Tyson Foods Enters Brazilian Poultry Industry

Arkansas-based Tyson has signed purchase agreements with three poultry companies in southern Brazil. Each is vertically integrated and offers the potential for domestic and international sales growth.

19/09/08 Tyson Foods, Inc., the world’s largest meat and poultry processor, is continuing the strategic expansion of its international business by investing in the Brazilian poultry industry, the company announced.

Terms of the planned Brazilian transactions were not disclosed, however, company officials confirmed Tyson will acquire Macedo Agroindustrial and Avícola Itaiópolis (Avita), both located in the state of Santa Catarina, and will initially have 70% ownership of Frangobrás in the state of Paraná. Tyson expects to conclude all three transactions in the next 60 days.

Santa Catarina and Paraná are leading corn and soy-producing states in Brazil. This is important since grain represents about half of the cost of raising a chicken. Both Brazilian states also have excellent access to major ports for exporting products.

“Our investment in these companies is a key part of our international strategy, especially since Brazil is currently the world’s leading chicken exporter and third largest chicken producer behind the U.S. and China,” said Rick Greubel, group vice president and international president for Tyson Foods, which had sales of USD $26.9 billion in fiscal 2007, with chicken sales representing 31 percent of the total.

“The Brazilian population consumes about 37 kilos (81 pounds) of chicken per person per year compared to 45 kilos (99 pounds) in the U.S.,” he said. “With the economic stability and a growing middle class, the per capita consumption of chicken will continue to increase in Brazil. In addition, our Brazilian operations will give us greater access to markets that are currently buying little to no poultry from the U.S.”

Macedo, based in São José, employs approximately 1,200 people and recorded sales of R$102 million in 2007. Macedo is a strong retail chicken brand in southern Brazil. The company also exports chicken to a variety of countries including the United Kingdom, Belgium, Spain, Hong Kong, Japan, South Africa and Yemen. As a result of the transaction, Tyson plans to expand production, more than doubling the plant’s capacity to 176,000 birds per day.

Avita and Frangobras are new poultry companies with tremendous growth potential. Both recently built new, strategically-located plants that contain modern processing technology. Avita, located in Itaiópolis, began operations in January 2008 and includes a network of contract poultry producers. The company’s processing plant is involved in producing whole and cut-up frozen chicken primarily for the foodservice industry. Frangobras, which is based in Campo Mourão and expects to start plant operations this month, relies on contract poultry producers. The poultry processing facility will also be involved in the production of whole and cut-up chicken for both foodservice and retail customers. Product from the two companies will be sold in the Brazilian domestic market as well as exported to several countries.

Tyson’s investment in Avita and Frangobras will enable each processing facility to increase daily chicken production to 320,000 birds. Direct and indirect employment is also expected to grow.

Jóster Macedo, president of Macedo, has been selected to head all of the Brazilian operations to be acquired by Tyson. “Jóster is an experienced, dynamic leader with excellent knowledge of the Brazilian poultry industry,” Greubel said. “We have aggressive growth plans in Brazil and we are confident he has the qualifications to lead this process.

“The current management teams as well as other jobs at all three companies are expected to remain in place as we move forward with expansion plans,” said Greubel. “The transition to expanded production will be gradual with our focus on the long-term success of these operations.”