Brasil Foods aims to double its sales over the next five years through domestic and international expansion. Domestically, Brasil Foods faces obstacles like inflation, competition from JBS and Marfrig, and regulatory limits from CADE. However, the analyst recommends focusing on food service to leverage urbanization and disposable income growth. In China, the growing market for processed foods presents an opportunity, but Brasil Foods must overcome infrastructure, cultural, and competitive challenges. Overall, the analyst concludes Brasil Foods can reach $50 million in sales within five years by cementing its brand in Brazil and gaining a 15% share of China's frozen and chilled food markets. Close monitoring of changing global conditions is also

1. To: Jose AntoniodoPradoFay
From: Jacob Daniel Donahue
Date: October13, 2016
Mr. Fay,Brazil has fifthlargestpopulationinthe world,andisbyfar the largestcountryin South
America.Witha rapidlygrowingeconomyandanurbanizedmiddleclass full of disposableincome,Brazil
isa premierlocation.AlongwithgrowingpopulationsandeconomiesincountriessuchasChina,India
and the countryof Africaas a whole,yourcompanycouldhave roomto grow.That beingsaid,there are
obstaclesstandingbetweenyourcurrentstate andthe expectedincrease insalesoverthe nextfive
years.Internally,the age oldrivalrybetweenthe twomergingcompaniescouldcreate ongoingand
destructive disputes.Domestically,inflation,sturdycompetitorsandthe watchful eye of the
Administrative Council forEconomicDefense (CADE) mustbe takenintoconsideration.Internationally,
the lack of infrastructure indevelopingcountriesandthe cultural differencescouldhampergrowth
overseas.Iam byno meansquestioningthe determinationandcapabilityof yourcompany.Yet,I am
questioningthe climate forindustrygrowth.There hastobe a reasonas to whya companyinyour
industryhasyetto make a bigsplashandbecome an international giant.
Growthis the goal of Brazil Foodsoverthe nextfive years.Majorgrowthnone the less.Asitstands
now,Brazil Foodslookstoexpandmarketsbothdomesticallyandinternationally.Fromadomesticfront,
I see three majorproblemsarisingoverthe nextfive years.The firstbeingastaple ina rapidlygrowing
economy,inflation.Asthe economygrows,sodoesthe value of goodsandservices.Thusequatingto
generallyhighercostsof runninga business.Brazil Foodsmaybe arguedasthe bestat what theydo.
Though,they are notthe onlyonesdoingit.Brazil basedJBS S.A and Marfrig Alimentosbothlooktoget
a firmholdin the domesticmarket.Fromaninternational standpoint,JBS,MarfrigandUS basedTyson
have beenexportingorhave atleaststartedto exportinternationally.All inanattempttoscoop up
marketpresence andsharesindevelopingeconomies.The mergerof twonational industrygiantswill
alwaysgrab the attentionof lawmakers.Grantedthe Braziliangovernmentappreciatesthe efficiencyof
production andthe potential flowof income fromamultinational corporation.CADEseesthingsabit
differently.AslongasBrazil Foodshas control of both Sadiaand Perdigao,CADEwill alwayslimitthe
companies’actionsdomestically.Internationally,the situationwouldnotbe anyeasier.Despite the
growingpopulationsandeconomiesincountriessuchasChina.The cultural differencesindietswould
still take some time togetusedto. Brazil Foodstakespride inthe operational capabilitiesitholds.From
the literal rootsof plantsto the deliveryof freshlycutmeatandpoultry,the efficiencyBrazil Foods
operatesatis one of its keycompetitiveadvantages.Translatingthatinternationallymaybe tough.
Generallyspeaking,isthere enoughopportunityinthe foodprocessinganddistributionindustryin
orderto double the salesof Brazil Foodsinfive years?
Mr. Fay, basedonthe pros and cons of the situation,Iofferyouthree potential plansof action.One
of whichIwill be pushing.The firstbeingatotal domesticfocus.Eliminate the hassleof international
growth.FocuscementingBrazil Foodsasa staple inthe growingBrazilianeconomy.Continuing,Isuggest
that the secondoptionshouldbe toagaincement the brand of Brazil FoodsinBrazil,and thengrow
move north.TouchingonforeignnationsbutstayingwithinnorthandsouthAmericawhere the majority
of targetmarketswouldhave the necessarytechnological resources.Lastly,cementthe brandname in
Brazil.Maintaina majoritymarketshare at home andpenetrate foreignmarketsinbothnorthandsouth
Americaas well asAsia.Itmay holda bitof risk,butit isby far the most lucrative option.Ourbestbetat
doublingsalesinfive years.ThuswhyIrecommendBrazil Foodsmovesforwardwithoptionthree.

