Interview: How BRF plans growth in stagnant Europe
BRF focuses on value-added, branded products at SIAL 2014
Brazilian food group BRF is working to an ambitious agenda. The company is bent on expanding as a global food manufacturer operating in the protein space. However, eking out growth in stagnant developed markets such as Europe can prove somewhat problematic. At this year's SIAL trade show in Paris, Katy Askew spoke to Europe CEO Roberto Banfi to find out how the company plans to meet this challenge.
BRF, the Brazil-based protein supplier, is working to grow its international business and capitalise on worldwide demand for value-added protein products. This strategy was front and centre of the group's presence at this year's SIAL show in Paris.
Speaking to just-food at the event, European chief Roberto Banfi stresses the importance of international growth to BRF's development strategy, which is focused on moving its product portfolio up the value chain and developing its offering of processed food items.
"The objective of the company is definitely to become a global company, to transform itself from an exporting company. Brazil still remains one of the best, if not the best, platform for the production of animal protein. But we are becoming more and more a food company with a footprint of a food company not only in what we would call standard products, commodities, but more and more up the value added chain."
Innovation will play a crucial role in BRF's bid to build its high-value processed product portfolio, Banfi continues. "Innovation is not only a key, it is a must," he stresses.
And here, BRF's European business - which boasts BRF's only R&D centre outside of Latin America - can play an important role, Banfi says.
"We are trying to be very honest, to capitalise on the innovation of Europe, to become slowly but surely the hub of innovation for the whole company. Our logo is Europe the hub of innovation for BRF.
"When we are talking about innovation we cannot talk only about the product. We have to think about the whole concept: the innovation of concept, the innovation of packaging, the innovation of product, the innovation of the go-to-market approach, the innovation of PR, of the way we can talk to consumers or to customers."
Evolving BRF's offering in Europe, where BRF's sales are limited by the quota system, is key to building value in the region. "We are not growing in volume. We are [concentrated on delivering] better price, better product, better value. Not volume. Our aim here is not growth in tonnage. Our growth is in value both for us and our clients. Moving from standard to customised products."
This will enable BRF Europe to deliver higher, more consistent margins, Banfi observes. "As long as you go down the value chain you are more distant from the variation of commodities. In nuggets, you don't think about nuggets in terms of the cost of corn and soya bean, which you might think when you sell a whole chicken."
Expanding in the value-added protein categories of Europe's low- to no-growth markets presents a number of challenges, the Italian continues.
"Firstly, to be playing on a global basis you have to be 'glocal', where you have some functions that are global and some functions that are very much local. And that you can perceive even more in Europe, when you go 50 miles and the flavour changes, the language changes, everything changes. It is very difficult to scale up from one market to another. That is the main challenge."
The diverse patchwork that is Europe means that BRF's regional business has to operate across countries that are at "different stages of development", he continues. Meanwhile the company is facing some stiff competition in the form of established branded players and the high uptake of private label in markets such as the UK, France and Germany.
"It is very difficult to plan anything in terms of a pan European brand. We are aware we are somehow late. But there are some geographically focused positions where we can enter still and still make inroads in branding."
Banfi is coy over which markets BRF has targeted to expand its consumer brands: "We would prefer to keep this secret." He does, however, reveal that Sadia will be the group's primary brand in a region where it also operates a number of national brands.
"The brand that we will definitely be growing will be the Sadia brand, which is the international brand. This does not mean that we don't use local brands. In Italy we have a strong brand called Speedy Pollo. But Sadia will be the signature or umbrella brand."
While the developed nature of many of Europe's most appealing consumer markets means that BRF faces an uphill battle to grow its brands, the company has identified a growth area where it believes there is space to grow its branded presence, Banfi continues. "There is another area where we think we can do some branding. Believe it or not, foodservice. I believe foodservice can be approached in a new way - not so dull as just a white or brown box, maybe with some branding which could eventually bridge to the consumer."
The company also believes it can help drive excitement in the frozen category, which has fallen out of favour with European shoppers.
"It is true [that sales are flat] but it is also an area where supermarket chains can make money and consumers can still be attracted. Because of the growth of and consumer preference for chilled frozen there has been a lack of innovation, a lack of lets call it - in a very American way - sex appeal in frozen. It is a little our fault that we didn't put some attractiveness in this area. That is why we feel there is still an opportunity, there is still space.
"I think we have to run away from the search for cheaper product [this will] destroy the category by presenting products that are of low quality. There is innovation to be done and we have, in a few markets, proven we can do it."
Messaging around issues such as quality or health and wellness can also play a role in boosting the appeal of the frozen sector, Banfi suggests. "First, frozen isn't a bad product per se. On the contrary, well treated well processed frozen products can be much healthier than a fresh product that has not been correctly handled."
Currently, much of BRF's product offering in Europe consists of breaded chicken products, such as nuggets. The group is working to expand its horizons, Banfi says. "That is what we are working on. More up- or even down-scale products because you can go down-scale with some innovation. But good products, good flavour, good breading and not bad oil for instance."
Although BRF has highlighted the strength of its balance sheet - and the group has been linked to poultry processors such as France's Doux - Banfi downplays the likelihood that BRF will engage in the process of consolidation under way in the European poultry sector. There is "absolutely nothing definite" on the M&A front in Europe, he insists.
"There is [growing] sector consolidation but also consolidation due to many companies going out of business. The consolidation is a movement that is global. You cannot avoid it. But whether we want to be part of that, in that specific primary production [in Europe] is another question."
On whether BRF would consider buying value-added branded businesses in Europe, he adds: "Maybe, but there is nothing to define yet."
In order to delve further into BRF's strategy, just-food caught up with CFO Augusto Ribeiro at the firm's investor day earlier this month. Click here to learn what Ribeiro had to say on building a company that can deliver stable margins and click here to hear his thoughts on the potential to create a "truly global" protein powerhouse.
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