On the money: JBS sees competitive edge in Brazilian beef
JBS to expand domestic production
Beef giant JBS has said it will increase beef production levels in its domestic market of Brazil as it looks to capitalise on the lower-cost production model operating in the country.
The company revealed yesterday (13 November) that it plans to increase its beef production capacity in Brazil by 15% "in the coming months". The group will open six new beef plans in Brazil between now and April next year, increasing capacity by 1.2m head of cattle.
Speaking to analysts during a conference call, JBS CEO Wesley Batista said that the move would allow JBS to capitalise on the comparatively low cost of raising cattle in Brazil, where cows are largely grass fed.
With an estimated herd of more that 200m head of cattle, Brazil is the world's largest exporter of beef and, according to JBS, production methods in the country mean that the protein group is well-positioned to grow while manufacturers in other markets are struggling.
JBS booked a 75.2% increase in EBITDA in an earnings release earlier in the day. The group attributed its improved performance in part to a "better equilibrium" between supply and demand. Batista said that protein companies in markets such as the US have been forced to reduce beef production levels. In these markets - where cattle are primarily grain fed - escalating grain prices due to a poor harvest and an imbalance of supply had made current production levels unsustainable.
"The cost of raising an animal in the United States is twice the cost of raising an animal in Brazil so they are reducing the size of their herd," Batista said.
Batista also emphasised that JBS has taken action to lower operating costs as it integrates the various acquisitions it completed over the last few years, driving synergies and taking inefficiencies out of the chain.
Now that it is comfortable with its operating performance, JBS is positioning itself for long-term growth by focusing on the development of value-added products and brands. To this end, JBS will increase its marketing and R&D investments, Batista added.
JBS said that it is looking to leverage brands that it can expand on the global stage, such as Swift and Friboi. The group is also developing its portfolio of regional brands, such as LeBon in its South American business, Mercosul, Pilgrim's in the US and Kings Island Beef in Australia.
The company is also expanding its presence in the frozen category, with the development of a variety of products ranging from hamburgers to "Arab cuisine specialities" and meatballs.
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