THE CASE STUDY IS BRASIL FOODS CASE.

QUESTION- As consumer lifestyles change, so too must the marketing strategies of the companies providing them with products and services. Identify three lifestyle trends that are currently impacting Canadian marketers and Brasil Foods in the future. For each trend that you identify, provide an example to demonstrate how the company can respond to the trend. Identify the three major areas of planning responsibility for marketers. Discuss the activities that are expected at each of these stages.

CASE STUDY BELOW

Executive Summary Brazil is the largest country in Latin America and the fifth in the world, and Brazil's economy is the most powerful in the region and has a significant impact on world markets due to highly developed agriculture, mining manufacturing and services economic sectors. Brazil is the world's largest producer of coffee and sugar cane, and one of the largest exporters of agricultural products1. This case study is about Brasil Foods, the largest Brazilian producer of meat and dairy. Today it has leading position in almost all its domestic sectors and strengthening its presence on the global market due to its potential. The globalization provides company many opportunities. First: it allows company to expand its market. Second: it is expected to raise the importance of country during the food crisis. Brazil with its rich resources is expected to be the largest supplier to the countries as China and India where the shortage of food will occur. In such circumstances, Brasil Foods, as the largest domestic producer, has all chances to become one of the largest producers in the world. Currently, company is considered as the largest world exporter of poultry and has much more growth. It is important for success of company to develop the effective and competitive strategic plan of entering to the new markets and to find the solution on how to decrease the risks. In this case study, author will analyze the main company's tactics in its operation and decision making and the main influences of globalization on it. For successful completion of the work there are 3 main objectives of the work: To analyze the economy of Brazil, Its internal and external influences. To explore the Brasil Foods' market position by implementing PEST and SWOT analysis. To identify the best alternative country for global expansion to start with. Introduction In May 2009 a Partnership Agreement was signed between Perdigo and Sadia, resulting in the creation of BRF S.A. This business combination came into full force and effect on September 22, 2009, and Sadia became our wholly owned subsidiary. BRF was granted the approval of the Administrative Economic Defense Council (Conselho Administrativo de Defesa Econmica or Cade) on July 13, 2011. The approval was conditional on the fulfillment of a Performance 2 Undertaking (TCD) for the sale of a group of assets made up of ten processed food plants and four animal feed plants, two abattoirs for pigs and two for poultry, 12 chicken rearing farms, two poultry incubators and eight distribution centers. The undertaking also includes the disposal of the Rezende, Wilson, Texas, Tekitos, Patitas, Escolha Saudvel, Light Elegant, Fiesta, Freski, Confiana, Doriana and Delicata brands. BRF also undertook to suspend the Perdigo and Batavo brands temporarily in certain product lines. The disposal of assets and brands agreed with Cade, which was based on an analysis of the results disclosed for 2010, resulted in revenues of R$1.7 billion, with volumes corresponding to 456 thousand tons of fresh, prepared and processed products, commemorative products and margarines. On the other hand, the suspension of categories of the Perdigo and Sadia brands is equivalent to revenues of R$1.2 billion. In December 2011 these assets were negotiated with Marfrig, and an asset exchange agreement was signed on March 20, 2012. In return, BRF will receive the entire shareholding in the Argentina-based company Quickfood S.A. (which will be restructured to meet the requirements of the agreement), amounting to 90.05% of the capital stock, plus an additional payment amounting to R$350 million. Company Profile BRF is the result of an association between Perdigo and Sadia and has given rise to one of the largest global players in the food sector, at the same time reinforcing Brazil's position as a key agribusiness player. The company operates in the segments of meats (poultry, hogs and beef cattle), processed meats, dairy products, margarines, pastas and frozen vegetables under household brand names such as Sadia, Perdigo, Batavo, Eleg, Qualy, among others. With reported net sales of R$ 28.5 billion in 2012, BRF is one of the world's largest exporters of poultry meats and features prominently among the largest global food companies in terms of market value. The company accounts for more than 9% of the total world trade in animal protein. BRF is one of the largest private sector employers in Brazil with a total payroll of approximately 110 thousand. The company operates 50 plants nationwide and has a comprehensive distribution network which includes 30 distribution centers responsible for delivering products to consumers in 98% of Brazil's territorial area. Exports accounted for 40.8% of net sales in 2012. In the overseas market, the company operates nine industrial units in Argentina and two in Europe (United Kingdom and the Netherlands), as well as having 19 commercial offices for attending more than 120 countries across