Brazilian meatpacking: more than it can chew

After two years of breakneck growth and consolidation funded largely by
the government, Brazilian meatpackers are protein providers to the
world. Can they also become global brands?

Two years ago the Brazilian meatpacking industry was a dog’s dinner.

There were far too many small competitors fighting for market share.
That led to dumping on the home market: cut price filet mignon
predictably led to a chain reaction.

Retail prices for other beef cuts were culled, followed by those for
pork and then chicken, notes Gustavo Wigman, food analyst at Goldman
Sachs in São Paulo. That was coupled with a tight market for cattle,
which compressed margins in the sector, he notes.

The industry was ripe for consolidation. Indeed, since the start of
2009, 10 meatpackers have sought judicial protection from creditors.
They include Independência, at the time the fourth largest meatpacker in
terms of capacity, with 800 million reais of gross sales per year.
Bertin, the number three at the time, was absorbed by JBS, adds Wigman.

The crisis continues to rumble through the industry with regular
announcements of new bankruptcies hastened by tax changes that remove
advantages from the informal sector, says Fernando Galletti de Queiroz,
CEO at Brazil’s fourth largest meatpacker Minerva.

Today, the top five meatpackers are JBS, Marfrig, Independência, Minerva
and Arantes. However, the only four listed Brazilian meatpackers and
food processors are JBS, Brasil Foods (BRF), Marfrig and Minerva.

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