March 26, 2009 Premium Beef

Volume 5 | Issue 1

Frigorífico Mercosul’s President Augusto Cruz tells Lee Weingast about this successful Brazilian beef company’s giant steps in its continuin

The beef is in the expert’s hands at Frigorífico Mercosul Southern Brazil. And it’s not just any beef. When asked what makes Frigorífico Mercosul’s “premium” meat so special, company President Augusto Cruz confidently replies, “Our people and our product.” He goes on to explain that the cattle raised for the superior quality meat sold by his company are of European stock, which are able to thrive in the cooler climate of Southern Brazil. And the people he’s referring to are the over 4,000 members of Frigorífico Mercosul’s staff. The founding family has been at the helm, orchestrating growth and improvement, since the company’s founding 40 years ago in the tiny town of Mato Leitão in the southern Brazilian state of Rio Grande do Sul. Now, based in Porto Alegre, one of Brazil’s major urban centers, Frigorífico Mercosul is the largest meat producer in the country.

While Frigorífico Mercosul has grown steadily since its founding, the company took a giant step in 1998, with the acquisition of its second slaughterhouse in Bajé. The additional capacity for the slaughter of 800 heads per day fostered a significant growth spurt bolstered by the purchase of another five locations in 2005. This brought the company’s capacity to 3,500 heads per day. Another major milestone in Frigorífico Mercosul’s expansion came in 2005 when the company was sought out by a foreign private equity firm. The injection of capital facilitated significant expansion along with a shift in the company’s structure: the founder’s son and daughter reduced their shares from 50 percent to 31 percent each. It also opened the door for Frigorífico Mercosul to venture beyond the borders of its home state of Rio Grande do Sul with the purchase of two facilities in Paraná and one in Mato Grosso do Sul. The year 2007 saw the acquisition of one plant in Goiás and one in Mato Grosso, bringing the company’s holdings to 10 locations. This year Frigorífico Mercosul made an unprecedented stride in its development with the purchase of its largest facility, with capacity for processing of 1,500 animals per day, in the state of Pará.

Nowadays, Frigorífico Mercosul has the capacity to process 7,500 heads at its 11 locations. Actual levels are at around 3,000 to 3,500 but this number will certainly shoot up once the Pará facility goes on line in December 2008. The company’s workforce will also grow with the hiring of 300 more workers for inauguration of the Pará plant.

GOING PRO – FAMILY STYLE
Cruz joined the team at Frigorífico Mercosul as part of the professional overhaul process underway over the past two years. Members of the founding family are active at the administrative level and provide strategic vision while highly trained professionals are being hired to oversee the day-today workings of the company. Cruz explains that this is a typical move for family-owned businesses who aim to grow. He cites a study by Harvard University Professor John Davis showing that companies that have undergone this type of transition have a greater rate of success than those who remain more traditionally family based.

The cows used to produce Frigorífico Mercosul’s premium beef are raised in partnership with ranchers in the south of Brazil. The company’s teams of technicians, veterinarians and agronomists offer its suppliers workshops and technical assistance to assure that the raising and reproduction of the European stock herds is carried out using best practices and the highest standards. Producers are offered information about health care and fostering improvements in the herds through genetic selection. Strict health and cleanliness standards are maintained at all the company’s own facilities and those of its partners and animals are treated in the most humane fashion possible.

Frigorífico Mercosul’s premium meats are carried to clients throughout Brazil through a fleet of specially equipped trucks with drivers trained in handling equipment and animals and assisting ranchers. The company sells to some of Brazil’s major supermarket chains but its focus is on small-scale clients such as butchers, restaurants including Brazil’s famous churrascarias (barbeque restaurants) and other retailers. The bulk of domestic sales is local, in its home state of Rio Grande do Sul.

EXPORTS STILL GOING STRONG
An appreciation of the unique flavor of premium tender Brazilian beef is found across the globe and Frigorífico Mercosul regularly supplies clients in 47 countries. While a great many Brazilian businesses, especially in the meat industry, have had to cut their exports due the fact that the European market is closed to Brazilian meats and the lowered value of the Brazilian currency, Frigorífico Mercosul adjusted prices and managed to maintain exports at approximately 40 percent of total sales. “People want the high quality protein of Brazilian meat,” says Cruz. “We export to Chile, Russia, Venezuela, Iran, Israel, Egypt, and other Middle Eastern countries.” Frigorífico Mercosul even has the special facilities and outsourced staff to meet the standards for kosher and halal meat production to serve its Muslim and Jewish clients.

Not only does the company adapt to the special needs of its clients, it also cares for the environment. The company purchases only specially produced wood for use in its boilers. In-house practices of reducing the use of paper, saving electricity and recycling are all part of the green side of Frigorífico Mercosul.

When asked about the company’s future goals, Cruz highlighted that next year’s sales forecast is for an impressive $10 billion and the company hopes to increase its processing to 5,000 heads of cattle daily. The next year will also see growth in scope with the production of smaller portions of packaged meat ready-for-sale in supermarket freezers, currently on the drawing board.

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