the five continents. The association between Perdigo and Sadia, resulting in the incorporation of BRF, was announced on May 19, 2009 and concluded in 2012, with the full compliance under the Performance Commitment Instrument (TCD) signed with the Brazilian anti-trust authorities, the Administrative Council for Economic Defense (CADE). The company's long-term strategic plan contemplates balanced growth through the organic expansion of the operations together with 3 selective acquisitions in strategic regions such as the Middle East, Latin America and other emerging regions. In 2012, BRF began the construction of a plant in Abu Dhabi, in the United Arab Emirates, completion of which is scheduled for the second half of 2013. The Company has also concluded a joint venture with Dah Chong Hong Limited (DCH), which operates a retail distribution and food services business in the Chinese market. BRF has been able to report major progress during the year thanks to its well-developed governance model and on the basis of which the Perdigo/Sadia merger was completed in 2012. The company has successfully achieved new levels of efficiency, contributing to an increasingly more competitive and sustainable company. In the period, investments amounted to R$ 2.5 billion, a 25% increase over fiscal year 2011. Resources have been dedicated to the development of hundreds of growth, efficiency and support products: adjustments to plants for the production of lines moved from transferred units agreed under the TCD, new distribution centers, and redesign of the logistics network, among others. During the year, the company launched 454 products, underscoring its capacity to innovate and reinforcing its footprint in the various retail channels. Sustainable Development is one of BRF's values. The pillars of sustainability were established by the company to ensure the perpetuation of the company's businesses and their competitive edge in the global market. BRF invests continually in environmental management as part and parcel of its commitments to sustainability through the constant striving for Eco efficiency based on the strategies of minimizing waste, improving production and reducing risk. BRF has been listed on BM &F Bovespa's Novo Mercado since 2006 thus enhancing its position of excellence in management. The company incorporates high standards of Corporate Governance through equal rights, shareholder protection mechanisms and the rigid observance of best disclosure practices and transparency in the publication of results and business forecasting. One of BRF's values is to offer quality and innovation to the consumer. For the company, to innovate implies the continuous development of new products, successive improvements in quality, the implementation of new technologies and the rigorous control of production processes to ensure food safety. The outcome of this dynamic are gains in competitiveness, thus permitting the company to supply the best product at a fair price and to reach the largest number of those consumers conscious of their role as citizens and therefore, demanding, vigilant and selective. Brazil economic environment Brazil's economy expanded 7.5 in 2010, its fastest pace in 24 years. A rapidly growing middle class fueled domestic demand, harnessing its purchasing power - real personal disposable income increased an average of 5.8 from 2007 to 2010 -to buy cars, flat-screen televisions, washing machines, vacations, and meals at restaurants Investment was strong, reflected in a 22 rise in capital spending in 2010. 4 Brazil still had significant problems. The strong currency threatened to undermine manufacturing and export competitiveness and curtail tourism; $6.00 Big Macs and $35 martinis took a toll on vacation budgets. Poor infrastructure, corruption, regulatory red tape, and other factors raised the cost of doing business. Despite low unemployment and the migration of millions out of poverty, stark income inequality persisted, fueling social tension and crime. Yet, societal ills notwithstanding, there was a sense in Brazil that the country's long-anticipated ascendance to worldwide prominence was, in 2011, finally being realized. Agricultural Transformation Brazil's economic story was closely linked to its agriculture sector. A net food importer as late as the 1980s, Brazil had embraced agronomic science and innovation-through its national agricultural research institution, Embrapa (Empresa Brasileira de Pesquisa Agropecutiria) -to find ways to leverage its huge land base and water supply for food production. The results were profound. In roughly three decades, Brazil transformed its vast savannah (cerrado), naturally nutrient-poor and unfit for farming, into the source of 70% of its farm output. Exports were diversified beyond traditional tropical products (e.g., coffee, orange juice) to soybeans, sugar, and meat. Embrapa reengineered an African grass to create a new variety with yields far exceeding those of native cerrado grass, enabling the creation of vast pastureland to support large beef herds. Meanwhile, increased grain output was used to expand poultry production. Multiplying these measures' economic impact were Brazil's privatization and deregulation reforms, which laid the structural groundwork for an extended period of high investment and growth. From 1996 to 2006 alone, the total value of Brazil's crops increased 365%. By 2010, Brazil had become a world-leading food exporter (alongside Argentina, Australia, Canada, the European Union, and