JBS S.A.: A Latin American Success Story
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Case Code: BSTR497 Case Length: 20 Pages Period: 2006-2016 Pub Date: 2016 Teaching Note: Available |
Price: Rs.600 Organization: JBS, SA Industry: Animal Protein Countries: Brazil; Global Themes: Growth Strategy, Competitive Advantage, International Management |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
JBS's Strategy
JBS’s strategy was to grow, lead, expand, and profit in a sustainable way by refining its value-added products, expanding its distribution network and customer base, strengthening its brands through investments in marketing and research and development, and seeking investment and acquisition opportunities in foreign as well as domestic markets. The company focused on reducing costs, increasing operational efficiencies, and leveraging growth in both domestic as well as global markets. According to analysts, the aim of this strategy was to make JBS a market leader in the global animal protein sector protein and to boost profitability.
Competitive Advantages
As of September 2015, JBS was the largest animal protein company in the world. According to industry experts, the company's market leadership and scale allowed it to take advantage of market opportunities and expand its business and market share in domestic as well as international markets. According to them, JBS was able to access the major world markets due to economies of scale, production optimization, reduction of fixed costs, and an advantaged position to negotiate purchase and sale prices with its suppliers and customers respectively. Talking about JBS's competitive advantages in the meat industry, Jerry O'Callaghan, Director of Investor Relations at JBS, said....
Global Expansion
A key element of JBS’s strategy was to expand to new geographical markets and to consolidate its position in all the countries in which it operated. The company expanded its business into countries that it believed were cost effective and profitable. As of September 2015, JBS had a presence in 22 countries in five continents with production platforms and sales offices in Brazil, the US, Australia, Canada, Italy, Argentina, Uruguay, Paraguay, Mexico, China, Russia, and others. JBS derived about 75% of its income from foreign operations. The company's global expansion policy was guided by a strategy to operate in the most cost competitive geographies with the highest concentration of livestock. It set up production facilities in low cost markets with a focus on flexibility of operations. JBS mostly extended its global reach through acquisitions...
Results
As of 2015, JBS was the only company in the animal protein sector with direct operations in the world’s three main producing countries – Brazil, the US, and Australia. It was a global leader in beef, lamb, and poultry processing with a capacity to process 100,000 bovines, 20,500 lambs, and 13 million birds a day. It was also the third largest pork producer in the US and one of the largest producers in Brazil, with the capacity to process more than 72,000 hogs a day...
Challenges
According to industry observers, JBS’s incredible growth had been accompanied by its own set of challenges. It faced political, economic, and regulatory challenges such as fluctuations in domestic currency, a political crisis in its home country, high interest rates, inflation, persistent livestock disease issues, and difficult labor laws. In addition, JBS had to constantly manage financial risks such as market rates, tax structures, and liquidity, and also comply with social and environmental aspects, they added....
The Road Ahead
During the second quarter of 2015, JBS's profit declined by 68.5% to R$80 million (US$22.7 million) compared to the corresponding period of the previous year. The company ended the quarter with a net debt of R$34.8 billion. However, analysts said that the slowed earnings growth in 2015 would not affect the long-term prospects of the company as it had a strong liquidity position and sufficient cash flow to sustain its position in the market. And with the Real down 35% against the US dollar in 2015, JBS’s global revenues would shoot up, they predicted. The company would continue to protect its business with hedge contracts in US dollars in order to avoid losses related to a weakening Real, the analysts added....
Exhibits
Exhibit I: JBS – Business Units
Exhibit II: JBS's Strategy
Exhibit III: Culture at JBS
Exhibit IV: Selected JBS’ Mergers and Acquisitions
Exhibit V: Financial Highlights
Exhibit VI: Performance by Business Unit
Exhibit VII: JBS Net Revenue (in R$ billion)
Exhibit VIII: Top Global Food Companies by Sales (US$ Million)
Exhibit IX: Global Protein Demand Estimates
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