Gas in a Bottle.

Ventane is doing a brisk business selling gas cylinders to Venezuela's poor.

DURING THE NEXT DECADE, VENEZUELAN President Hugo Chavez wants to see his country cleared of ranchos, or slums. But that won't do Industrias Ventane much good. The main customers of the Caracas-based company, which sells cylinders of cooking gas, are rancho residents whose rudimentary housing has no access to gas mains or, sometimes, even electricity.

Despite Chavez's goal, executives at Ventane aren't worried about an eventual dearth of clients. Why? Houses will always crop up faster than gas pipelines can be laid down. "This is a market that should always be in growth," Ventane President Francisco Estrada Garcia says. "Venezuela has a housing deficit of 1.5 million units, and construction of housing is our principal source of growth."

Ventane, which is 97% owned by Houston-based energy giant Enron Corp., stands as Venezuela's market leader in liquefied petroleum gas cylinders. Its Vengas brand holds a 36% share and, including its cylinders sold through other companies, it controls 44% of the market. Ventane has grown so fast that it ranked fourth on LATIN TRADE's list of the 50 fastest growing companies through the second quarter of 1999 in Latin America. (See "Hot Growth Companies," February 2000.)

However, since the middle of last year, Ventane has gone downhill. The company sold 682,188 cubic meters of gas last year, amounting to US$118 million-- basically flat when compared with 1998. But that was during a recession that sent Venezuela's GDP plunging 7.2%. "Last year wasn't a good year for anyone," Estrada says. "But we had zero growth while many people had negative numbers," This year, Ventane expects to regain its strength and is looking at 2% growth with a sales goal of $127 million. "Everything depends on the push the government gives to housing [for the poor]." he says.

Double-burner strategy.

Key to Ventane's staying competitive during Venezuela's worst recession in 11 years is its marketing strategy aimed at the growing rancho population. That group makes up 85% of Ventane's client base; the remaining 15% are small businesses, mostly restaurants. Ventane offers quite a deal: A 10-kilogram gas cylinder, two-burner tabletop stove and installation go for around $22--affordable even for the poorest segment of society. "We sold about 100,000 of those last year:' Estrada boasts.

Ventane has been in constant expansion since it was founded in 1953 in Venezuela's eastern oil town of El Tigre. But since Enron bought into the company in 1967, it has been more aggressive in its efforts to grow. The parent company, which owns similar companies in Jamaica and Puerto Rico. has more than doubled the number of branches and filling plants around the country to 63. (It began fabricating its own steel cylinders in 1985.) Ventane's emphasis on safety in handling the highly volatile product has been a key factor in building the Vengas brand and customer loyalty over the years, Enron spokesperson Dennis Vegas says.

In 1992, Enron sold a 3% stake in the company on the Caracas Stock Exchange. The reason? To raise the capital necessary to buy a competitor, thus gaining another 6% market share at that time. With such a small share offering, Ventane's shares are not traded often--maybe five times a year. "Ventane's business is very attractive in and of itself, but they're not liquid," says Humberto Bizzo, an analyst with Caracas brokerage firm Merinvest.

That could change soon. The Chavez government plans to develop both natural gas and value-added petroleum derivatives such as liquefied petroleum gas, which is a byproduct of the oil refining process.

Analysts think Ventane is well positioned to exploit this opening. Foreign investors are required to form a joint venture with a local company to bid on upcoming gas transportation and distribution plans. Ventane is already considered a local company, and with a foreign giant like Enron behind it, it could seize opportunities to branch out into other activities in the hydrocarbons sector. "Ventane could provide a good investment vehicle for gas projects," says Boris Molina, an analyst at Santander Investment in Caracas.

Ventane's Estrada admits the company is studying ways it can participate in the so-called "gas opening:' but he declines to give details. "I firmly believe we'll go into some project," he states.

The company, which employs 2,700 workers, is also looking into exporting to neighboring countries such as Colombia and Brazil. Northern Brazil, with densely populated cities remote from the rest of the country, appears especially attractive. "This could be a natural market for us," says Estrada, an accountant who graduated from the Universidad Central de Venezuela and has been with the company for 34 years. "We're just starting to do a market analysis.

Expansion into foreign markets may be needed to sustain the company's long-term growth: The government's plan to install a natural gas pipeline network and massive residential access in the country's main cities could eventually undermine Ventane's customer base. But Estrada believes there will always be a substantial niche for bottled gas. "The gas network is not going to arrive to all areas of the cities," he says. "It'll be a long time before natural gas displaces liquid gas."