the U.S.) and the first major exporter in a tropical region. The country was first or second in poultry, sugar cane, ethanol, and soybean exports, and it housed the world's second-largest cattle herd. Brazil still had significant room to expand food production: it had the world's largest renewable water supply and was only using 50 million hectares (ha) of its 300-400 million ha of potentially arable land. There was no shortage of customers, either: by one estimate, meat output alone would have to double from 2010 to 2050 to satisfy worldwide demand. As global population growth raised the specter of severe food shortages in the coming decades, Brazil would play a central role - both as a food supplier to the world, and as an example of innovation's potential to improve food production. "The world is facing a slow-motion food crisis now," said The Economist in 2010. It should learn from Brazil." 5 BraSil Foods BRF The beginning It is all happened with the merger and partnership between Sadia and Perdigo, two of Brazil's largest food producers and best-known food brands, paving the way for Brasil Foods (BRF) - the name of the combined firm - to begin operating as one entity. With 110,000 employees and net sales of R$22.7 billion in 2010, BRF sold some 3,000 products, including poultry, pork, beef, processed meats, dairy, margarine, pastas, frozen dishes and vegetables, and other processed products. The company controlled 9 of the global protein trade and had a 60 to 80 market share in several processed food categories in Brazil. Mission To be a part of people's lives offering tasty foods, with high quality, innovation and at affordable prices anywhere in the world Vision To be one of the leading food companies in the world, admired for its brands, innovation and results, contributing to a better and sustainable world. Values Integrity as the basis of any relationship. Focus on Consumer is a fundamental ingredient for our success. Respect for people makes us even stronger. Developing people is fundamental to sustain our growth. High performance is what we strive for permanently. Quality in our products and Excellence in our processes. Constant Innovative Spirit. Sustainable Growth. Global Vision, Local Agility Commitment to diversity and the acceptance of differences Corporate governance BRF Brasil Foods shares are traded on the Sao Paulo Stock Exchange's (BM&F BovespaBRFS3) Novo Mercado, a listing segment of the exchange consisting of companies committed to the highest standards of transparency, full disclosure and equality of treatment to shareholders. These commitments cover the issue of common shares exclusively, prohibition on shareholders and executives obtaining unfair advantage due to access to information not yet in the public 6 domain, a trading policy for securities and disclosure of material facts, and the use of arbitration as a more agile and specific manner with which to resolve conflicts of interests. In addition, BRF has adopted a defense mechanism for avoiding shareholding concentration: if a shareholder or group of shareholders obtains control of more than 20% of the total stock, it is obliged to make a public offering of shares (POS). In this event, each acquired share will give its owner the right to an additional remuneration of 35% on the average value of the quotation for the 30 days prior to the holding of the offering. The offering price may also be based on the economic value recorded in the valuation report or again, 135% of the issue price of the shares of capital increases over the previous 24 months, whichever the highest. Since the Company's securities in the form of Level III ADRs-BRFS trade in the United States capital markets, the financial statements adopt the procedures and internal controls required by the Sarbanes-Oxley Act's (SOX) Internal Controls System over Financial Reporting (SCIRF). The Board of Directors and the Board of Executive Officers are responsible for the periodic evaluation of the Company. On a quarterly basis, the Board examines the results, which are published according to generally accepted accounting practices (IFRS). The Board of Executive Officers meets monthly to monitor general performance using economic, social and environmental indicators proposed by Brazilian and international institutions, such as the Social Report of the Brazilian Social and Economic Analyses Institute (Ibase) and the Global Reporting Initiative (GRI). The Company has a Governance, Sustainability and Strategy Committee providing advisory support to the Board of Directors; an Executive Sustainability Committee, consisting of the executive vice presidents and officers; and a Working Group for sustainability, comprising managers with the purpose of evaluating and monitoring performance in addition to risks and opportunities in sustainability. Ethical behavior Trust is the first principle and value adopted by BRF for operating ethically and transparently in its activities as they relate to all stakeholders. The Code of Ethics and Conduct underscores this behavior by establishing guidelines and orientating decisions and attitudes of the employees in their relations with clients, suppliers, co-workers and other stakeholders. The Code can be found by accessing the Company's internet page, through the internet and in the Employee Manual. Internal audits are conducted at the units - Plants, corporate offices, sales branches, milk catchment points, etc. - For evaluating the suitability of the internal controls and detecting complaints as well as procedures or practices contrary to the Code of Ethics and Conduct. The frequency and coverage of the audits depend on the track record of problems, relevance/materiality or degree of risk represented for each one of the units. 