When we consider the trials and tribulations of beef packers, there is often very little room for sympathy. But beef packing is a tight-margin business and processors will engage in more than one protein to offer consumers. Looking at the top five global processors in the world shifts our perspective on the importance of processing beef.
We can’t start the conversation without acknowledging the influence of JBS from a global perspective. The largest meat processor in the world, JBS has a weekly slaughter capacity of 500,000 head of cattle, 60 million chickens, 125,000 lambs and 350,000 pigs. A global employer in 22 countries, including Canada, there are 185,000 persons on the payroll. One in 10 cattle worldwide is processed by JBS. Started by the Batista family, who currently own 28 per cent of the company, JBS was unheard of in North America prior to its buying Swift in 2007 and now its operations in Canada, the U.S. and Australia account for 73 per cent of group revenue.
Funded by the Brazilian Economic Development Bank, which owns 30 per cent of the company, the run on acquisitions has been at warp speed, giving JBS a quick global presence and deep market penetration. That has brought its own set of challenges from operating in so many different cultures, to competition from within Brazil. To survive, this company has turned back to its extensive knowledge of the cattle and beef industry. This way they continue to control many markets (they own 25 per cent of the Australian industry) and to export the beef they produce for external markets.
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We know Tyson Foods as a beef processor but it is heavy into chickens with a weekly slaughter capacity of 41 million birds. And it is chicken that it is flocking to in the corporate boardroom. In the first quarter of this year, chicken margins were 9.5 per cent and that is due to the value adding to poultry. Tyson adds value to 60 per cent of all chicken compared to the one to two per cent in beef and pork. With US$34.8 billion in sales last year, Tyson employs 115,000 persons who work in 13 beef plants, nine pork plants, 26 prepared food plants and 57 chicken plants. It is the chicken and prepared food plants where the money is made as the company offers 2,500 products to food service and this number is expected to keep growing. What’s hot is fried and rotisserie chicken along with grill breasts, strips, wings and diced product. For pork the shine is on meals like mac and cheese with pork added or racks of ribs and pulled pork. Because consumers rarely know what they want or will cook for dinner, these quick alternatives sell well. Chicken wraps and sandwiches are still the No. 1 seller for food service.
For Cargill, meat packing is just a small part of a broad portfolio of processing and product lines. Privately owned by the Cargill family in the U.S., total revenues for 2013 exceeded USD$136.7 billion. The States is home to the majority of its beef slaughter with 154,000 head per week going on the rails. With such a diverse product line from chocolate to minerals, grain, nutrition, energy and finance, it is easy to see why beef packing has to be part of something much greater on the side of value adding. The ever-popular Sterling Silver branded beef line is just the trim on product offerings from Cargill.
Value adding in Canada for beef is provided through both the plants in Spruce Grove, Alta. and Brampton, Ont. Together these plants produce 1.5 million pounds of beef burgers every week. Cargill focuses on more than just beef in Canada and also processes 230,000 chickens per day in two separate Ontario plants.
The other top two players in the global processing industry are from Brazil and they nip at the heels of JBS for world power. Unlike JBS that counts on the knowledge of the beef industry to survive, for rival Brasil Foods, poultry accounts for 32 per cent of sales. Brasil recorded US$13.6 billion in sales last year and ran 49 processing facilities but beef and pork made up only 9.3 per cent of sales as 35 million birds are being slaughtered per week.
Marfrig the other Brazilian competitor, can process 104,000 head of cattle per week. Its revenue was US$8.4 billion in 2013 and the bulk of that came from the poultry side as it processes 3.7 million birds per day. Vion Foods, from the Netherlands, is Europe’s largest meat processor. Small companies make up the majority of European processing. Unlike the success of JBS and Tyson in world markets, Vion found the culture difficult to dominate.
This story could be about corporate dominance but there is more at stake than just a report on profits. In markets where consumers are not connected and tend to buy in bulk, such as in North America, large corporations do well. In cultures where food is a way of life then small processors collectively dominate and global coporations have cultural competition. For all global processors both the volume and the value added came from their poultry divisions and output outstripped beef at every turn. Consumers want it quick and easy.
The day we started eating chicken balls we knew we had a problem but this is more than fluff and feathers. According to Tyson, the value adding to poultry is expected to grow two times the rest of its business. Is beef fast and affordable enough to compete?
Brenda Schoepp is a motivating speaker and mentor who works with young entrepreneurs across Canada and around the world. She can be contacted through her website www.brendaschoepp.com. All rights reserved. Brenda Schoepp 2014