MercadoLibre Taps Into Pharma and Food With Regional Pilots

MercadoLibre is experimenting with small pilot programs to develop ventures in industries like pharma and food delivery. This development emerges after Bloomberg first reported that Amazon had acquired a stake in Colombian delivery platform Rappi through a $25 million convertible note. 

Martin de los Santos, Chief Financial Officer of MercadoLibre, discusses why pharmaceuticals have a chance to improve their low e-commerce penetration, as well as why food products create new revenue opportunities for the Latin American powerhouse due to the high frequency of purchases. Martin speaks with Katie Greifeld and Matt Miller on Bloomberg Businessweek Daily.

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Episode Transcript

Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News.

Speaker 2 (00:08):
You're listening to Bloomberg Business Week with Carol Masser and
Tim Steneveek on Bloomberg Radio. Mercado Libra is basically the
Amazon of South America. The stock is more than doubled
in the past five years U one hundred and twenty
five percent, and the CFO joins us right now out

(00:30):
of Latin America. Martin de los Santos and Martin, I've
spoken to you a couple of times in the past
few months. Give us an update on how your business
is doing, how your growth is looking right now, and
how the economy feels to you.

Speaker 3 (00:45):
Hi, Matt, Thank you for having me pleasure to being here.
We announced results a couple of months ago for Q two.
We shown a very strong growth both on our e
commerce platform as well as our fintech business. Number of
users growing very nicely thirty percent on fintech twenty five
percent year and year growth, and commerce performing very very

(01:06):
well in all of the markets where we operate. We
continue to increase financial inclusion. But then when we look
at you know ahead, we see plenty of growth in
the future. Right. Penetration of ecommerce in Latin America continues
to be relatively low compared to the US or Rasia's
at midteen percent. Financial inclusion is very very low, and

(01:27):
we're also making significant progress on bringing people to our ecosystem.
So we are very excited not only with the results
that were delivered in Q two, but with the more
importantly with the growth that we see ahead of US.

Speaker 2 (01:39):
I will say normally, So, Martin, I know, normally you're
in Montevideo, but right now you're in San Francisco.

Speaker 1 (01:46):
Just to correct myself, Yeah, we'll talk a bit, Martin
about why you are in San Francisco.

Speaker 3 (01:52):
We are attending the Goldman Sachs Technology Company a conference.
I'm sorry, So we're visiting with investors and an analyst
and again talking about the results and the future of
the company.

Speaker 1 (02:03):
And to that point, I mean this, so this is
a technology conference. How are investors globally thinking about the
Latin American texting is? What are some of the conversations
that you're having on the ground there.

Speaker 3 (02:15):
Yeah, obviously they're looking at growth, the opportunity that we
have on fintech, the new launches that we have done
recently on the fintech side, we announced the launching of
the new credit card in Argentina. We are doubling our
credit book year and year. In this quarter, we are
doubling the number of the amounts of the funds investing

(02:36):
on our platform. On the commerce side, we are at
record levels in terms of growth. We continue to increase
market shares on all of the markets that we operate.
We're increasing our free shipping offering. So a lot of
new things happening on our ecosystem and those are the
type of things that we're discussing with investors.

Speaker 2 (02:52):
Pun and Goyle are Bloomberg Intelligence analysts who watches your
business wants to know about the acquisition global Brazilian drug
store and how we should interpret that acquisition, what you're
going to do with what your strategy.

Speaker 3 (03:06):
Yeah, I think when you look at the pharma category
is a category that is very low with very low
penetration of e commerce, but it's a large category within
commerce in general, with a lot of frequency of portraits.
So we are experimenting not only in Brazil, but in
each country that we operate. We have a small pilots

(03:27):
on Pharma is a complex segment of a market because
it's highly regulated, but we think it generates a big
opportunity going forward. So it's not a lot to report
right now. Which just acquired in Brazil a small pharmacy
to start to experiment is a very small part of
our business, but it has a big potential because of
the size of the commerce that is done on pharma.