7 Some are audited every year although with others frequency may involve intervals of more than a year. Notwithstanding, all units should be audited on a remote basis every year. The Company maintains various channels available for registering complaints or infringements of conduct such as The Audit Department (11-2322-5060/5059 or 49- 8816-0780) and Dial Integrity (DIS -0800 702 7014). The internal auditing area is responsible for investigating complaints of any nature such as misappropriation, fraud, moral or sexual harassment. The result is presented and discussed with the Chief Executive Officer and with the vice presidents from the areas involved. Should any infringement of the Code of Ethics and Conduct be identified, the penalty may be the rescission of work or service contracts. The penalties are decided by a multidisciplinary team with representatives from Human Resources, Legal and Auditing areas together with the vice president of the area. In 2010, the work contracts of 47 employees were rescinded and the credentials of three suppliers cancelled. The Company recorded no legal case of corruption. Human rights policies and procedures are set forth in the Code of Ethics and delivered to all those employees joining the Company and taking part in the New Employees Induction Program. In 2010, this translated into 12 thousand hours of training for 40 thousand new hires (35% of the payroll). A further 164 employees (0.2% of the total) took part in 48 hours of training with the focus on basic labor legislation, disciplinary measures, moral and sexual harassment and managerial responsibility (civil, criminal and labor). The Company also has a Material Information disclosure and Share Trading Policy which is disseminated to all stakeholders. During the course of 2010, BRF was sentenced to pay fines amounting to R$ 1.6 million for infringing laws and regulations. Through a Conduct Adjustment Agreement (TAC), which lays down periods for compliance with certain legally enforceable rulings, the Company allocated R$ 160 thousand on canalization work between the decanting lake of the Rio Verde (GO) plant and Saneago's (the water and sanitation utility for the state of Goias) water catchment lake responsible for the supply of water to the municipality. In the same municipality, R$ 167 thousand was invested in the construction of a paved area and fencing around the entire perimeter of the source of Rio da Barrinha in addition to R$ 450 thousand in the restoration of the sources of the Ribeirao da Ababora. Production Production volumes at BRF Brasil Foods have recovered to levels prior to the 2008/2009 crisis with growth of 6 % against the preceding year. A total of 1.6 billion head of poultry and 10.5 million head of hogs/beef cattle were slaughtered, a growth of 3.9% and 2.8%, respectively. Other processed products reported growth of 57.4% on a pro-forma basis, most notably in margarines, pastas and pizzas as well as appetizers following their launch by the Company. Located across 60 industrial sites, BRF operated 42 units for slaughtering and processing pork, beef, and poultry; 14 units focused on dairy products; 1 unit for soybean products; 2 for margarine production; and 1 for production of pizzas, pastas, desserts, and other processed 8 products. The distribution of farms and slaughtering units throughout Brazil helped hedge against the risk of trade bans due to safety problems with products from a particular region. BRF also operated three industrial plants outside of Brazil: a dairy plant in Argentina and Plusfood (BRF's international division, acquired by Perdigao in 2007) plants in the Ll.K. and the Netherlands. In 2010, the company invested roughly R$l.l billion to expand and modernize its productive capacity. The unit's slaughtering capacity has been increased from 320 to 470 thousand head of chicken per day, while hog slaughtering capacity has been raised from 2 to 4.8 thousand head/day. Logistics BRF has one of the most complex and capillaries logistics structures in the country. The Company operates a fleet of 9 thousand trucks - the largest in Brazil - and employs 15 thousand to meet supply chain requirements - involving more than three thousand items. The system is responsible for the delivery of animal feed to the producers' poultry farms for feeding 6.5 million head of poultry/day and also 40 thousand hogs/day as well as transporting animals to the slaughtering units, supplying raw materials to the plants and distributing the portfolio of products to BRF's 150 thousand clients. The Company is the only one in the country with a nationwide distribution network for chilled and frozen products. BRF Strategic Goal BRF's strategic plan, titled "BRF 2025," called for doubling the firm's revenues between 2011 and 2025, to roughly R$70 billion. The domestic vision was two-pronged. In retail, BRF would focus on strengthening brand loyalty and preserving its existing market share (growth of which was restricted by the CADE ruling). Given the retail restrictions, the bigger domestic opportunity was foodservice, a fast-growing market as more Brazilians dined out. BRF's nationwide distribution network and product profile, centered on staples such as milk, meats, and margarine, positioned it well to serve