Ceratti is best known for its Italian-style mortadella ham, and has both retail and foodservice arms.
Hormel Foods’ $104 million move for Cidade do Sol, the Brazilian meat company behind the Ceratti brand, highlights the opportunity that exists for companies – both inside and outside Brazil – following the country’s carne fraca scandal in March.
The deal – announced earlier – marks Hormel’s entry into the South American market, the first time that the Minnesota-based business has bought into Brazil.
Ceratti is best known for producing traditional Bologna-style mortadella hams, as well as sausages, salamis and bacon. It also has a foodservice business, which provides a variety of meats including sliced and diced ham and pepperoni to operators across Brazil.
Earlier in August, Hormel acquired Chicago-based sausage and meatball company Fontanini for $425 million.
It is perfect timing from Hormel, jumping on the opportunity that exists in Brazil’s meat industry less than six months since the so-called carne fraca scandal broke. Industry giants like BRF and JBS were implicated in an investigation into bribery within the food chain, with employees of both companies accused of paying health officials to overlook unsanitary factory conditions and potentially contaminated meat.
The country is one of the world’s top producers of chicken and pork, so it’s telling that both Hormel Foods vice-president Larry Vorpahl and Cidade do Sol chief executive Mauro Preti emphasised the words ‘reputation’, ‘transparency’ and ‘premium’. In the aftermath of the carne fraca investigation, dozens of countries imposed restrictions on the import of Brazilian meat, and at one point it looked as though there was an opportunity for other beef-producing countries to step up. But the market recovered after sanctions were lifted, and now there is scope for smaller producers like Cidade do Sol – the company behind well-known mortadella brand Ceratti – to leverage its untainted reputation and premium position as a platform for further growth.
There could also be opportunity outside Brazil, in a week when a new ‘meat index’ found massive discrepancies in the retail price of meat products around the world. It found that some of the world’s largest producers of various meats – especially the US – were charging consumers more than the global average for products that are essentially home-grown.
Brazil scored well below the global mean for beef and pork prices, but even after a quick recovery from carne fraca, consumer confidence will surely be woefully poor.
It’s an opportunity highlighted by Cargill – first through the acquisition of El Bucanero in Colombia and now in its reported interest in US chicken producer Pilgrim’s Pride.
BRF itself bounced back with a management shake-up and an increase in second-quarter earnings compared to the first quarter of the year, and could yet – even in the face of its supply chain failings – launch a discount brand aimed at ‘cost-conscious’ consumers.
What they said
Hormel Foods president and chief executive officer Jim Snee: “Strategic international growth is important to Hormel Foods and South America has been of interest to us for several years. The Ceratti brand has a strong family ownership and a rapidly-growing distribution of its portfolio of value-added products. This acquisition is a strategic fit for Hormel Foods, provides us an initial entry into the Brazilian market and will serve as a platform for future growth in South America.”
Larry Vorpahl, group vice-president of Hormel Foods and president of Hormel Foods International: “The acquisition of the Ceratti brand allows us to enter the fast-growing Brazilian market with a premium brand. The Ceratti brand is poised for continued growth, given its strong reputation in the market and outstanding products. This acquisition allows us to establish a full in-country presence with an excellent team of professionals in sales, marketing, operations, logistics and accounting. We are committed to continued international expansion and, with the addition of the Ceratti brand, our global footprint will continue to grow.”
Cidade do Sol chief executive officer Mauro Preti: “We are certainly proud to become part of the Hormel Foods family. Hormel Foods has a strong reputation with values that align closely with the values we have built throughout our 85-year history. They share an unwavering focus on product quality, state-of-the-art technology, and transparency. Hormel Foods’ acquisition of the Ceratti brand provides the resources of a global company and will allow us to facilitate our plans for expansion and growth.”
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