Perdigao SA

Avenida Escola Politécnica, 760
05350-901 Sao Paulo
Brazil
Telephone: ( + 55) 11-3718-5300
Fax: ( + 55) 11-3718-5287
Web site: http://www.perdigao.com

Public Company
Incorporated: 1934 as Brandalise, Ponzoni & Ciey
Employees: 19,291
Sales: R 2.79 billion ($1.4 billion) (2001)
Stock Exchanges: Sao Paulo
Ticker Symbol: PRGA
NAIC: 311615 Poultry Processing; 311611 Animal (Except Poultry) Slaughtering; 311612 Meat Processed From Carcasses; 424440 Poultry and Poultry Product Merchant Wholesalers

Brazil’s Perdigao SA is the second largest producer of pork and poultry products, behind Sadia, with vertical operations including pork and poultry and grain farms, plants for producing animal feed, incubation and genetic research facilities, slaughterhouses and poultry processing facilities, and cold storage warehousing and distribution operations. Although some 63 percent of Perdigao’s sales, which neared R 2.8 billion ($1.4 billion) in 2001, come from Brazil itself, Perdigao has built up a growing international business, with exports, through subsidiary Brazilian Fine Foods, to more than 70 countries in the United States, Europe, Asia, and the Middle East. In the late 1990s, Perdigao, which was taken over by a consortium of pension funds in 1994, has begun to diversify into processed foods, with lines of frozen vegetables, ready meals, frozen pizza, and other food items. The company also has extended its meat operations to include turkeys. Perdigao is listed on the Brazilian stock exchange and is also traded on the New York Stock Exchange—the first Brazilian food products company to do so—through Level II ADRs. The company is led by Chairman Eggon J. da Silva and CEO Nildemar Seeches.

Corner Store Operator in the 1930s

Two Italian immigrants, Saul Brandalise and Angelo Ponzoni, opened a grocery store in Vila das Perdizes in the state of Santa Catarina, Brazil, in 1934. Brandalise, Ponzoni & Cie quickly sought to expand the business. At first the partners attempted to expand by adding other stores, merging their company with Floriani, Bonato & Cie, which operated a store in nearby Bom Retino, in 1937. The merger lasted only a year, however. Instead, Brandalise and Ponzoni turned toward food production, and in 1939 formed an association with another company that operated a slaughterhouse and processing plant for pork meats and byproducts. By 1941, Brandalise, Ponzoni & Cie were ready to launch their own line of pork products. For this, the company launched a new brand name, Perdigao (partridge), using the bird as its logo.

Brandalise and Ponzoni expanded the business again in 1943 when they acquired Sociedade Curtume Catarinense, which gave the company tanning facilities for the pork skin byproducts of its main meat processing facility. The tannery, later known as Curtume Perdigao, also began processing skins acquired from other pork processors. Renamed Brandalise, Ponzoni SA Comercio e Industria in 1945, the company continued to diversify its interests, adding flour milling, with the opening of a wheat mill in 1946, and lumber, with the purchase of a sawmill in 1947.

The company’s expansion dovetailed with its drive toward vertical integration in the 1950s. In 1954, the company opened its own farm, Granja Santa Gema, in the town of Videira, where the group began developing and raising high-quality pig breeds. The farm also marked the company’s expansion into poultry production—by 1955, the company had begun to slaughter chickens as well. To support its growing industrial operation, Brandalise and Ponzoni launched the company into two new directions, opening a feed plant for its own animals, and starting up a distribution subsidiary, Expresso Perdigao. In 1957, the company added air transport with the purchase of two Douglas DC-3s, which allowed it to begin distribution to the important Sao Paulo market.

Brandalise and Ponzoni formally changed the name of their company to Perdigao in 1958. Over the next decade, Perdigao made steady improvements in the quality of its livestock. The company also introduced microbiological controls as it stepped up its research and development investments. In 1968, Perdigao added automated processing equipment for its chicken production, allowing it to raise production from 500 birds per day to more than 1,500 per day.

Diversification and National Expansion in the 1970s

Perdigao expanded its tanning business in 1970, acquiring Emporio Courus, which was merged into the existing tannery subsidiary to form Perdigao Courus SA. The company also formalized its animal feed production operation, which began supplying third parties, forming subsidiary Perdigao Raçoes SA, later known as Perdigao Alimentos, in 1974.

Until the mid-1970s, Perdigao’s poultry processing was performed in the same facilities as its pork processing business. The growth of the company’s own poultry production—as poultry production expanded to become one of Brazil’s major food industries—led Perdigao to construct a dedicated poultry slaughtering facility in Videira in 1975. That same year, Perdigao pioneered another area of the Brazilian poultry market, as it became the first in the country to export its products, with a shipment to Saudi Arabia. The following year, Perdigao became one of the founders of UNEF, the Brazilian union of chicken exporters, which helped raise Brazil into one of the world’s leading poultry-producing countries.

