June 26, 2012 Oil in the Family

Volume 15 | Issue 2

Sina Alimentos is a family-owned producer of vegetable oils that has thrived in the Brazilian market for close to a half century due to a sa

As a business, Sina Alimentos started out very small: in the founder’s São Paulo backyard, where a mechanical extraction press was used to grind peanuts and extract both oil used for cooking and meal used as animal feed. In the early ‘80s, the company activated its dynamism gene for the first time when it began importing soybean oil from neighboring Argentina and refining, packaging, and selling it to the Brazilian market. By the late ‘80s, Sina had become one of the largest importers of vegetable oils – in addition to soybean, it also imported peanut oil – in Brazil.

STRATEGIC ACQUISITIONS
By the late 1990s, however, the company had lost its strong advantage due to the arrival of a host of new competitors. With its future livelihood menaced, the company decided to branch out by launching the first of a series of strategic acquisitions. At the time, Sina was purchasing soybeans and outsourcing the job of crushing them into oil and meal to other companies. In order to become more vertically integrated, more cost effective, and more competitive, in 2004 the company purchased a crushing plant of its own in Santo Anastácio, São Paulo, where it began producing sunflower as well as soybean oils, along with meals and lecithin. Equipped with a refinery, the 108,000-square-foot unit was also able to produce refined oils.

As a result of the new plant, the company saw its output double between 2004 and 2005. Realizing it was onto a winning strategy, Sina continued to invest in its ongoing growth by continuing to invest in new production units. In 2008, it purchased a 230,000-square-foot crushing facility in Bauru, São Paulo, for the production of cottonseed and soybean oils, meals and lecithins. In 2011, it acquired another 164,000-square-foot plant in Orlândia, São Paulo, where in addition to manufacturing the products made at its pre-existing plants, it also began producing vegetable fats. And in early 2012, it made its most recent acquisition: a 820,000-square-foot complex comprised of 12 separate units, located in Pirapozinho, São Paulo, where, aside from vegetable oils and fats, Sina now also produces margarine, castor oil derivatives, glycerines, and starches.

“Since there have been no major advances in technology in terms of soybean and vegetable oil processing since the ‘90s, we always purchase these plants at public auctions,” explains Yuki Kumakola, Sina’s director of exports. “Not only do we get a better price, but we obtain a business that’s already up and running, which really reduces costs.”

CONSERVATISM AND CONSTANT EXPANSION
Sina’s modus operandi belies a conservative streak that runs as deeply as its commitment to constant expansion. Says Kumkola: “We’re a family business, one in which the family actually works in the company and where our employees, (which currently total 2,500), are like family too. We run our business on a back to back model; whatever we’re selling, we’ve already bought.”

Recently, such steps have been large ones. In 2011, the company took in revenues of R$1.1 billion (roughly US$603 million) and this year, it predicts that earnings will hover around R$1.35 billion (US$740 million). With its Pirapozinho plant alone, it expects to add R$400 million (US$219 million) to its total revenues.

In terms of clients, Sina caters to a wide diversity of segments both in Brazil and overseas. Overall, 60 percent of output supplies the domestic market while 40 percent is reserved for exports, however these figures vary according to products.

COMMODITIES WITH ADDED VALUE
“Since the financial crisis of 2008, exports have been more cautious with clients buying hand-to-mouth. However, we expect business to pick up within the next several years,” declares Kumakola.

“Right now, due to economic factors, people are buying regular oils and meals. Because we’re a B-to-B company and not a B-to-C company, we can’t launch such products on our own initiative,” he explains. However, Sina is exploring the possibility of selling certain products to final consumers under its own brand name.

“At our new plant in Pirapozinho, we’ll be able to make many types of glycerines, soaps, detergents, vegetable fats, and even ice cream. There are many potential opportunities,” says Kumakola. “Right now we’re deciding whether to stay in the middle market or expand into the consumer market. The biggest consideration revolves around the fact that in order to carve out space in the marketplace, we’d have to spend a lot on marketing, which would diminish our margins.”

Meanwhile, despite the fact that it sells products that are viewed globally as commodities, over the course of 41 years, Sina has succeeded in differentiating itself in the marketplace as a result of the strong relationships it has cultivated with its clients. “This is how we distinguish ourselves from mere producers of commodities,” declares Kumokola. “It is how we add value to our products and how we conquered our share of the market, in which we’re currently among the top 10 national players. Although we’re a medium-sized family business that’s grounded in our past, we always have an eye on the future. We’re not afraid to think big, to spread our arms and grow.”

Subscribe to Industry Today