2. Domestic:
Before anygrowthis to be done,the firstpotential problemthatmustbe keptincheckis the actual
mergerof Sadia andPerdigao.Mergersare not alwaysa smoothtransition.Oftenthe employeesof said
companybeingboughtfeel outof place,somewhathomeless.Asif aconqueringnationcame inand
changedeverythingtheyknewandstoodfor.Inthiscase,if the employeesandassetsof Perdigaoare to
be usedto theirfull potential.Thentheirworthtothe companymustbe illustrated.Teachthemthe
value of Brazil Foods. Show thattheycouldhelpmake history.Theycouldbe part of the first
multinationalfoodsupplierfeedingthe world. Inmanycasesmoneyincentiveswill notwinthemover.
Theywant to see the worthbehindtheirwork. Theyare now workingfora Brazilianbornandbred
national champion.
Once the integrationof the twocompaniesiscomplete,itisimportanttolayout the planand goalsof
the nextfive yearsdomestically.Granted Brasil Foodshasa wide varietyof productofferings.The
companyrevolvesaroundthe productionanddistributionof meats,poultry, frozenprocessedfoodsand
chilledprocessedfoods.Notablyholdinga57 percentmarketshare infrozenprocessedfoodsand55
percentinchilled.Ontopof that, 60 to 80 percentmarketshare invariousotherprocessedfood
categories(beverages,vegetables, dairyproducts). Movingforward,Iurge Brasil Foodstokeepa tight
grasp on those marketshares.Grantedthe Braziliangovernmentand CADEwill limitanyfurthergrowth
withineach.Inorderto do so,Brasil Foodsmust continue to improve theirsupplychain.From
productiontodistribution.Growingdemandfor processedfoodswill call for increasedcompany
efficiency.Maintainleadtimes,potentially cutthemdown.Alwayspushthe brandof Brasil Foods.
Brazilianconsumersare becomingmore knowledgeable.More concernedaboutwhattheyare buying,
whotheyare buyingfrom,howmuchit cost andwhat wentinto it.In today’sBrazil,the namesSadia,
PerdigaoandBrazil Foodsmay be worthmore to consumersthanthe product itself. Aspeople of lower
income are hesitanttowaste valuable moneyonrelativelypoorfood.
WithCADE limitingthe roomforgrowthinthe foodretail industry. Brasil Foodswillturntothe food
service industry.While continuingtoholda majoritymarketshare inmeat,poultry, frozenandchilled
foodretail. The Brazilianeconomyisinastage of heavygrowth.In2010 the economy expanded7.5
percent.The largestjumpin24 years.Witha risingmiddle classfullof disposableincome,spendingon
foodinBrazil was expectedtogrowfrom316 billionin2009 to 567 billionin2015. The foodservice
industryisundoubtedlyexpectedto see some of thatmoney.Already,spendingonfoodaway from
home had risenfrom24.1 percentof personal expendituresin2002/2003 all the wayto 31.1 percentin
2009. The rise inurbanizationhascalledforquickservice andconvenience.Consumerslookto the food

3. service industryforsuchcharacteristics. Brasil Foodsshouldbe the onesthe foodservice industrylooks
to for itssupplies.Meat,poultry,pork,andpotentiallyevenbeveragescouldbe suppliedonalarge
scale. Obtainingamarketshare similartothat of the retail sectorof frozenandchilledfoodsinthe
service industrywill putalarge dentinthe salesbenchmark.
Afterlookingatthe domesticclimate forgrowth, there are afew issuesthatare worthpointingout
(full analyses canbe seeninexhibit1,2, 3). For boththe foodretail andservice industrya“5 Forces”
analysiswasrun.On completionInotnotedthatthe fear of a potential rival withinbothindustriesstill
looms.AfterBrasil Foodshad completedtheirmerger,CADEruledthatthe companymustsell of 13
percentof itsrevenue producingassetstoasingle buyer.Effectivelycreatingacompetitor.Grantedthis
competitormaynothave the upperhandat the moment,theydohave the necessaryresources.Suchas
production anddistributionpower.A PESTanalysisof the currentenvironmentrevealedtwoimportant
issues.First,the restraintsthe BraziliangovernmentandCADEhave on Brasil Foods.Evenif national
efficiency increasesdue toone majorproducerof a givenproduct.Inthe longrun,monopoliestendto
hurt the marketand itsconsumers. Lawmakerswill continue toholdbackBrasil Foodsincertain
domesticmarkets(foodretail).Besidesthe ongoingeconomicchangestakingplace inBrazil.We alsosee
numerouscultural shifts.The PESTanalysisillustratedthatcontinuedurbanization,informedbuyersand
changingfoodpreferencessuchasconvenience mustall be consistentlymonitored.The Value Chainand
capabilitiesanalysisnotedone majorissue.If Brasil Foodsistomaintaina strongpresence inthe retail
industryandjumpintothe service industrytheymustincrease production,distributionandoperations.
Yet,I still don’tsee thatbeingtoohighof a hurdle.Buya few more farms,slaughterhouses,trucksand
distributioncenters.Asfaras laborgoes, Brazil hasplentyof workers.Studiesnote thatBrazil hasseena
144 percentincrease inforeignworkpermitsfrom2006 to 2010. With all the potential issuesaccounted
for I still viewall three analysesashavinga positive outlookforBrasil Foods.Irecommendmoving
forward.
International:
Brasil Foodshas a fewdifferentinternational marketstheycouldsinktheirteethinto.I
recommendnotspreadingthe company’sresourcestoothin.Pickone majordevelopingeconomyand
go at it infull force.Basedona numberof analyses,Iwouldrecommendfocusingonthe expanding
economyandpopulationof China.Bynomeansdo I recommendcuttingoff exportstoalreadyexisting
revenue producingcountries.ThoughI dobelieve thatChinaisthe bestoptionwhenitcomestosetting
up a productionanddistributionsystemsimilartowhatis alreadyestablishedinBrazil (eliminatingfresh

