We have three other stories on JBS as our Processor of the Year; see notes at the end of this story.
It’s been a remarkable and fast-paced journey for JBS USA. You might say the U.S. company went from zero to $30 billion in just 16 years. It also might be said that, in the process, the U.S. operation took its Brazilian parent from a regional, beef-only meat packer to the biggest animal protein processor in the world.
“The Swift acquisition in the U.S. fundamentally transformed the [JBS S.A.] company – there’s no doubt about it,” says Wesley Batista Filho, CEO of JBS USA CEO. “The 2007 acquisition of Swift & Co. was the most pivotal moment in our history. JBS [S.A.] went from a $2 billion company to a $10 billion company overnight.”
JBS USA accounts for the biggest share of the parent firm’s global sales: $30 billion overall, including $22 billion in beef and $8 billion in pork. Add to that, through a dotted line, $17.5 billion in poultry through its 80% ownership of Pilgrim’s Pride and the U.S. accounts for more than half of JBS S.A.’s revenue.
But it consistently has accounted for an even greater share of the global corporation’s profits. Last year, the earnings before taxes, etc., of those three JBS USA units (beef, pork and Pilgrim’s Pride) were $4.17 billion, nearly two-thirds of the global corporation’s earnings before interest, taxes, depreciation and amortization – and that’s down from an outstanding 2021 when their EBITDA was nearly $6.7 billion.
Back in 2007, there was concern in some circles about a foreign company taking over a key U.S. food provider, especially one with the market share, name recognition and the long history of Swift. There have been several acquisitions of U.S. firms by foreign ones since, but at the time, this was the biggest.
But in the years since, the new owners have proven to be great corporate citizens. “The first thing they did was take the Greeley (Colorado) meat plant from one shift to two, doubling employment,” says Cameron Bruett, head of corporate affairs – who at the time was a senior staffer on the US Senate Committee on Agriculture in Washington D.C. “The company has consistently made tremendous capital investments across all the facilities.”
JBS USA also does a great deal for its employees, the communities it operates in and the environment in general. Community college tuition is paid for all its employees across the country, as well as their children. JBS has partnered with state and local governments and non-governmental organizations to add nearly 1,500 new housing units in communities where the company has facilities. The company also has engaged with local childcare providers as well as Boys and Girls Clubs and YMCAs to expand their facilities to provide slots for JBS workers’ families.
In the past few months, we’ve reported the tribulations of Tyson, Smithfield, Perdue and other meat processors, with each of those companies closing plants and laying off people because of the current headwinds in the animal protein industry. JBS USA hasn’t closed a plant or reduced its workforce in any material way.
JBS USA has a fascinating story and is truly worthy of being our 19th Processor of the Year. We’re focusing on JBS USA, although in some of the following discussion it’s difficult to separate the American organization from the global/Brazilian one.
JBS, by the way, are the initials of the founder, Jose Batista Sobrinho, who operated a small butcher shop in Anapolis, Goiás. His fortunes suddenly changed in 1957, when his little butcher shop got a contract to supply meat to workers building Brazil’s new capital in nearby Brasilia. He purchased the company’s first meat packing plant in 1970 and created the Friboi brand, a portmanteau of Portuguese words for refrigeration and beef.
Swift, once the largest meat processor in the U.S., was experiencing difficulties in the U.S. Its ownership changed hands several times early in this millennium, including owners Beatrice Foods and Conagra, and ultimately it ended up being owned by private-equity firm Hicks, Muse, Tate & Furst.
“Swift was clearly underperforming relative to its peers,” says Bruett. “It had gone through immigration raids, recalls of product, losing key customers. Along comes this Brazilian upstart company that doesn’t have specific experience in the U.S. market but certainly understands the global beef business. It didn’t have a lot of exposure to pork, and certainly no direct operational experience in the United States or Australia. So it was a huge risk, and I think most in the [U.S.] industry had their doubts.
“But this was not a hedge fund or a venture capital organization,” Bruett continues. “[JBS S.A.] really believed in agriculture and the promise of the future. They were going to invest in those assets and make this once again a very productive business.”
The time was right and so was the price. JBS SA paid $1.5 billion in cash for Swift & Co. in mid-2007.
“We brought in a new management structure, but most of the other employees remained,” says Bruett. “We’re good at turnarounds. Our motto is to create value through disciplined acquisitions at the right price, not just to grow for the sake of growth.
“One of the things about JBS is, yes, we are big, we are global, one of the largest food companies in the world. But we really operate autonomously in the different regions. So Australia is run by Australians, Brazil by Brazilians, the U.S. is run by the U.S. There are some global synergies and collaboration, but in general, ownership is given to each region. We want them to be the best in their region, and we monitor the results and help when help is needed.”
JBS proved adept at acquisitions, and it also had an appetite for U.S. assets. So Swift & Co. was just the first of many that would become JBS USA. In 2008, JBS acquired the U.S. beef operations of Smithfield, leaving the latter almost solely a processor of pork. In 2009 it acquired a controlling interest in Pilgrim’s Pride, an ownership stake it has increased several times since (now at nearly 80%).
