The sale of Swift & Co. to São Paulo, Brazil-based JBS SA will allow the South American meat company to take advantage of the reputation American beef has globally.
JBS, founded in 1953, is already the largest beef processor in Brazil.
Acquiring Swift is a major step in establishing a global presence for the Brazilian company, JBS chief executive Joesley Mendonça Batista said in a statement.
The deal gives JBS quick entry into premium markets, said Wendy Voss, a Sydney, Australia-based analyst at Rabo bank Group.
“North America and North Asia are the prized markets for the beef industry around the world,” she said.
There have been periodic bans on exports of Brazilian beef in recent years because of fears over hoof-and-mouth disease, said John Nalivka, owner and president of Sterling Marketing, a Vale, Ore.-based consulting firm.
“I think most of the companies in Brazil have made no secret that they’re looking to expand their global reach. For a strategic move, JBS had to do it,” Nalivka said. “The U.S. has the distinctive competitive advantage in the world with high-quality, grain-fed beef. Anybody that wants access to that market, they have to have access to a U.S. company.”
This is not JBS’s first foray into the U.S. market. In January, the company acquired meat distributor SB Holdings, which has operations in Connecticut.
But the purchase of Swift gives JBS solid footing in the U.S. market and access to facilities that have the capacity to slaughter 5,500 cattle a day. JBS currently has the capacity to process 800 to 1,600 cattle daily.
“The company doesn’t have experience in handling plants as big as Swift,” said Steve Kay, editor and publisher of Cattle Buyers Weekly. “They are going to have to rely on current Swift management to improve those plants.”
There are other risks for JBS, Kay said. While Swift’s pork-processing business is doing well, the decline in Asian exports has hurt the company, Kay said.
“The real issue for JBS is to get Swift’s beef business consistently making money. They have paid a hefty premium to gain entry into the North American market, and I still wonder whether they quite know what they have got themselves in for,” he said.
Additionally, JBS is not well- known in the U.S., and lack of familiarity with the foreign outfit may spark some backlash in the U.S. cattle industry, Nalivka said.
“We’ve been consolidating for 25 years, but it was always one U.S. packer buying a U.S. packer. Now, we have another global player buying into a U.S. packer,” he said. “I think the fringe cattlemen’s groups will jump into this. There will definitely be comments made about a foreign company owning an American cattle company.”
Staff writer Tom McGhee contributed to this report.
Staff writer Kimberly S. Johnson can be reached at 303-954-1088 or kjohnson@denverpost.com.