4. meatand poultry until adequate resourcesare available).So,whyChina?In2010 alone Chinese
consumersspent19 billiononfrozenprocessedmeatand 73.3 billiononchilledprocessedmeat.Back
home,Brasil Foodsholdsdominate marketsharesinbothfrozenandchilledmeats.If theycouldgrab
ontoa 15 percentmarketshare inChina, theycould walkawaywith close to 20 billioninsales.Growing
populationsthroughoutAsiawillcall fordramaticincreasesinfoodproduction.Chinaalone doesnot
have the capabilitiestofeedall of theirpeople.ThankstoBrasil Foods,the Chinese people will notgoto
sleephungry.
Before anyordersare placedor plane ticketsare booked.Brasil Foodsmustfindthe rightpeople to
put intoplace internationally.Peoplewhovalue the company.Appreciatewhatthe companystandsfor.
Andabove all else realize whatishappening.Brasil Foodsisbreakinggroundandbecomingone of the
firstmultinational foodprocessingcompaniesinthe world.Theseindividualsmustbe able tothink
globallyandadhere tocultural differences.Once those people are foundthe nextstepscantake place.
In China’scurrentstate,the infrastructure willonlyallowforminimal annualgrowthinfrozenand
chilledproducts.Inthe shortterm,slowgrowthisalright.Inthe longterm I urge Brasil Foodsand the
Chinese governmenttoinvestinincreased infrastructure.Asitwill be beneficial forbothparties.Inthe
meantime,Brasil Foodswill begintoroll upcompaniesinthe fragmentedproductionanddistribution
industryandcreate partnershipswiththe Chinese supermarkets.SlowlybutsurelyBrasilFoodswillbe
creatinga supplychainsimilartowhattheyhave inBrazil.Once cementedinthe marketplace,Brasil
Foodsmustpush the value of theirbrand.Arguablythe mostimportantstep.Chineseconsumersare
veryconcernedwiththe safetyof the foodtheypurchase.Pushingthe value associatedwithBrasil
Foodswill naturallydrawcustomersawayfromcompetition.
The opportunityisthere. Similartothe domesticopportunity,there are some challengesinthe way.
Analyseswere runandthere are againa few majorobstaclesworthreporting(full analyses seenin
exhibit1, 2, 3). Ananalysisof the industrythroughthe “5 Forces”illustratedtwomajorissues.The first
beinga threatof substitutes.Brasil Foodssellsfrozenandchilledprocessedfoods.Chineseconsumers
still have the optiontobuyfreshproductsat wetmarkets.Grantedtheirconcernfor safetymaysteer
themmore towardsthe frozenand chilledaislemore frequently. Second,the marketsforbothfrozen
and chilledfoodsisamess.Competitioneverywhere.Fifteencompaniesholdacombined40 percent
share in the frozenfoodindustry.WhileChinese giantShinewayGroupholds a15 percentshare of the
chilledfoodindustry.ThoughIbelieve acompanysuchas Brasil foodswouldhave noproblem
competingwithandeventuallysurpassing the domesticcompanies.Potentially some of those
competingcompaniescouldbe rolledintoBrasil Foods. A PESTanalysisindicatedthatthe majorityof

