Arturo Méndez Hidalgo, CEO of Armebe y Menher, talks to The Energy Year about the company’s market niches and strategy for expansion, as well as its outlook for the LPG sector in Mexico. Armebe y Menher fabricates stationary and carburation LPG cylinders and tanks.
Tell us about Armebe y Menher and its operational and production capacity.
We have two plants in operation – Tanques Menher and Cilindros MEBA – and close to 500 employees. In terms of operational and production capacity, in total we produce about 40,000 cylinders monthly, buying around 1,000 tonnes of steel every month to fulfil this demand. We make about 20,000 in our plant in Vallejo, and another 20,000 in Tizayuca. If necessary, we also have the capacity to manufacture double this number – 80,000 cylinders per month – by running two shifts. We did this a couple of years ago when we worked on the AMLO [Andrés Manuel López Obrador] government’s Gas Bienestar project.
What other market niches and alternative services are you involved in?
Apart from production, we also provide a type of recycling service for cylinders. We do not buy tanks to recycle and resell – everything we sell is new – but many gas distributors send us their cylinders for us to fix, service and repaint. This is another separate service we provide. To give you context, theoretically a tank lasts 10 or 15 years, but with good maintenance, there are cases of products lasting almost 50 years.
An area in which we have also grown is in the manufacturing of LPG distribution trucks. This is important as many Mexicans, from the middle class up generally, have stationary tanks for their homes that need to be refilled. Therefore, we produce the trucks that provide this service, and the tanks we produce are very big, with a capacity to hold 250,000 litres.
Tell us about your key markets and clients.
Generally, with regard to revenue, approximately 20% comes from the sale of stationary tanks and 30% from cylinders. Regarding clients, we used to work for the government company Gas Bienestar, for which we produced around 600,000 cylinders. However, working with the government in Mexico is very risky. We made good money, but after the work, they owed us MXN 11 million [USD 538,652] and it took them two years to pay us.
Since the end of 2021, we have had no contracts with the government, and we now work primarily with the main gas distributors, such as Zeta, Global Gas and Gas Express Nieto. The hardware market in Mexico, from small stores to large ones such as Home Depot, is also a fairly big industry for us.
Outside of Mexico, our key markets are the United States, Canada, Central America, Colombia, Peru and Uruguay. Today, 25% of our revenue comes from exports.
What is your strategy to penetrate and maintain your presence in these international markets and are you looking at others?
With regard to how we create and maintain business in these international markets, especially in the US, the truth is that companies look for us. Wherever we are, the strategy is always the same: have a quality product that is backed up by the ASME, DOT and ISO certifications, which are required to sell in the US; be reliable; and provide good service. This, along with our reputation for being a safety-oriented company that delivers what we promise, has won us many clients.
Talking specifically about Colombia, we now have an office there with salespeople and a warehouse with a large inventory of tanks and cylinders. This adds a lot of value to our service in Colombia as when a client needs a certain product, we have it there on site, ready to be sent and delivered.
In terms of other international markets, we also recently sent a couple of containers to Iraq. In Iraq, there is a big market, but unfortunately, there is not a lot of money. A market that has both demand and money is Brazil, but entering the country is very complicated.
What outlook do you have for the future of the LPG distribution industry in Mexico?
Our outlook for the industry is challenging. We have a problem with competition from small Chinese cylinders of between 20 and 25 pounds, which have been imported into the country in vast numbers. This has been going on for two years and we are currently taking legal action against unfair dumping practices.
Furthermore, the government is also not facilitating our operations. They require us to deliver vast amounts of paperwork and ultimately just end up rejecting our permits, creating a difficult environment in which to operate. Of course, we have no choice but to keep working through these complications and the fact that we’re still here after 75 years is a testament to everything we’re doing right.