August 9, 2011

Brazil Foods Plans Aggressive International Expansion

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

The president of Brasil Foods, Jose Antonia Fay, recently indicated that his company, which is one of the largest food companies in Brazil, plans to aggressively expand in the international food processing sector. Brasil Foods was created several years ago with the merger of the Brazilian companies Sadia and Perdigao. At the time of the merger, both companies held strong positions in poultry and pork production and processing. The merger was finally approved by the Brazilian government in early July and now the company plans to move aggressively in acquiring food processing companies outside of Brazil. Brasil Foods is the principal exporter of poultry from Brazil and one of the principal pork exporters as well.

According to Fay, the strong Brazilian currency is both a hindrance and a benefit for the company. Since one of its primary activities is to export poultry from Brazil, the strong Brazilian currency makes their products more expensive for international buyers. In contrast, the strong currency now makes it easier for the company to purchase foreign food processors and that is where the company will put its focus.

In recent months meat exports from Brazil has hit a roadblock when in June Russia unexpectedly banned dozens of Brazilian meat processing plants from exporting their products to Russia. The explanation given by the Russian authorities was that the facilities no longer met their sanitary requirements. Brazilian officials feel there is an ulterior motive and they have been meeting their Russian counterparts to resolve the impasse. Some progress has been made in resolving the issue, but discussions are ongoing. Russia is the number one importer of Brazilian pork and a major importer of Brazilian poultry.

Brasil Foods executives feel the impasse will be resolved by mid-September allowing enough time for additional Russian imports of Brazilian meat products before the harsh Russian winter slows port activities.

They are also expecting to export pork products to the recently opened Chinese market. Although no contracts have yet been signed, they expect activity on this front in the near future.