5. pushbackwill come fromsocial andtechnological factors.Fromasocial standpoint.Chinaishome to
verylarge cities,butalsovastrural areas and millionsof people.Distributionservicesmayvarybasedon
orderlocation.Ontop of that, the dietarypreferencesinChinawillbe different.Like Brazil,China
consumesa lotof meat.Yet the type or cut of meattheyprefermayvary. Generallyspeaking,Chinese
infrastructure andtechnologymaynotbe quite whatBrasil Foodsisusedto.From productionto
distribution,the frozenandchilledfoodindustrywillneedimprovementsinordertomeetthe efficiency
Brasil Foodsisaccustomedto. Uponcompletionof aCAGE analysis,the cultural andgeographic
distancesseemtopose the biggestthreats.Mostnotably,the linguistic differences.Communication is
keywithinacompany.Makingsure translationsare performedseamlesslyinordertoavoid
miscommunicationwillbe vital tosuccess.Froma pure geographicpointof view.The distance between
Brazil and Chinaare immense.The costsof shippingfromBrazil toChinawouldbe throughthe roof.
Brasil Foodswouldbenefitfromminimalcrosscountryshipments.
Conclusion:
In five yearsBrasil Foodswanttodouble theirsales.The opportunityisthere,butare the obstaclesin
the way toobig? I have concludedthatinfive yearsBrasil Foodscanreach 50 millioninsales.If not,
come veryclose to it.Through the continueddominance inBrazilianmarketsanduntappedconsumers
inChina,Brasil Foodswill become the firstmultinational foodprocessinganddistributioncompany.
Chinaalone couldpotentiallybringBrasil Foods50millioninsales.If theywere tograbjusta 15 percent
marketshare in bothfrozenandchilled foods, theycouldobtain nearly17billionsales.Notaccounting
for yearlygrowthineachmarketand the eventual additionof local,freshmeatsandpoultry.
Keepingeverythinginmind,I leave Mr.Fayand Brasil Foods withone lastrecommendation.Continue
to keepaneye on the worldaroundyou.Circumstancesare constantlychanging.Economieshave
boomsjustas oftenas theyhave bursts.EveninBrazil,the rapidlygrowingeconomycancause concern.
Somethinglikeinflationcandramaticallyhurtthe costof doingbusiness.Keepaneye onthe restof the
world,be aware of trendsandalwaysbe readyto pivotat a moment’snotice.

6. (EX 1)
PEST
POLITICAL
-Braziliangovernment(taxes,tariffs,trade agreements)
-CADE(anti-monopolylaws)
-Increasedsecuritymeasures
ECONOMIC
-Growingeconomy
-Growingmiddle class
-Growingdisposableincome
-Growingneedforqualityfood
-Highinflation
SOCIAL
-Increasedpopulations
-Urbanization
-Changingdietarypreferences
TECHNOLOGICAL
-Increasingproductioncapabilities
-Humanresources/ideas
-IncreasingITand communicationstechnology
(EX 2)
5 FORCES
SUPPLIERS
-Rawmaterials
-Small Farms
-Labor
-Majorityof suppliesare inhouse
-Vertically integrated
SUBSTITUTES
-Cheaperproducts
-Private labels
BUYERS
-Consumersinneedof food
-convenience
-little power
POTENTIALENTRY
-Low
-Highcosts
-Many resourcesneeded

7. COMPETITORS
-One majorcompetitor
-Sold13 percentof assetsafterCADEruling
(EX 3)
SWOT
STRENGTHS
-Limitedcompetition
-Strongcapabilities
-Goodfinancial situation
-Stronginfrastructure
WEAKNESS
-Limitedeconomicgrowth
-Potential monopoly
OPPORTNITY
-Newgrowingindustry
-Moneyto be made
THREATS
-Governmentintervention
-Legitimate domesticandforeignbasedcompetition
(EX 4)
PEST (China)
POLITICAL
-Lack of governmentcertainty/honesty
-Unwillingtoaida foreigncompany
ECONOMIC
-Growingincomes
-Huge frozenandchilledfoodindustry
SOCIAL
-Differentcultures
-safetyconcerns
-Shiftawayfromfreshproducts (wetmarket)
TECHNOLOGICAL
-Limitedsupportinginfrastructure
-neededprocessing/distributionincrease orimprovement

8. (EX 5)
5 FORCES (China)
SUPPLIERS
-Procurement
-Purchase materialsfromChinese farmers
SUBSTITUTES
-Freshmeat
-Wetmarkets
BUYERS
-Moderate buyingpower
-Little information
-Huge populations
-Moderate/littlepower
POTENTIALENTRY
-Low
-Much neededresourcesandcapabilities
COMPETITORS
-Numerousfragmentedmarkets
-fewmajorityleaders
(EX 6)
CAGE(China)
CULTURAL DISTANCE
-Highlanguage barrier
-Communicationof product
-specificassociations
ADMINISTRATIVEDISTANCE
-Large numberof employees
-Natural resources(water/land)
-Security
GEOGRAPHICDISTANCE
-Perishable products
-NeededChinese basedsupervision
-Moderate value toweightratio(frozen/chilledmeatsandotherfoods)
ECONOMICDISTANCE
-Differentincome levels
-Labor factorsare different
-Needtoadjustquicklytolocal Demands