Brazilian broiler firms vie for top spot
A hostile takeover attempt spurred Perdigão into action to overtake Sadia as the largest poultry and pig producer in Brazil.
Twelve months after a hostile takeover attempt, in which Sadia tried to buy Perdigão, Brazil's top two poultry producers reversed positions. Perdigão passed up Sadia when it finalised the acquisition of Eleva Alimentos in February.
Takeover bid spurs Perdigão growth
The unsuccessful takeover attempt in 2006 spurred Perdigão to revise its business strategies and enter an accelerated growth mode with the goal of strengthening the company and reducing its vulnerability to future takeover bids. To insure survival, the company began aggressively pursuing growth domestically and globally. Focusing on diversifying its business and, spurred by a significant investment programme, Perdigão went shopping.
In the first half of 2007, the company acquired Sino dos Alpes for $4.8 million. A small, specialty poultry meat and pork products company located in southern Brazil, the division was a subsidiary of Grandi Salumifici Italiani, a traditional Italian sausage producer with more than 150 years of experience and operations in 11 countries.
The same month, Perdigão opened the Mineiros, Goiás State complex, in Brazil's Midwest, with an annual capacity to process 81,000 tonnes of heavy poultry meat-based products (turkey and the Chester brand roaster).
An established supplier of raw materials and finished products to Europe, Perdigão's strategy of entering the European Union's retail market with its own brands had not been successful. Company executives chose an alternative strategy of diversification, investing in more sophisticated products for higher market segments.
After two years of negotiations, the company finalised the purchase of Plusfood, a Dutch meat processing company, for 30 million ($46.29 million). With plants in The Netherlands, the United Kingdom and Romania, Plusfood has an annual income of about 75 million ($115.72 million), selling 20 thousand tonnes of hamburgers, nuggets, and grilled products under the Friki brand of poultry products, and Fribo brand of beef products, in addition to a strong presence in the foodservice market. Prior to being acquired by Perdigão, the company belonged to Cebeco Groep B.V., a Dutch co-op holding with over 200 subsidiaries in 100 countries, 40,000 associated producers and an annual income of 3.4 billion ($5.25 billion).
According to Perdigão, the acquisition's main goal was to help it move up the value chain with sales reaching European end-consumers in the retail and foodservice segments. The purchase also enabled the company to perfect new products for the EU market, become more effective with deliveries and gain total control over sales and distribution services.
Perdigão has other international investments scheduled for beyond 2011.
To celebrate 73 years in business, the company opened the Nova Mutum poultry processing plant's extension projects in Mato Grosso State in western Brazil, with a capacity of 280,000 birds per day. It bought the Gale Agroindustrial poultry complex in Jataí, Goiás. This facility, along with the one in Rio Verde, processes 500,000 birds a day.
Perdigão also returned to beef production, a business it had left in the 1990s and re-entered in 2005 by leasing a third-party unit, acquiring industrial facilities in Mato Grosso and Paraná states. Based on Perdigão's plans to acquire or build new facilities, its present 500-head per day beef cattle operation should reach 6,000-head per day in 2009 and 8,000 by 2011.
Already in the margarine market with house brands, the company closed a deal with Anglo-Dutch conglomerate Unilever to acquire their Doriana, Claybom, and Delicata margarine brands, which Unilever continues to produce. The agreement envisages a joint venture between the companies to manage the Becel and Becel ProActive premium brands. Unilever licensed the use of the brands, which can be used in other Perdigão product lines. The move accelerated Perdigão's growth in the margarine segment.
Perdigão added the remaining 49% of Batávia, a traditional southern Brazilian dairy, to the 51% it had acquired in 2006. It now has full control of the company that processes 63.4 million gallons of milk a year.
Brazil's northeastern region, with an annual growth rate of 15%, was selected as Perdigão's new manufacturing base. The company plans to open a $140-million Batávia unit in the state of Pernambuco to process 100,000 litres (26,420 gallons) of milk per day and possibly ramp up production levels of up to 300,000 litres (79,260 gallons), to yield some 125,000 metric tonnes a year.
A sausage, traditional cold cuts and bologna manufacturing site, with a capacity for 120,000 metric tonnes per year, and a distribution centre are also planned.
Perdigão takes over
In February, Perdigão acquired Eleva Alimentos, previously Avipal, one of Brazil's most important poultry, swine and dairy producers, based in Rio Grande do Sul.
According to Perdigão, 46% of the nearly $1.7-billion purchase was paid in cash with resources gained through public offerings and the rest through the incorporation of shares. This purchase, made little over a year after the hostile takeover attempt, gave Perdigão the lead in sales of Brazilian poultry and pork meat processing.
A company press release said that Perdigão closed 2007 with gross invoicing of nearly $4.3 billion, a 27.6% increase over 2006 figures. Its net income for the year grew 174%, to $170 million.
Perdigão's rapid growth came from strong domestic and export performance, along with scale and productivity profits and an increase in the share of sales of processed products in total net sales, reaching 53%. These factors, along with Batávia's dairy activities, the margarine business, and the beef cattle acquired during the year, fuelled the 27.3% growth in gross income, which touched $3.4 billion.
As Perdigão continues to grow, Sadia, now second in the Brazilian poultry market has also moved into expansion mode, with the hope of regaining its No.1 spot. Regardless of who is on top, Brazil's meat industry and overall economy are reaping the benefits of the growth of its top meat producing companies.