Volume 5 | Issue 1 | Year 2009

Minerva got its start in the 1950s when the Vilela de Queiroz family began raising and transporting cattle from ranches to meatpacking plants in the countryside of the state of São Paulo, Brazil. Over the years, the company has risen steadily in the field of meat production in Brazil and abroad, maintaining the utmost standards for quality, honesty as well as health and safety. Minerva’s remarkable success can be attributed to intelligent “on the books” financial management that created the liquidity and stability needed to grow through acquisition of smaller companies. Minerva’s differentiated strategies for export and domestic sales have positioned it well in both markets. The company is currently expanding both in size as well as scope, with an exciting new joint venture underway.
The first major steps in Minerva’s growth were taken in the early 1990s, when the company purchased a slaughterhouse and meatpacking business. Currently, Minerva’s seven plants in Brazil and one in Paraguay have a processing capacity of 6,200 heads of cattle per day. The company actually processes approximately 1,300 tons of meat daily. Another milestone on Minerva’s road to success was its initial public offering in 2007. It has the distinction of being one of only three companies in the sector to have shares on the Brazilian stock market.

CONSOLIDATING THE SECTOR
Of the over 700 companies in Brazil’s meatpacking sector, the top five companies represent only 30 percent of the total slaughtering capacity, as compared with the United States, where the top five companies account for 80 percent capacity. “This consolidation,” explains Ronald Aitken, the investor relations officer at Minerva, “is still underway in Brazil.”

Minerva has clearly established itself as a participant in this process. Aitken explains that the sector is dominated by “informality,” or businesses that operate outside the margins of tax laws and other regulations. The current credit crunch along with a government crackdown on irregularities in Brazil is causing smaller companies to go out of business. Financially stronger companies are buying up smaller companies. “Minerva,” Aitken boasts, “is growing” through acquisition of smaller businesses.

Brazil is the largest meat exporter and is known around the globe for its superior quality beef. Minerva, Brazil’s third-largest beef exporter with 65 percent of sales in exports, plays a role in upholding that reputation. In fact, the company’s clients in over 80 countries purchase cuts of fresh chilled or frozen beef. For the United States and United Kingdom in particular, Minerva also produces cooked, canned beef (corned beef). All beef exported from Brazil is boneless to remove the risk of disease, like hoof and mouth that are transmitted through bone.

Minerva also sends frozen beef to the Middle East, whereas its clients in Europe generally prefer it chilled. Because Minerva has sheiks and rabbis certify that processing is done in accordance with strict halal and kosher standards, Minerva can export to clients with these special requirements. These considerations are important, given that Israel accounts for 5 percent of Minerva’s exports, while the Middle East and North Africa represent over 30 percent. Aitken cites the fact that Minerva has always done business “by the book” as an important differential. The company has been able to meet international standards that other, more “informal” companies cannot. Thus, Minerva is uniquely positioned to be a significant player on the export market.

HEALTHY, EFFICIENT GROWTH
Minerva’s strong position in both the export and domestic markets is bolstered by the company’s efficiency. While the company accounts for only 5 percent of Brazil’s slaughtering capacity, Minerva has 16 percent of the market share of Brazilian beef exports. Aitken reports that 15 years ago Brazil was an importer of beef and that better organization of industry brought space in the market: “We’ve been riding the wave of huge growth in exports.” Aitken points out that while Minerva is the third-largest beef exporter in Brazil and fourth in terms of total revenues, the company ranks ninth in terms of slaughtering capacity. So, what gives Minerva its edge? “In Brazil, most companies are utilizing only 50 percent of capacity,” explains Aitken. “We are more efficient, operating at 85 percent of capacity.” While some companies expanded too aggressively and were not able to weather fluctuations in demand, Minerva’s carefully planned expansion has placed it in stable position.

Given the fact that 80 percent of beef produced in Brazil is consumed within the country’s borders, the population of close to 200 million gives Brazilian meatpackers a significant scale. Minerva is poised to augment sales both at home and abroad.

Minerva has a multifaceted approach toward domestic and overseas sales. Aitken explains that Minerva exports to the biggest buyer, mostly large-scale industrial clients like well established supermarkets in developed areas like Europe. He adds that all aspects of export, including facilities exports are inspected and certified to international norms and standards for health, safety and animal welfare.

SERVING THE UNDERSERVED
On the home front, on the other hand, Minerva sells to small- and medium-sized retail stores; chains with only four stores and fewer than 10 cash registers each. Because many major suppliers do not make regular deliveries to smaller towns and establishments, Minerva also resells third party products to its Brazilian clients. For example, Minerva imports frozen fish from Chile and Argentina, which it resells to smaller stores along with its own products. Aitken says, “We call it the ‘one-stop-shopping’ idea of sales. We reach over 15,000 establishments this way.” And Minerva is currently expanding sales to the states of Santa Catarina and Espirito Santo in Brazil. Aitken further notes, “Prices of raw material have been going up and our financial stability depends on passing along these prices. We are better able to do this with smaller clients; we have more bargaining power.” Aitken points out that from 2003, President Lula’s stance on supporting orthodox economic policies and improving income redistribution strengthened the Brazilian economy and spurred a crackdown on tax evasion, reduced credit availability to “informal” businesses, and higher consumer standards. This landscape put Minerva, a highly professional company, in a position to increase its focus on the domestic market. Aitken boasts that after faithfully supplying a chain of goods with biweekly deliveries for over 10 years, Minerva has earned client loyalty and has carved out a healthy chunk of market share.

JOINT VENTURE
One of the most exciting things at Minerva these days is its partnership with the Irish company Dawn Farms. Founded in 2007, Dawn Farms focuses solely on the food services segment and Minerva is very optimistic about this joint venture with one of Europe’s biggest processors. After an investment of $60 million, the brand new, state-of-the-art 12,000-square-meter Minerva Dawn Farms plant in Barretos, São Paulo, marks the Irish company’s first entry into Brazil and Aitken conveys Minerva’s pride at being selected as its partner.

Because the new company, owned equally by Dawn and Minerva, acts in the value-added food service industry, a new area for Minerva, it has its own chief executive officer. Processing all three proteins – beef, pork and chicken – the company’s products meet specifications of clients like Subway and the Yum Group, the holding company for Taco Bell; Kentucky Fried Chicken and Pizza Hut. Exports will account for 70 percent of Minerva Dawn Farms’ sales. Aitken notes that while most industrialized plants in Brazil work on a very large scale, Minerva Dawn Farms can be flexible in terms of product and scale. “We are more diversified in range and scale,” he says, adding that he expects to see $40 million revenue this year and forecasts double that for the company’s second year.

While industrialized high-value-added products currently account for only 2 percent of total revenue, Aitken reports that the company’s target is to boost that to nearly 25 percent by 2011. With the wealth of expertise and technology from Dawn and Minerva’s vast experience in the meat industry; it is primed for success in what is now the fast growing food services/fast food segment.

Minerva’s management recognizes that the uncertain times in the world economy have impacted export volumes. Aitken says, “We expect this in the short term, but things will bounce back. Now the competitiveness of Brazilian beef is much greater given the depreciation of local currency.” Aitken says that Minerva will continue to expand its volume and activity in the consolidation process of the Brazilian market. And the company is indeed putting its money where its mouth is: The year 2008 saw investments of R300 million, by far the greatest yearly investments in the company’s history.