this channel. However, the company had to ensure that food service sales did not "leak into the retail channel" (i.e., foodservice customers selling BRF products into the retail market) and cause a violation of the CADE ruling. Internationally, "BRF 2025" called for BRF to build the foundation of a multinational presence, with the ultimate goal of having production, distribution, and branding operations in Africa, Asia, the Middle East, and Latin America. In these emerging markets, BRF sought to move down the value chain and closer to the consumer, thereby building brand loyalty and capturing more value from each product sold. A critical step was to acquire companies with distribution capabilities in order to build direct relationships with retailers. Ideally, BRF's acquisition targets 9 would also have strong consumer brands, allowing it to learn about the local market while giving it a direct channel to cultivate consumer relationships. "BRF 2025" entailed three phases. In phase one (2011-2012), BRF would complete its post-merger integration, consolidate its domestic foothold, and advance its global presence through acquisitions and strategic partnerships. Phase two (2013-2024) would continue the internationalization effort with a focus on building a global company culture, both through development of existing personnel and recruitment of new talent; acquisitions would help bring in new expertise. In phase three (2025 and beyond), BRF would become a world-class multinational such as Nestle or Unilever. BRF's management envisioned setting up manufacturing plants around the globe and building a portfolio of brands which consumers viewed not as Brazilian, but as native to their local market. Domestic Market With incomes rising and millions of Brazilians entering the middle class - a trend projected to continue - spending on food in Brazil was forecast to grow from R$316 billion in 2009 to R$967 billion in 2021. In addition to processed and ready-to-eat foods, the food service category would benefit from these demographic trends. Already, spending on food away from home had risen from 24.1% of personal expenditures in 2002-2003 to 31.1% in 2008-2009. Sales to the domestic market totaled R$ 13.5 billion, a growth of 11.3% against the preceding year. The Company sold 3.8 million tons of products, 4.9% higher than 2009 on a pro-forma basis. Thanks to these results, margins were restored to pre-crisis levels. International Market With BRF's domestic growth restricted, Brasil Foods management team looked for international opportunities to sell protein- based and processed products, especially in developing countries with large and growing middle classes. Instead of simply exporting commodities and low-valueadded goods to foreign customers, BRF wanted to move down the value chain by establishing local manufacturing, distribution, and marketing operations in international markets. The company would use Brazil as a major source of raw materials, but it also wanted to establish regional supply hubs. In 2010, export revenue increased 4.3% to R$ 9.2 billion on volumes of 2.3 million tons (5.9% greater) - pro-forma basis and a growth of 40.2% in sales revenue on a Corporate Law basis. International Market With BRF's domestic growth restricted, Brasil Foods management team looked for international opportunities to sell protein- based and processed products, especially in developing countries with large and growing middle classes. Instead of simply exporting commodities and low-valueadded goods to foreign customers, BRF wanted to move down the value chain by establishing local manufacturing, distribution, and marketing operations in international markets. The company would use Brazil as a major source of raw materials, but it also wanted to establish regional supply hubs. In 2010, export revenue increased 4.3% to R$ 9.2 billion on volumes of 10 2.3 million tons (5.9% greater) - pro-forma basis and a growth of 40.2% in sales revenue on a Corporate Law basis. BRF Major Competitors Tyson Foods, Inc. In 2010, U.S.-based Tyson Foods, which ranked 93rd on the Fortune 500, recorded $28.4 billion in sales and $780 million in net income. The company, employing 115,000 workers, was a global leader in meat products and value-added meat-based processed foods. Beef accounted for about 40% of Tyson sales, chicken for 34%, pork for 16%, and prepared foods for 10%. In a given week, Tyson processed 41 million chickens, 393,000 heads of pork, and 139,000 heads of cattle. Tyson exported to more than 100 countries, with total export sales of $3.2 billion in 2010. The company's major export markets were Canada, Central America, China, the EU, Japan, Mexico, the Middle East, Russia, South Korea, and Taiwan. In 2010, Tyson had a total debt-to-equity ratio of 49.1%. JBS S.A. Brazil-based JBS had sales of R$55.1 billion and net income of R$196 million in 2010. JBS was a world-leading beef producer and exporter, and employed over 128,000 people globally. The company had a daily slaughtering capacity of over 86,000 cattle, 7.9 million birds, 50,000 hogs, and 24,000 sheep. Unlike Tyson, which had mainly grown organically, JBS became a major global processor of beef, pork, poultry, and lamb through acquisitions. Beef accounted for 64% of JBS revenues, chicken for 22%, and pork for 9% (the rest came from other products). A 2009 deal to buy Pilgrim's Pride, a U'.S, poultry producer, made JBS the second-largest poultry processor in the world. In 2011, JBS had 140 production facilities across