In 2012 it extended its reach into Canada after buying XL Food (although JBS Canada is run as a separate operation). A busy 2015 saw the Brazilian parent acquire Tyson chicken operations in Brazil and Mexico, as well as Cargill’s pork business in the U.S.
Beef at its core
“We’re working in the most important job of all, feeding and nourishing the world,” says John Crowder, head of beef marketing and retail sales. “We’re providing protein and nutrition. People are talking more and more about a movement back to fresh foods, foods that contain the essential vitamins and other vital nutrients with the lowest amount of calories possible. That’s beef.”
If animal protein is to remain a solution to feeding the world – and there’s no question, as far as JBS is concerned – a global company like JBS would be best positioned to deliver the benefits, efficiently, safely and in the needed volumes, around the world, as opposed to smaller regional players, Crowder says.
While pork and especially chicken products are heavily branded, less than 10% of JBS USA’s beef is – although the company is working to heighten the recognition of the few brands of beef it has, says Crowder. “We have Holstein, Angus, other specialty beefs,” he continues. “The Aspen Ridge brand is no antibiotics and certified humanely raised. Grass Run Farms is grass-fed, 100% born, raised and harvested in the U.S. and also no antibiotics.
“Our value-add is in getting the best cattle and in our processing: further trimming, smaller cuts, ground beef, seasoning and marinating, plus educating the consumer on nutrition and preparation,” he says. Recent innovations have been the La Herencia brand, meats with Mexican seasonings ready to be made into tacos, and “Pound of Ground,” ground beef crumbles that are frozen but in the form of crumbles, so it can be cooked without thawing an entire brick of beef.
While still heavily invested in primary processing of beef, pork, lamb and chicken, JBS USA and its parent are pursuing value-added products. It built an Italian meats and charcuterie plant in Columbia, Mo.; upgraded a plant in Moberly, Mo., for cooked bacon; added a new harvest floor in Grand Island, Neb. Recent acquisitions include Sunnyvalley Smoked Meats in California, which makes smoked bacon, ham and turkey products, and the Empire Packing business, which produces case-ready, branded retail products.
“In value-added, we do private label and have two brands as well,” says Eduardo Noronha, president of JBS Value Added. “We have La Herencia, which is about two years old. Then there’s Adaptable Meals, which we started about seven years ago with marinated chicken, pork and beef.”
“If you look at the size of JBS and look at prepared foods as a segment, there’s so much upside for us and so much excitement,” adds Rick Foster, president of JBS Prepared Foods. “You can see that in our new Italian meats plant and our new bacon plant. Prepared foods is newer territory for JBS as a company, and it presents a lot of opportunities – in foodservice, retail, snack, convenience.”
While JBS – both USA and S.A. – will keep meat processing at its core for the foreseeable future, both companies are pursuing other food categories, although apparently sticking with proteins.
JBS S.A. bought into Huon Aquaculture, an Australian company raising Atlantic salmon in the Pacific Ocean. Also of interest to the global parent, but no longer to the U.S. operation, is plant-based meat analogues. JBS S.A. continues to explore the category but JBS USA created a plant-based business, Planterra Foods, in 2020 but closed the operation at the end of 2022.
An interesting development, also on the global front, is the parent firm’s growing interest in cultivated meats. JBS SA last year bought a 51% stake in BioTech Foods, a Spanish cultivated meat company, enabling the latter to build a production plant in San Sebastián, Spain. The $40 million plant is expected to have an annual capacity of 1,000 tons when it begins operations in mid-2024.
This September, JBS S.A. began construction on a cultivated protein R&D center of its own in Florianópolis in Brazil’s state of Santa Catarina. When it opens at the end of 2024, it will be the largest research facility focused on food biotechnology in Brazil, the company says. JBS initially will invest $22 million in the JBS Biotech Innovation Centre for the construction of lab facilities (phase 1) and a pilot plant (phase 2). It will have a scientific team of 25 specialist post-doctoral researchers, as well as staff and clerical support.
In total, the facility is budgeted for $62 million over three phases. In the third stage, an industrial scale model will be built to demonstrate the technical and economic viability of cultivated protein, a model for future plants that JBS may build globally to produce beef and other cultivated protein types. While those are global developments, cultured meats may one day become a part of the U.S. operation as the sector continues to grow and consumers demonstrate an increased appetite for traditional meat alternatives.
JBS S.A. already is a leader in animal proteins in North and South America and Australia, and through Pilgrim’s Pride is the largest food company in the UK. But there are still growth opportunities in Europe, Asia and Africa. “We’re always looking globally,” says Bruett. Prepared foods is considered a key growth area. “Adding value is the name of the game. Ultimately, getting closer to the consumer presents an opportunity for value creation and margin growth, so we’ve made significant investments in bacon, hams, deli meats, case-ready, prepared foods and aquaculture across the global company.”
What will JBS look like 20 years from now? “I think in 20 years, JBS will still be a protein company at its heart – however, we think beyond protein - we are a global food company,” says Nikki Richardson, head of corporate communications. “The company is focused on providing food options that its customers and consumers want.
“We are keenly aware of the fact that by 2050 we’ll have a significantly greater global population to feed, so we’re looking at all kinds of ways of doing that,” she continues. “So I think we will continue to evolve, continue to diversify, and continue to provide a diversified portfolio of high-quality food across many categories.”