
05/15/2014
Company: 
KUA
Financing Requested: 
Up to US$5 million (or its equivalent in Mexican pesos)
Sector: 
Food and Beverages
Location: 
Mexico
Country: 
Scope Objective: 

 KUA is a company that produces, distributes, and markets food and beverages in Mexico.  KUA’s business model consists of integrating and consolidating healthy, artisan, niche, and nostalgic products with innovative characteristics and significant potential for growth. KUA is at the forefront of Mexico’s food sector in terms of innovation and health promotion.
KUA came about as a result of an effort by a group of executives with a long track record in the food industry who see significant opportunity in this under-served segment of the Mexican market. KUA mainly adds value in terms of strategy, operations, management, and marketing. Additionally, significant economies of scale are achieved through KUA in the form of synergies and operational consolidation in purchasing, production, storage, distribution, marketing, sales, and exports, among other areas. As of May 2014, KUA’s products and brands included the following: fruit juices (Frutos de Vida); chili peppers and sauces (Lucero); chocolates and sweets (L’Atelier du Chocolat); products made from nopal (Nopalia); and beans and sauces (Alira). Other opportunities for KUA include products in the bakery, sweets, snacks, fruit juice, vegetables, and fish subsectors.
The IIC equity investment in KUA will support KUA’s organic growth, including expansion in and improvements to installed capacity. Likewise, the IIC’s investment will provide KUA with access to technical assistance programs, experience and contacts from throughout the region, additional financial resources, and best practices in corporate governance and environmental and social standards.
 

Environmental Review: 

Environmental and Social Risk Categorization
According to the IIC Environmental and Social Sustainability Policy, this is a Category B project.  Potential environmental and social risks are expected to be typical of those in the food and beverage sector, which are generally of limited extent, largely reversible, and mitigated via measures that are readily available and feasible to implement.

Environmental and Social Appraisal
The IIC’s Environmental and Social Appraisal focused on the Project’s current and anticipated performance in three key areas: (i) overall management of potential environmental and social impacts and risks; (ii) labor and working conditions; and (ii) resource efficiency and pollution prevention.

(i) Management of Environmental and Social Impacts and Risks
KUA has a well-developed code of ethics, which clearly states the company’s commitment to social responsibility and to environmental protection.  The company is working actively to put this commitment into practice, beginning with the recent hiring of a social responsibility director (SRD).  As KUA acquires new products, the SRD, with the help of an external consultant, performs detailed baseline evaluations of the existing environmental, health, safety and labor conditions, using as a benchmark the IFC Performance Standards.  These evaluations identify any gaps in performance and define the measures that will be taken to fill them.  To ensure that products in the KUA portfolio then continue to operate in accordance with the IFC Performance Standards, the IIC Environmental Sustainability Policy, and good international practice in general, KUA is in the process of developing an Environmental and Social Management System (ESMS).  To assist with this effort the company has hired an international environmental consulting firm.  The firm is currently in the process of developing recommendations for an appropriate ESMS structure.  Establishment of an ESMS in line with the firm’s recommendations will be a key element of the project’s Environmental and Social Action Plan (ESAP).

(ii) Labor and Working Conditions
A main goal of the SRD will be to guarantee the occupational health and safety of all workers employed under the KUA umbrella.  To help meet this goal even as the company expands, the KUA management is assessing options for providing the SRD with additional, specialized, occupational health and safety capacity.  This capacity may take the form of one or more of the following: additional training; targeted support from external consultants; or additional full-time staff support.  The project’s ESAP will require KUA to demonstrate that it has developed the internal capacity required to fully implement its ESMS.

KUA’s code of ethics makes explicit its commitment to respect the right of all its employees to freely associate with organized labor groups.  In practice, the company is taking steps to help strengthen and formalize labor groups that act in the interest of its employees.  It has also taken measures to be inclusive of employees with disabilities and attentive to gender issues in the workplace.

(iii) Resource Efficiency and Pollution Prevention
KUA has already demonstrated its willingness to explore and implement cost effective resource efficiency and pollution prevention measures in the products in its portfolio.  For example, in one of its largest facilities KUA is in the process of switching the boiler fuel from liquid petroleum gas to cleaner burning compressed natural gas.  The same facility is currently in transition from an open-flame cooking system to a more efficient steam-heating system.  Moving forward, minimizing pollution risks and mitigating accidental spills will be key aspects of KUA’s ESMS.

Monitoring and Compliance
IIC will verify the project’s ongoing compliance with Mexican regulations and with the IIC Environmental and Social Sustainability Policy by requiring from KUA the submission of annual environmental and social monitoring reports.  IIC will review these reports and conduct periodic site visits throughout the life of the Project in order to verify continued compliance.