In 1976, Perdigao used its feed production operations to launch itself into the larger area of industrial soy products manufacturing, building a facility to provide oil refining and other processing operations. The following year, the company added a new subsidiary, Perdigao Veloso, located in Salto Veloso, and began producing pork chicken and beef products, such as hamburger and salami. The company continued adding to its industrial park through the end of the decade, building a new plant in Catanduvas in 1979, then launching two new farm and industrial processing complexes in Herval D’Oeste and Capinzal in 1980.

Perdigao S/A Comercio, along with its two main operating companies, Perdigao Alimentos S/A and Perdigao Agroindus-trial S/A, went public in 1980, listing on the Brazil stock exchange. The following year, Perdigao began marketing a new poultry brand, Chester, after the company’s research and development team had succeeded in breeding a chicken that concentrated 70 percent of its meat in its breast and thigh portions. The Chester brand was then expanded in 1982 to include low-fat products.

Perdigao’s industrial development continued into the 1980s, with the launch of a new chicken farm, feed, and slaughtering facility in Orleans, in Jaguaruna, in 1983, then opened another integrated chicken production complex, Borella SA, in Marau, in 1985. The following year, Perdigao attempted to enter the beef market as well, acquiring Frigoplan Ltda, located in Lages—that facility was later transformed into a processing center for frozen processed foods. At that time, Perdigao exited a number of noncore operations, including its sawmill and its supermarket business. Soon after, Flavio Brandalise, son of Saul Brandalise, took over the company’s leadership as president.

Perdigao’s industrial growth enabled it to expand throughout much of Brazil during the 1980s. The company moved into Serafina Correa with the creation of two new farm and slaughterhouse complexes, Sulina Alimentos S/A and Ideal Avícola S/ A, the former for pork production, the latter dedicated to poultry in 1988. That year, the company also launched a soy processing subsidiary in Cuiaba, Amazonia SA, and formed a chicken breeding joint venture with the United States’ Cobb-Vantress. Other partnerships followed, such as an agreement with Japan’s Mitsubishi Corporation to step up Perdigao’s international exports. The company also debuted a new brand, Turma de Monica, and a line of processed meat products.

Professional Management for the New Century

Perdigao moved into canned vegetable production in 1989 with the acquisition of Swift, based in Santo André. The company added a new cold storage facility with Mococa SA. The opening of the Brazilian market, which enabled Brazilian companies to expand internationally for the first time, led Perdigao to take the leap in 1990 with the launch of a joint venture in Portugal with Persuinos, for the production of sausages. That partnership was disbanded the following year, however. Nonetheless, Perdigao achieved some success overseas, particularly with an award for its sausage products at the Paris food fair of 1991. The company’s Capinzal and Marau facilities also gained EC permission to begin poultry imports into Europe that year.

By the mid-1990s, however, Perdigao’s expansion, coupled with the disastrous economic climate of the early years of the decade, had nearly forced the company into bankruptcy. In 1993, the company brought in minority shareholder Egon Joao da Silva as the group’s president. In 1994, the Brandalise and Ponzoni families sold their controlling stake in the company to a consortium of Brazilian pension funds, which appointed Da Silva as chairman and brought in Nildemar Seeches as president.

The new management team led Perdigao on an extensive restructuring drive, shutting down or selling off its noncore operations, which now included animal feed proteins and concentrates production, among others. Perdigao then embarked on a long-term investment program designed to boost its production efficiency and to achieve a higher-quality product. Through the end of the 1990s, the company spent more than $260 million on upgrading and modernizing its industrial facilities. Meanwhile, Perdigao, under threat from the flood of cheap Asian imported meats into Brazil starting in the mid-1990s, also began repositioning itself into higher-margin meat and poultry categories.

Company Perspectives:

Mission: Working in harmony with the community and the environment, Perdigao’s mission is to become the premium food merchant, premium investment and employer of choice in Brazil and around the world.

In 1996, Perdigao added a new production facility in Rio Verde, with a total production capacity of 280,000 chickens and 3,500 pigs per day. The following year, the company opened a new feed plant, in Marau, with a production capacity of 33,000 tons per month. That year, Perdigao completed its restructuring drive, which included merging its operating companies into a single, publicly listed entity, Perdigao SA.

As part of its drive into higher-margin food production, Perdigao began investing in other food categories in the late 1990s. One of the first of these was a move into frozen vegetable production, importing from Belgium for distribution in the Brazilian market under the Healthful Choice brand, beginning in 1997. In 1998, the company extended the Healthful Choice brand to include processed, frozen fish products as well. Then, in 1999, Perdigao turned to the fast-growing market for ready-made meals, launching its own branded line, Toque de Sabor (Touch of Flavor). That product line was then expanded in 2000 to include a range of frozen pizzas under the brand name Apreciatta. In that year, the company acquired Frigorífico Batavia, which enabled it to enter the market for turkey meats under the Batavia brand name. In 2001 the company was ready with the launch of a new brand, Light & Elegant, featuring a range of low-sodium turkey products.

