Is bigger always better? The competition commission in Brazil, it would appear, may not think so with regard to Brasil Foods, the food giant that was created at the height of the financial crisis but that now might be facing the prospect of being slimmed down. At the time of writing, a decision on the food giant’s future was still expected.
However, in the Northern Hemisphere things might be going in the opposite direction.
In Costa Rica, Cargill has bought Corporacion Pipasa, as part of its overall plan for Central America. The purchase will greatly expand Cargill’s local presence as Pipasa has a 60% market penetration.
There continue to be reports of poultry producers around the world going out of business or merging, and a new report suggests that one in seven companies in the poultry industry in the UK could change hands as a result of the economic climate.
Too many companies, too little market
The report, published by Plimsoll, says: “Any director worth his salt would agree that, in the current climate, there are simply too many companies chasing too little market. With many directors eyeing the exit doors and highly leveraged buyouts consigned to history for the time being, it really is a buyers’ market out there for cash-rich companies.”
Against this, however, figures from the UK’s Department for Environment, Food and Rural Affairs, suggest that broiler chick placements were higher in the UK over the first three months of this year. Demand for poultry meat, while weakening, is still increasing. The UK’s egg industry is, however, said to be in a “desperate” situation due to over production.
The analysts, who have identified 117 that are prime to be taken over, say the poultry industry is regarded as one of the UK’s most fragmented sectors. Plimsoll analysts have identified 71 companies that have sizeable cash reserves sat on their balance sheets that, due to record-low interest rates, is generating nothing, and so are in a position to buy up chunks of their market to make the cash work.
Some analysts have commented that the scale of Brasil Foods poses a threat to consumers and that the company is in a position to affect prices. By the time you read this, the pronouncements of the Brazilian competition commission should already be known. Those affecting the UK poultry industry could take longer. Watch this space!