the globe, including major operations in China, Mexico, Russia, Paraguay, and Uruguay. JBS exported to Africa, Mexico, and the Middle East, but the majority of revenues came from the U.S. and Australia (73%) and South America (24%). In 2010, JBS had a total debt-to-equity ratio of 106%. Marfrig Alimentos S.A. Brazil-based Marfrig Alimentos had net sales of R$15.9 billion and net income of R$146.1 million in 2010. With 90,000 employees and 22 regional distribution centers, the company serviced markets in 140 countries. Marfrig's daily processing capacity could support 31,700 cattle, 10,400 hogs, 12,900 sheep, 50,000 turkeys and 3.7 million chickens. Beef accounted for roughly 31% of Marfrig's 2010 net revenues, poultry and pork for 30%, processed and prepared food for 28%, and other foods for about 12%. In its drive to expand internationally, Marfrig pursued an acquisitive strategy. From 2006 to 2010, it purchased meat processing facilities in Argentina, Brazil, the U.K., Uruguay, and the Ll.S, The company had a large commercial presence in Australia, China, France, Malaysia, the Middle East, New Zealand, Thailand, South Korea, the Ll.S; and the U.K. In 2010, Marfrig earned 62% of total revenue in the domestic 11 market and 38% from exports and international holdings. Europe was its largest export market. In 2010, Marfrig had a total debt-to-equity ratio of 325.9 b. Problem Statement The BRF Company have restrictions on domestic market share as per the Administrative Council for Economic Defense (CADE), Brazil's antitrust agency, suspending sales of certain Perdigobrand products for three to five years, plus reducing the production capacity by divesting BRF from several factories, slaughterhouses, poultry farms, and distribution centers, all these assets accounting for about 13% of BRF revenues. BRF management also wants to decide where to expand first. Latin America, the Middle East, Africa, and Asia were all attractive. BRF Strategic decisions BRF would focus on maintaining its retail share (within the bounds of the antitrust ruling) and gaining share in the fast-growing food service sector. Internationally, the company would seek to transform from an exporter into a multinational modeled after Nestle, to be achieved by building units or acquiring companies with strong brands in emerging markets. In order to doubling revenues by 2015, the BRF team next needed to focus on an international geography, weigh their options for expansion-e.g. and decide where to expand firs, greenfield development or acquisitions; if the latter, what type? -and build a team capable of executing the vision. At the same time, they needed to tend to the domestic market: stay attuned to consumer trends, strengthen brand loyalty, capitalize on food service growth, and expand within the limits of CADE's rules. In December 2011 the divest assets were negotiated with Marfrig, and an asset exchange agreement was signed on March 20, 2012. In return, BRF will receive the entire shareholding in the Argentina-based company Quickfood S.A. (which will be restructured to meet the requirements of the agreement), amounting to 90.05% of the capital stock, plus an additional payment amounting to R$350 million. Global expansion Alternatives China In 2010, Chinese consumers purchased 2.1 million tons of frozen processed foods with a sales value of about RMB 37 billion. Frozen processed meat products (including seafood) accounted for roughly RMB 19 billion in sales, or 52% of total frozen processed food sales. Miscellaneous products (e.g., frozen dumplings and filled buns) comprised another 30% of category sales. Sales of frozen poultry amounted to RMB 9.5 billion, seafood to RMB 6.3 billion, and red meat (primarily mutton), RMB 3.4 billion (409,200 tons, 251,800 tons, and 94,400 tons by weight, respectively). The most popular frozen processed poultry products were chicken wings (30% of category sales) and chicken nuggets (22.5%). In chilled processed foods, which had 2010 sales 12 of about RMB 74 billion (close to 2 million tons), meat products (e.g., sausages and ham) dominated, with sales of RMB 73.3 billion (1.9 million tons). Chilled ready meals generated RMB 988 million in sales (43,200 tons). China's frozen processed foods market share was fragmented among a large number of firms. According to Euromonitor, only four firms held individual market shares above 3%. China's top 15 firms collectively held about 40% of the frozen processed food market. The only foreign firm in this group of 15 was General Mills, which held a 2.7% market share in frozen processed foods. Domestic companies likewise dominated the chilled processed food market. China's Shineway Group held 15.2% of this market; the next 12 companies held less than 12% combined. Like its manufacturers, China's cold chain infrastructure was fragmented. In 2008, only 15% of perishable products were transported by refrigerated vehicles, compared to 90% in developed economies. China's cold storage facilities covered about 25% of perishable output, compared to 80% to 90% in developed countries. Approximately 90% of meat products and 80% of aquatic products in China were managed without cold chain logistics. One survey found 96% of Chinese consumers were "very concerned" about food safety. They therefore chose supermarkets and hypermarkets rather than traditional wet markets as the source of 70% of their chilled foods and 92% of frozen food purchases. It was estimated that China would require $100 billion in cold chain infrastructure