Perdigao continued to increase its industrial park as it moved into the new century, expanding its feed plant in Catanduvas in 1999. That plant became the largest animal feed production facility in all of Latin America. In 2001, the company announced the beginning of a new investment phase, with plans to spend some $250 million to build the largest pig and poultry breeding and slaughtering facility in Latin America. That year, in addition, Perdigao joined with Sadia—the largest pork and poultry producer in Brazil—to form an export joint venture, BRF Trading, to bring the partners’ products to such emerging markets as Russia, Africa, and the Caribbean, with plans to boost sales to more than $500 million per year. The partners ended the joint venture in 2002, however, with Perdigao retaining control of BRF, which posted sales of more than $190 million in the first nine months of that year.

Meanwhile, Perdigao continued its drive to reinvent itself as a diversified food products company. The company continued to boost its frozen foods line, which already accounted for some 12 percent of the company’s sales. Perdigao also continued to expand its ready-made meal lines, adding two new products in 2002. In September of that year, Perdigao announced its intention to add another product category, cheeses, with production to begin in Sao Paulo and Parana by the end of the year. With sales of nearly R 2.8 billion ($1.4 billion), Perdigao had transformed itself from a single grocery store to a major international food products group.

Principal Subsidiaries

Perdigao Agroindustria SA; BRF International SA.

Key Dates:

1934:

Saul Brandalise and Antonio Ponzoni open a grocery store in Vila das Perdizes, Brazil, forming Brandalise, Ponzoni & Cie.

1939:

The company acquires slaughtering facilities and enters pork meat production.

1941:

The company launches the Perdigao (Partridge) brand and logo.

1943:

The company acquires Sociedade Curtume Catari-nense and begins tannery operations.

1954:

The company begins vertical integration with the opening of a pig and poultry farm, feed, slaughtering, and processing facility, Granja Santa Gema.

1955:

The company begins a chicken slaughtering and processing operation; the company forms a distribution subsidiary, acquiring two airplanes to deliver products to the Sao Paulo market.

1958:

The company changes its name to Perdigao SA.

1968:

The company adds automated processing equipment to triple the volume of chicken processed per day.

1970:

The company acquires Empòrio Courus to expand its tannery operations.

1975:

Perdigao opens a dedicated poultry slaughtering and processing facility; the company begins poultry exports.

1980:

The company goes public with a listing on the Sao Paulo stock exchange.

1989:

The company diversifies into canned vegetable production.

1994:

A consortium of Brazilian pension funds acquires Perdigao and restructures operations.

1996:

The company opens a new production facility with a total production capacity of 280,000 chickens and 3,500 pigs per day in Rio Verde.

1997:

The company opens a new feed plant, in Marau, which becomes the largest in Latin America; the company launches the Healthful Choice brand of frozen vegetables as part of a diversification drive into new high-margin processed food products.

1998:

The company launches the Healthful Choice of the Sea frozen fish products brand.

2001:

Perdigao forms BRF Trading, an export joint venture with Sadia.

2002:

The company takes over full control of BRF; announces plans to extend its processed food operations into cheese production.

Principal Competitors

Vitarich Corporation; Cargill Inc.; ConAgra Foods Inc.; Tyson Foods Inc.; Smithfield Foods Inc.; Orkla ASA; Alfa S.A. de CV; ContiGroup Companies Inc.; Nutreco Holding NV; QP Corp.; Maple Leaf Foods Inc.; Perdue Farms Inc.; Keystone Foods L.L.C.; Sadia SA; Hillsdown Holdings Ltd.; Pilgrim’s Pride Corporation; Gold Kist Inc.; Seaboard Corporation; NFZ Norddeutsche Fleischzentrale GmbH; Doux S.A; Grampian Country Food Group Ltd.; Lambert-Dodard-Chancereul; UNICOPA.

Further Reading

“All Clucked Up: Brazilian Chickens,” Economist, April 4, 1998.

“Perdigao Bets on Frozen Food,” South American Business Information, September 26, 2002.

“Perdigao Expanding in Europe,” South American Business Information, November 9, 2001.

“Perdigao Investing $250 Million in New Complex,” Feedstuffs, September 24, 2001, p. 31.

“Perdigao, Sadia Form Export Company,” Feedstuffs, October 1, 2001, p. 9.

“Perdigao Sees Market Share Grow,” Eurofood, August 31, 2000, p. 9.

“Sadia and Perdigao End Partnership,” South American Business Information, October 30, 2002.

—M.L. Cohen