Carlos Slim: How Cigatam and Malboro Became a Business Success

Crisis Investment Strategy

• 💡 Carlos Slim acquired Cigatam and a 40% stake in La Moderna in 1981-1982, taking advantage of a market crash where companies were valued at 1-2% of their real worth.
• 🎯 During the 1982 crisis, when "the devil took the whole market," Slim was one of the few buyers, seeing opportunities in undervalued assets.
• 🔑 Cigatam, despite selling Malboro, was not doing well and had not paid dividends for 17 years, but Slim saw its potential and cash flow.

Malboro's Market Dominance

• 🚀 Malboro initially held only 6% of the market but grew significantly, reaching 40% in six years and eventually 45-50% of the Mexican market.
• 📈 Key strategies included aggressive support for Malboro, maintaining a close price gap with competitors like Rale, and focusing heavily on distribution networks.
• 📺 Slim invested heavily in television advertising, leveraging a deal with Televisa, which helped Malboro gain significant market share.

Navigating Regulatory Changes

• ⚠️ The removal of advertising from TV, billboards, and radio, combined with increased taxes, significantly reduced per capita cigarette consumption by 60%.
• 💰 Despite reduced consumption, these changes paradoxically increased profitability because companies saved on marketing expenses and higher prices offset lower volume.
• ✅ Cigatam also stopped supporting older brands like Delicados and Faros, allowing them to decline while focusing resources on Malboro.

Confronting Philip Morris

• 🤝 Cigatam had a 72% stake, and Philip Morris 28%, with a 10-year contract revisable every five years for Malboro distribution.
• 🥊 During a contract review, a Philip Morris executive aggressively claimed Malboro was theirs, implying Cigatam had no value without it.
• 🔥 In response, Slim increased Malboro's price by 20%, forcing Philip Morris to reconsider their stance within three months.

Broader Crisis Acquisitions

• 💸 The irrational market during the crisis allowed Slim to acquire other significant assets at extremely low prices.
• 💰 Examples include buying 23% of Firestone for $160,000 and Telmex for around $160-200 million in the 1990s, highlighting the widespread undervaluation.