over the decade ending 2019. Absent sufficient infrastructure, value growth in frozen processed food sales would be constrained to a projected 9.6% compound annual growth rate (CAGR) from 2010 to 2015. Chilled processed foods sales had a forecast CAGR of 12.4% from 2011 to 2016. India In 2010, Indians purchased 14,740 tons of frozen processed foods with a sales value of 2.5 billion rupees (Rs).b Poultry, red meat, and seafood accounted for about Rs 1 billion, or 41% of total frozen processed foods sales. Vegetables accounted for Rs 1.1 billion, nearly 44% of total frozen processed foods sales. Within the meat category, sales of poultry amounted to Rs 429 million, seafood to Rs 384 million, and red meat to Rs 193 million (1,763 tons, 1,031 tons, and 690 tons, respectively). While frozen processed food consumption remained low in India, chilled processed foods had even less traction, due to lower availability and higher prices than frozen processed and fresh foods. With the exception of the 4.2% share held by Canada-based frozen potato producer McCain Foods, India's leading frozen processed food companies were all locally domiciled. The three leading companies included Mother Dairy Fruit and Vegetable (20.8% share of retail sales), Al Kabeer Exports (16.5%), and Venky's India (10.9%). Another six firms held a collective 30% market share. Sales (by value) of frozen processed foods were expected to accelerate from 2010 to 2015 at 11.6 CAGR. Poultry sales were expected to grow at a CAGR of 11.4%, red meat at 9.6%, and seafood at 8.8% over the period. However, India's insufficient cold chain infrastructure was likely to be an obstacle to achieving this level of growth. As much as 30% of 13 India's fresh produce was lost due to lack of cold chain infrastructure. Consumers' need for microwaves and ovens to prepare frozen and chilled foods was another factor limiting growth. South Africa In South Africa in 2010, retail consumers purchased 102,000 tons of frozen processed food with a sales value of 4.2 billion Rand (R)." Red meat, fish, and poultry comprised 21% of the total weight sold, and Rl.l billion, or 27% of the total value sold. Frozen processed fish and seafood had sales of R674 million, poultry R281 million, and red meat R181 million (12,000 tons, 5,900 tons, and 4,200 tons respectively). Other leading categories of frozen processed foods included vegetables (sales of R820 million) and ready meals (R965 million). Protein products dominated the chilled processed food category, which had 2010 sales of R8.6 billion (roughly 17% seafood and 63% other meat, mainly pork products) and 96,000 tons by weight (12% seafood and 64% other meat). Chilled processed foods were generally perceived as fresher and therefore commanded a higher unit price than frozen foods. Leading frozen processed food companies selling in South Africa included McCain Foods (primarily potatoes; Canada-based), with a 21.8% market share, Irvin & Johnson (primarily meat, South Africa-based) with a 14.7% share, and Woolworths Holdings (South Africa-based retailer, at 10.1%). Eight additional companies collectively held another 30% of the market. In chilled processed foods, South Africa's Tiger Brands led with 31% market share, followed by Woolworths Holdings (19%) and Eskort Bacon Cooperative Ltd. (17%). South Africa's cold chain infrastructure was among Africa's best, and included processing and storage facilities for products qualified for export to the EU, though the domestic standard of processing, storage, and distribution often did not match EU or Ll.S, levels. For example, higher than normal processing temperatures stressed chilling and freezing facilities and lowered overall quality, safety, and efficiency. CAGR in South Africa's frozen processed food sales (by value) over the 2005-2010 period was 9.6%. Sales growth was expected to slow over the 2010-2015 period, however, to a CAGR of 1%, with poultry showing the strongest growth (1.9%) among protein categories. Growth patterns for chilled processed foods were similar, at 9.1% CAGR from 2006 to 2011 and a forecast drop to 2.6% CAGR from 2011 to 2016. Iran Iranian consumers purchased over 63,270 tons of frozen processed foods in 2010, with sales approaching 6.5 trillion Iranian Rials (IRR).d Iranian demand for frozen or chilled processed food products was largely driven by frozen meats and seafood; other categories such as frozen or chilled fruits and vegetables had minimal demand. Of total 2010 frozen processed food sales, nearly IRR5.2 trillion was from red meat, followed by ready meals at IRR522 billion. Fish and seafood was over IRR 434 billion, poultry IRR 238 billion, and vegetables IRR 65 billion. Popular frozen processed food items included breaded fish and chicken products, as well as both 14 red meat and poultry burgers. Sales for chilled processed foods exceeded those of frozen processed foods in 2010, at IRR6.7 trillion, despite selling just over half as much volume as frozen foods, at 37,800 tons. Here, too, processed meats dominated, accounting for all 37,800 tons of chilled processed food sales identified by Euromonitor. Iranian consumers hesitated to accept frozen and chilled products partially because fresh foods were easy to buy (with most Iranian families shopping daily rather than weekly), inexpensive, and better suited to local tastes, as most meals were cooked daily from fresh ingredients. In addition, frozen and chilled products were not frequently carried by neighborhood stores or markets, and advertising