Frozen treat is red-hot success

THE BALTIMORE SUN

TOCUMBO, Mexico -- The winding road between the towns of Cotija and Los Reyes, in the state of Michoacan, runs mostly through fenced green fields of grazing livestock and seems like just another drive in the country. Then, over a hill and around a turn, suddenly, on the right, appears an enormous statue of a Popsicle-like treat as tall as a three-story house and painted a creamy apricot.

With panache rare for a Mexican village, Tocumbo thus greets the world. The village is like no other in the country. Lavish houses spread out across half city blocks; a municipal park has a swimming pool; and, no less remarkable, every street is paved.

Tocumbo, population 2,000, is "the wealthiest village in Mexico," says Luis Gonzalez Gonzalez, dean of the country's rural historians. The story of how it earned that status is one of the epics of Mexican business.

Mexico, generally, has offered two routes to economic progress to its rural people. One is emigration to the United States. The other, more recent, is the drug trade. The state of Michoacan is a major producer of marijuana and ranks second among Mexican states in the number of emigrants it sends north.

But the people of Tocumbo discovered la paleta, a frozen dessert made of ice cream or frozen fruit, and they have turned it into one of the most popular Mexican products of the past half century. Tocumbans founded, then expanded, the La Michoacana ice cream shops, called paleterias.

La Michoacana "is not a brand. It's like a franchise. But it's not that either," says Martin Gonzalez, a sociologist who has written a history of Mexico's ice cream industry. "It's not a large corporation, but if you put all the Michoacanas together, it would be the largest ice cream company in Mexico."

Whatever it is, La Michoacana proved adaptable enough to allow illiterate rancheros to compete with multinational ice cream companies and get rich in the process. No one knows how many Michoacanas exist nationwide. Estimates run between 8,000 and 15,000. But almost every plaza of every town in Mexico has at least one.

Two cousins, Agustin Andrade and Ignacio Alcazar , are credited with starting the ice cream shops in Mexico City in the early 1940s. Their shops were small and offered a few flavors, along with soda and candy. But they provided a living. Soon Andrade and Alcazar opened more, Andrade opening 177 paleterias. But Alcazar became the better businessman.

He and his brother, Luis, discovered they could make more money financing the paleterias of others than from running them themselves. Soon they were returning to Tocumbo and offering to lend money to anyone who wanted to enter the ice cream trade.

A paletero could pay off the cost of opening a profitable shop and end up owning his own business. By the mid-1950s, Tocumban men were deciding that owning an ice cream shop in Mexico City sounded a lot better than a trip to the United States. They would work in a paleteria, then buy it from the owner, usually a friend or relative. Or they would borrow money from the Alcazars. Each owner managed his business his way.

So La Michoacana did not grow into a huge corporation. It had no central accounting, no marketing or advertising. Workers in the back room poured ice-cream base into molds and churned ice cream with small mixers.

That proved to be La Michoacana's greatest strength. Its production method kept costs the lowest in the industry. Making ice cream and paletas on site, when needed, also ensured freshness. And La Michoacana needed no expensive fleets of refrigerated trucks delivering from a factory to far-flung outlets.

"They have been able to grow and keep growing, although the competition in ice cream has grown," says Gonzalez, the historian. "They're able to sell their product pretty cheaply. Baskin-Robbins costs three times what a Michoacana Popsicle costs. They serve a market that the large ice cream corporations have ignored."

La Michoacana's main initial weakness was quality. That began to change in 1959, when an unschooled rancher, Rafael Abarca, arrived in Mexico City.

Abarca ushered the Michoacana concept into its second phase. He became the first to use stainless-steel molds, and he brought in the first refrigerated display cases, so that people could see and choose what they were going to eat.

He made paletas in the standard chocolate, vanilla and lime, but also offered them with mango, papaya and other tropical fruits. The higher standards allowed La Michoacana to expand beyond Mexico City. People from Tocumbo began forming partnerships, then scouring the countryside looking for towns with attractive street corners or plazas.

As thousands of other retail food outlets stumbled and died during the recessions of the 1980s, the number of Michoacanas grew, in part because Tocumbans financed themselves. Banks would have foreclosed on businesses that defaulted on loans. La Michoacana's financing was built on friendships, family ties and trust.

As La Michoacana moved across the country, Tocumbans developed an almost insatiable thirst for labor. They would hire someone in Mexico City. He would have a cousin back home who needed work. Pretty soon, dozens of men in his hometown would be making paletas.

The Michoacana business model was in a sense too successful. What allowed the shops to spread across the Mexican ice cream market, each owner's independence and the ease with which people enter the business, is what hinders the business today.

That worries members of Tocumbo's younger generation, among them Alejandro Andrade, who owns a marketing firm in Tocumbo. He believes La Michoacana must change if it is to continue to thrive.

The business model "has worked up to now, but not to its full potential," he says. "Sales, production, administration would be optimized if there were a general agreement among paleteros to maintain a certain quality, a corporate image, and not everyone independent and disunified."

Andrade wants to form an association of Tocumbo paleteros that would act as a clearinghouse for information on new production and marketing techniques.

"There are paleteros who don't even know how ice cream base is made or what kinds there are," says Andrade. "The older paleteros who own 30 or 40 paleterias won't listen to me, but some of the young people will."

For Tocumbo's young paleteros, the profits their fathers secured by financing others are disappearing because most families don't need to ask for loans. What started as a business by Tocumbans, solidified by village ties, is fracturing into large family groups.

"The older generation knew each other," says Gerardo Abarca , Rafael's son. "Then they left to face the future and that turned out to be leaving the village and getting into Popsicles. They helped each other, and that's how they got ahead. That doesn't work among the younger generations. We don't know each other that well. There's competition among the Tocumban families.

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