Vangelis Apostolakopoulos, CEO of INTRALOT de Peru talks at Public Gaming Magazine

PGRI Introduction:  The markets, gaming cultures, and political structures vary widely throughout Latin America.  Not surprisingly, so too do the regulatory and taxation models.  A model being adopted with more frequency throughout the world is to license the operation of the government lottery to a commercial company.  INTRALOT  SA is one of the major global suppliers of terminal systems, sports-books, and other gaming products and services to government gaming operators.  As its wholly owned subsidiary, INTRALOT de Peru is a  licensed commercial operator of lottery, sports-betting, and other games in Peru.  Vangelis Apostolakopoulos discusses the huge potential for the industry in Latin America, and the ability of INTRALOT de Peru to contribute to this industry that supports Good Causes – or “Beneficiencias” in Peru.

Paul Jason, Public Gaming:  Could you explain the “stakeholder” structure of INTRALOT de Peru?  

Vangelis Apostolakopoulos:  The Peruvian  constitution  of 1993 guarantees open market conditions  in any business segment, including lottery.  The Lottery Operations are governed by the government law #21921 established in 1977 whereby: Lotteries can be established by any  Non-profit organizations (Beneficiencias)   under the  control of the state institution of INABIF .  There are more than 100 Beneficiencias throughout Peru. Lottery operations  could  also  be established  by private operators in partnership with a Beneficiencia.

The  games and their payout structures are established by each lottery committee within the scope of every contract signed between operators and their Beneficiencias. Intralot in Peru currently has agreements  with  the Beneficiencias of the  City of Huancayo and the city of Jaen. The lottery brands all belong to Intralot, and the contracts with the two Beneficiencias are renewable every 3 years.

How much autonomy does INTRALOT de Peru have to launch new games, decide how the games can be promoted, and how to distribute the games?  Are there strict government oversight committees that makes those decisions?  And who defines the mission and financial objectives of INTRALOT de Peru (the government, INTRALOT, or a combination of the two)?

New games  are launched in cooperation with the Beneficiencias that we are working with.  Decisions about what games to launch, the payout rates, game rules, prize structures are made  by the  established lottery committees with  each Beneficiencia   Intralot de Peru defines the appropriate channels and overall retail strategies to secure optimal success for the business and the sale of the products.

Describe the types of games that INTRALOT de Peru offers.

V. Apostolakopoulos:  Intralot offers a variety of Lottery and Sports betting games. In the lottery category we currently offer traditional numerical lotto type games  ( Tinka, Kabala, Gana Diario) , Digit games ( Super 3 and Fechaza ), interactive  games and, last but not least, Instants . In the  category of  sports  betting we offer the traditional Toto game and FOB . However we are completing the development  of new fast-action games such as  Kino  and  Monitor / Virtual  games, which will be launched within the next couple months.

What percentage of the revenue comes from lotto draw games, what percentage from Instants, and what from sports-betting?

V. Apostolakopoulos:  The  numerical  games represent the majority of our business.  Sports Betting is very promising, and Instants  now represent  slightly less than 10%.

What games, or game category, do you expect to have the highest growth potential over the next two years?

V. Apostoloakopoulos:  We expect that Sports Betting will increase its share significantly, when players get more educated, since it is a skill game and the market matures gradually.  The Instants  market should also increase.  The current penetration level of Instants is very low and we are introducing new games that we expect to appeal to the consumer and drive sales.

Are you introducing any significant new game changes or new game categories over the next two years?

V. Apostolakopoulos:  Yes we are about to introduce Kino and other games through Multi-media visual content   for the first time to the Peruvian Consumers.  And we are planning to make changes to our Lotto games to make them more attractive to the players.  In addition, we are currently exploring the possibility of introducing Racing for Lotteries by offering a  number of virtual races.

What is the ratio of retailers to consumers in Peru?  How are they compensated (commission rate, etc.)? 

V. Apostolakopoulos:  The retail market is still very much based on the small  businesses which number more than 230,000. The so called modern retail channel (malls and supermarkets) is  growing rapidly and in 2011 has a penetration of  around  30-32 %.  That is still one of the lowest in the region. The retailers are compensated for their sales via  a commission scheme over  the sales ,On an average  the  commission rate that they are enjoying  is around 10-12 %

Is increasing the number of land-based retailers an important business objective?  If so, what is INTRALOT de Peru doing to accomplish that?

V. Apostolakopoulos:  Intralot de Peru has its own strong retail network comprised of 1000 POS and in parallel is also operating another 1000 POS through retail agents.  Making the products more accessible to the consumer is critical to long-term success.  So we are Increasing the number of POS’s.  But we are adding retailers selectively.  Just as important as increasing the number of retailers is the goal of improving the efficiency and return on investment from existing POS’s.  We really want to focus on developing highly dedicated and productive retailers.

When did you first start to sell products online? 

V. Apostolakopoulos:  We  have been  testing  the online  market  since late 2008 However, it wasn’t until  early 2010 that we introduced our new portal and e-commerce platform that has  enabled us to promote and sell our games online.

If there are multiple operators, how do you avoid the syndrome of increasing prize-payout percentage to maintain or increase market share, and the coincident margin erosion that results?

V. Apostolakopoulos:  Over the past five years, four lottery operators entered and then exited the Peru market.  The extensive retail network and the strong consumer brand awareness of Intralot products proved to be very big obstacles for them to overcome.  Since 2003, Intralot has been dedicated to building the market and establishing the retail networks, trademarks, brands, and products that will meet and exceed the expectations of the consumers, the Beneficiencias, and all our stakeholders.  More importantly, we are always focused on continual improvement.  We want to continuously improve the quality of our retail network, the products, and to maintain the high standards of customer service.  Our success strategy is to constantly innovate and offer new games which reinforce Intralot’s strong presence in the market.  The Peruvian lottery market is not big enough to support multiple operators.  Insofar as Intralot de Peru serves the market in this fashion, with continuous investments, therefore  it is difficult for any other operator to establish  a viable operation  in this market

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