Economic Development

JBS leverages strong real to grow internationally

Latin America

Latin America
Our Editors
Contributor, The Economist Intelligence Unit

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JBS, the meatpacker, is one of Brazil’s big success stories. Through an aggressive campaign of acquisitions, the Brazilian company has become the world’s largest beef processor and among the largest poultry and pork processors.
The company, originally called Friboi, began modestly in 1953 with slaughterhouse capacity of just 5 heads per day. It only began to expand about 30 years later through acquisitions and investments to increase production. By 2002, its slaughter capacity was around 5,800 animals per day.
The company changed its name to JBS, the founder’s initials, when it began to expand internationally in 2005. Its first move was to acquire Swift Armour, Argentina’s largest beef producer and exporter. More acquisitions followed, and slaughter capacity had quadrupled by 2006.
In 2007 the company made history as the first beef company in the world to launch an initial public offering (IPO), issuing shares on the Bovespa stock exchange. Also in 2007, it entered the US market by acquiring Swift Foods Company and then purchased 50% of Inalca, one of Europe’s largest beef-producing companies. Today it operates in all of the world’s major meat-producing markets.
It took more than an IPO to finance the company’s appetite for overseas competitors, however. In 2009 the Banco Nacional de Desenvolvimento Econômico e Social (BNDES, the state development bank) provided JBS with a heavily subsidised short-term loan for the acquisition of Pilgrim’s Pride, the largest chicken producer in the US.
Expansion has not been without challenges. Cattle supply in Argentina has dwindled following a severe drought last year and government measures that limited beef exports and capped local prices. JBS recently announced that it has suspended production at several of its beef processing plants and may sell out because of a lack of animals. In the US, the company faces allegations of religious discrimination at a plant in Colorado. Its partnership in Inalca is reportedly under stress. In addition, JBS may face a fine if it is unable to meet the deadline for repayment of the BNDES loan as a result of weak financial market conditions, which have delayed the launch of Pilgrim’s Pride on the New York Stock Exchange.
Such challenges are typical of a rapidly growing company. To support its aggressive strategy, JBS has relied on its extensive knowledge of the beef sector. But perhaps what sets the company apart is its use of Brazil’s strengthening currency as an opportunity to expand abroad, buying competitors and gaining access to every major market, notes Marcus Vinicius Pratini de Moraes, a JBS board member.
The agricultural market is becoming more globalised, but trade barriers still block access to markets in the US and Europe. JBS’s strategy was perfect for overcoming those obstacles and gaining access to the final consumer. Going forward, the company plans to add value to its products, developing ready-to-eat, cured and other products. These are strategies that can help other Brazilian companies to gain prominence in the global market.

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