Speaker 1 (03:48):
We'll talk to us more broadly about how you're thinking
about M and A right now. You made this purchase.
Of course, at the end of August, should we expect
to see more purchases from you.

Speaker 3 (04:00):
No, We historically have been very very We have performed
very few acquisitions. For the most part, we like to
build what we do and we have done so. You know,
we have built our full fulfillment infrastructure on our own
instead of acquiring. We have built our fintech solutions throughout
the years on our own. We have eighteen thousand developers

(04:21):
that are focusing on building the product at Marcallliro Marcalo, Bago.
So I would say that for the most part, where
I'm not an acquisitive company.

Speaker 2 (04:29):
What about the pharmacide of the business, I mean, do
you see a lot of growth there. It's something that
Amazon has recently gone into. Here are how many of
your customers are getting their drugs from you now or
online now compared to what you expect in say, five years.

Speaker 3 (04:46):
I think if you look at the pharmacy as percentage
of sales and Marcallira is negligent, it's almost non existent today.
So it's more of an opportunity going forward than a
reality today. As I mentioned, we operate in eighteen different countries.
It's she has a different regulation for pharma, so I
think it's more of an opportunity than our reality today.
But like pharma, there are many different bets that we're

(05:09):
doing throughout the operation. That supermarket one Pee were experimented
with food delivery that are small today but represent large
opportunities going forward.

Speaker 2 (05:19):
By the way, Martin, can you watch what Amazon does
and you know, do you have time to watch them
wait and see how it works out for them and
then do it yourself or do you like to make
your own innovative moves make moves at the same time.
How does that work?

Speaker 3 (05:36):
I think obviously we observe when we analyze everything around
the world, obviously the US, but a lot of what's
happening in China, and we try to bring those things
to Latin America. But those require adaptation, right. I mean
in the early days when we started in Marclo, Lileria
twenty five years ago, we used to be very similar
to Evay, but we rapidly realize that, you know, we

(05:58):
needed to adjust the model and we we move away
from that, the auction model for instance. Then we build
our infrastructure, you know, in the same way as Amazon
has in the US. Our fintech solution looks a lot
more of what the Chinese have in China because of
financial inclusion that we needed to make. So I think
we do observe a lot what's happening in the world,

(06:18):
but then we need to customize it to Latin America,
which has a different, very different environment.

Speaker 1 (06:23):
Well, it feels like Amazon is the elephant in every
room just about. And on the topic of Amazon, they
recently bought a stake in a Latin American delivery startup,
Rappy I believe it's pronounced it's a Colombian delivery company.
What does this potentially mean for you? What did you
make of that news?

Speaker 3 (06:41):
I think we've been competing with Amazon for many years
in Brazil and obviously more intensely in Mexico. And again,
as I mentioned, before. We have built our logistic infrastructure
and pay infrastructure to compete with Amazon with Asian players,
and we will continue to compete with them based on
the strength of system. So again doesn't change the trajectory

(07:04):
of our investments or our strategy. Not much to report
on that front.

Speaker 2 (07:10):
What's your investment strategy in terms of AI or data centers?
So are you pouring you know, like all of the
megacap tech companies over here, billions of dollars into that.

Speaker 3 (07:20):
No or not? I think we regarding AI would break
it down in three. There are certain initiatives that are
helping us with cost savings. There are certain ones that
are consumer facing and are helping us to push growth
and improve the user experience and conversion, and that there
are certain ones that speak more about the you know
agentic AI, the way we interact with our users. I

(07:42):
would say that we're making a lot of progress in
terms of cost savings and many different areas of the business,
in particular coding. You know, the eighteen thousand developers that
we have are embracing AI and becoming more productive. Also
consumer facing. A lot of ways that the users interact
with our platform being improving because of AI and then
on the Agenda AI, we're you know, experimenting a lot.

(08:05):
I think in that front we have more questions that
answered yet, but we have a large theme of people
are looking at ways we can improve the user experience
via developing our own agents.

Speaker 1 (08:15):
All right, that's a good place to leave at Martin.
It's really great to get some time with you. That
is Martin Delos Santos. He is the chief financial officer
of Mercado Libra