One of Brazil’s leading producers of chicken, Céu Azul has adopted a commercialization strategy that is both intensely regional and extremely global. As Director José Marcelo Pavan explains to Michael Sommers, when combined with the company’s vertical integration of the entire production cycle, it’s a sure-fire recipe for profits.
The age old dilemma of which comes first – the chicken or the egg – is one that doesn’t apply to Céu Azul Alimentos. The largest producer of chickens in São Paulo state, Céu Azul runs an operation so vertically integrated that it takes into account the eggs, the chickens and every other aspect related to the poultry production cycle. Not only does the family owned and operated company have its own breeding houses, hatcheries and poultry farms, but it also possesses its own feed units and slaughterhouses, not to mention transport vehicles. And it has plans to go even further.
TOTAL VERTICAL INTEGRATION
“Our big goal is to achieve total vertical integration,” confesses José Marcelo Pavan, Céu Azul’s managing director. “Right now, for instance, only 35 percent of the poultry we produce is raised on our own farms. Our short-term goal is to increase this figure to 60 percent – and eventually, of course, to 100 percent – so that our entire production process is integrated. The more we’re able to consolidate all of our operations – from farms and hatcheries to feed units and slaughter houses – within a 10 to 20-kilometer radius, the more we’ll be able to improve quality control and cut down on costs.”
Already, Céu Azul has its own metal works plant where it develops and produces all of its own high quality, customized equipment – from pluckers and scalders to cutting and packing machines. More recently, it also began opening its own network of retail stores in large urban centers throughout São Paulo state. “Our ultimate goal is to sell 50 percent of our products in our own stores and to have one store for every 50,000 people,” confesses Pavan. “Since these are our own establishments, we’ll be able to offer our products at retail for wholesale prices. This will give us a major competitive advantage.”
Céu Azul never passes up an opportunity to increase its competitive edge. With 41 million residents, São Paulo is Brazil’s most populous state, boasting more inhabitants than any other South American country with the exception of Brazil and Colombia. If the medium-sized company is the Number One chicken producer in São Paulo, it is because the company has shrewdly focused all of its efforts on producing and commercializing its products solely within the boundaries of this nation-sized state.
Founded in 1974, in the town of Pereiras, São Paulo, by José Marcelo’s father, Aristedes, Céu Azul began life as a poultry breeding farm. It wasn’t until 1982 that it teamed up with four partners to open a slaughterhouse and begin producing, packaging, and selling chicken. When the partnership disintegrated, in 1992, Céu Azul opted to not only operate the slaughterhouse on its own, but to expand business throughout the state. Today, apart from its headquarters in the city of São Paulo, it operates production units in nine towns.
Following the purchase of two abattoirs earlier this year, Céu Azul now possesses five slaughterhouses. When the two new units go into operation next year, the company’s production capacity will virtually double from 450,000 to 700,000 birds a day. At the same time, its annual growth rate in terms of revenues, which has hovered around 10 percent in recent years – last year, the company took in R$600 million (roughly US$323 million) – is expected to soar by around 40 percent in both 2012 and again in 2013. Pavan calculates that the increased output as a result of the new acquisitions will catapult Céu Azul into the list of top five poultry producers in Brazil.
However, the company’s consolidation of the São Paulo market is only one half of the equation; the other half involves conquering the global market, a goal toward which it’s making great strides. Unlike many other Brazilian industries, whose international sales have suffered due to a devalued U.S. dollar and high real, Céu Azul has managed to maintain its export levels. Currently, 50 percent of the company’s business is dedicated to exports. Among its biggest clients are Canada and the United States, as well as South Africa, China, Hong Kong, Thailand and various Middle Eastern nations.
“We’ve invested a lot of money in technology in order to ensure the highest levels of quality and biosecurity,” emphasizes Pavan. “As a result, today we’re capable of meeting the most rigid standards of every country in the world.” At the same time, the company is also capable of catering to any demand its clients may have. Aside from offering every type of poultry cut imaginable, Céu Azul also provides various types of packaging, ranging from 100-gram individually wrapped pieces to 1-ton bags destined for industrial use. The company has also begun packaging chicken that is not only pre-cut, but pre-seasoned as well. “This is part of a growing trend in which practicality is increasingly important to consumers,” says Pavan. “But it’s also part of our growth strategy that entails aggregating more value to our products.”
BOOMING BRAZILIAN MARKET
While the pre-seasoned chicken is available both abroad and domestically, Céu Azul is targeting most of its added value products toward the booming Brazilian market. With this goal in mind, next year, it will be launching various new poultry product lines including burgers, ham, and sausages – all made from chicken.
“In the past few years, the minimum wage in Brazil has increased significantly and there is a more equitable distribution of wealth,” explains Pavan. “With more disposable income, Brazilians are buying more chicken. Actually, because it’s such a basic and inexpensive item, it’s one of the products that has seen the largest increase in consumption; currently the average Brazilian consumes 40 kilos of chicken a year. This is almost the same amount per capita as Americans, who are the biggest consumers of chicken in the world. And there’s every indication that demand will continue to grow.”
With its new acquisitions and upcoming products, its ability to meet the most demanding and diverse foreign quality standards, and its total control over the entire production process, Céu Azul is ready to continue expanding in all directions. Moreover, the fact that the company has remained in family hands throughout its history – (while José Marcelo Pavan and his brother have taken over the administrative reins, both their father and mother are still actively involved in decision-making) – allows Céu Azul to act in a more flexible and timely fashion than many of its larger, corporate competitors.
“We may not have their volumes, but we are very hands-on and can make very quick decisions,” asserts Pavan, adding that such flexibility enables Céu Azul to meet its ultimate goal: the creation of products of the highest quality, for the least expensive cost, which is definitely something to crow about.