for such products was poor. A lack of adequate transportation and storage also hampered widespread access to frozen or chilled foods. This was most pronounced in Iran's fruit and vegetable industry, where, according to one report, such items are generally transported; using vans, trucks, and on occasion, refrigerated vehicles." Iran's frozen processed food market was largely dominated by domestic companies and was highly concentrated, with five firms accounting for well over 80% of total 2009 sales. International companies were slowly creeping in - Carrefour entered Iran in 2009 - but the national government made conditions favorable for domestic producers in an effort tailored to, according to Euromonitor, "reducing dependence on foreign commerce as part of its self-sufficiency programme." In spite of these challenges, sales of frozen and chilled foods were on the rise. While just over 28,000 tons of frozen processed red meat was sold in Iran in 2005, that number grew to 44,000 tons by 2010, and was forecast to exceed 70,000 tons by 2015. Total sales (by value) of frozen processed foods were expected to grow at a CAGR of 8% from 2010 to 2015, while chilled processed foods had a forecast sales CAGR of 9% over the same period. Leading this climb, according to Euromonitor, was a move towards Western lifestyles, including eating habits, especially amongst the affluent younger generation. SWOT Analysis Strength - BRF had strong operational know-how. - Diverse portfolio of products -along with a deep understanding of consumers and brands. - BRF was the world's largest poultry exporter and second-largest meat exporter. - BRF is the only Brazilian company with a nationwide distribution network for chilled and frozen products. - BRF employed a sophisticated information technology (IT) system to constantly study the market and adapt accordingly. - In domestic retail, all BRF products were branded. - Good financial position. 15 Weakness - Expertise specific to the domestic market. - Lack of firm internationalization expertise Opportunities - The Brazil economy is experiencing a rapid growth. - Developing countries with large and growing middle classes. - The use of MERCOSUR economic integration with total population of 275.5 m as of 2011. Threats - The restrictions on the domestic market by the Administrative Council for Economic Defense (CADE) rule. - Strengthens of domestic competitor due to the assets exchange. - Lack of sufficient cold chain infrastructure in some of the global alternatives countries. - Selected competitors, Tyson Foods, Inc., JBS S.A. and Marfrig Alimentos S.A PEST analysis PEST analysis is a scan of the external macro-environment in which an organization exists. It is a useful tool for understanding the political, economic, socio-cultural and technological environment that an organization operates in. It can be used for evaluating market growth or decline, and as such the position, potential and direction for a business. Political factors BRF concern about tariffs, legal systems, government attitude toward foreign firms, terrorist activity and employment laws. Economic factors BRF adopts a long-term view permanently focused on the efficiency of the entire production chain. This strategy contributes to offsetting the impacts of factors affecting the trading environment at any given time (currency exchange rates for example) thus helping to sustain the targets for market share without sacrificing margins. 16 Social factors BRF's community initiatives are aligned to the principle of playing an important role as an agent for social development in the locations where it operates its businesses. In so doing, it assumes responsibility beliefs, values, attitudes, opinions, lifestyle, human rights and skill level of workforce. Technological factors During the year 2010, an integrated systems platform was set up to support the merger between Perdigao and Sadia for capturing identified synergies, these contingent on a unified system once the merger is finalized. The project, which will take approximately 18 months to conclude, involves about 200 people in 4 stages: 1)Upgrading of the SAP system to increase processing capacity. 2) Construction of the initial platform. 3) Development of the Human Resources SAP system. 4) The roll-out of SAP APO - Advance Planning Optimization. Conclusion BRF Company has strong competencies like the logistic, production and adaption to the market environment changes along with raised food safety standards and customer focus, all of that allowing the company to perform on global stage with confidence of winning against new competitors in different markets. After analyzing the alternatives countries for global expansion we find that, China is one of the favorable markets as it has a big market selling value for processed foods over USD 17 billion $ with good potential growth for the next five years also there is no dominant competitors in the market, however currently it is lacking the sufficient cold chain which raises questions around food safety among a lot of consumers. Next after China is South Africa with net sales value over USD 1.2 billion $ with good cold chain, however there is strong competition while the overall domestic market processed foods safety and quality is considered low. In contrast Iran is using stringent Government Regulations toward foreign firms to dominate the market by domestic companies on the other hand India is showing very small market size, also weak economy plus poor cold chain.