Brazil plays a key role in the global food industry and its development as a reliable source of ingredients is important to many of the sector’s key players.
It is, for example, one of the largest suppliers of grains and seeds, including soya and corn, and is the source of a high volume of beef, pork and chicken. Brazilian companies in these markets have recognised their importance and have been making efforts to expand their presence in the global supply chain.
The country’s economic growth, which is at a high level by global standards, gives it the chance to make the best of its wealth of natural resources, not least its agricultural potential. Producers and distributors of ingredients are increasingly diversifying to establish a platform across several markets and make the most of the country’s potential.
"We have seen moves from the big companies to access overseas markets with valued goods," says Henrique Bavoso, business unit director for Univar Brasil. "Processed meat is a good example, as we have a local company that has become one of the largest meat processors in the world. Such moves will continue in different markets based on the strategy of various companies that are seeking to diversify; for example, by moving from meat into the dairy business."
Univar Brasil is a diversified company with interests in sectors including food, cosmetics, polyurethane and industrial paints. Its food business distributes additives and ingredients from well-known manufacturers to clients in markets such as bakery, meat and dairy products, sauces, soups, condiments, beverages, pet food and sweets.
The parent company, Univar, made the move into the Brazilian market two years ago. Univar is one of the leading chemical distribution companies in the world and became a force in Brazil in 2011 through the acquisition of Arinos. Since then, the key priority has been the transition of the local subsidiary to a new business model as part of a global organisation. Univar Brazil is increasingly involved and aligned with the global network, and is building stronger relationships on the supplier side and with global customers.
Bavoso recognises the opportunities for diversification for companies like Univar, but he also acknowledges that there are many challenges ahead. Although Brazil is among the BRIC countries that are often held up as
the economies with the best prospects for GDP growth in the years ahead, such growth is dependent on good management of the economy and, increasingly, how the country stewards its natural resources.
The future of the Brazilian economy is by no means certain, but there is a strong will in the corporate and political spheres to secure healthy economic growth and put in place a clear plan for the long term.
"The economic situation and infrastructure issues are key factors in determining Brazil’s production of ingredients, besides any climate conditions that impact all natural resources," confirms Bavoso.
"The big challenge is to solve the infrastructure issues to permit better planning at every stage of the supply chain, from the field to the end-user. Based on the development of that infrastructure the country can be much more competitive in the international market," he adds.
A bright future
Developing this infrastructure will not be an easy task, nor will it happen overnight. Much needs to be done by the business community and the state to lay the necessary foundations and open the door to sustained investment.
"There must be massive investment from the federal government and better conditions for the private sector to invest," explains Bavoso. "in the past 20 years, Brazil has experienced a much better economic situation than ever before and, in the last five years, it has shown a high rate of market growth. GDP growth in 2010 was around 7%. Changes are needed to continue this growth and establish a better platform for the industry."
"The drive to innovate and create valued partnerships will be vital in helping Brazil’s food sector companies maximise the country’s potential as a supplier of ingredients."
Assuming that the right political conditions prevail, and the private sector is able to play a part in infrastructure development, the outlook for the future is very positive. Companies such as Univar will be keen to create a business model that will enable them to not only contribute to the development of the right infrastructure, but also to use it in a way that meets the needs of both the domestic and international markets.
"Univar Brazil is committed to the Brazilian market, offering key ingredients and full solutions to our customers from key suppliers in the industry," says Bavoso. "We have a one-stop shop concept. Univar worldwide acts as a big player for the food industry with key products and a network of reliable suppliers. With the right infrastructure in place, we can continue to pursue a strategy of innovation. For instance, as a distributor, Univar Brazil is focusing on salt reduction for the main products we supply to the local market."
This process of innovation is part of a much broader strategy to drive the growth of Univar Brazil. First, the company wants to expand into new areas, and is building three new business units to manage activities in the agriculture, mining, and oil and gas sectors. Its portfolio of products in the food sector is also expanding to cover the key markets of dairy, bakery, beverages and meat.
New products and suppliers
The company recently launched a number of new products, including speciality minerals products such as precipitated calcium carbonate, amino acids for the sports nutrition market, sweeteners and vanilla products. It has also expanded its range of suppliers, bringing in partners such as LycoRed, which will supply beta carotene and lycopene.
"We currently distribute flavours from International Flavours and Fragrances (IFF) as part of an exclusive relationship, and other products such as Silica from Grace, carboxylic acids from Oxea, TiO2 from Sachtleben, CMC from Dow and PG USP from Lyondell," explains Bavoso. "Expanding the current portfolio is a constant exercise and more products will come in 2014. We are investing in blending facilities and white rooms that could provide better service to customers."
There is no doubt that Bavoso and Univar have ambitious plans for the future, and that there is a great deal of optimism about Brazil’s growing importance in the global supply chain. The drive to innovate and create valued partnerships will be vital in helping Brazil’s food sector companies maximise the country’s potential as a supplier of ingredients, but much still depends on external factors, the most important of which are economic and political.
Brazil’s future is promising, but all stakeholders in the supply chain must work hard to preserve the food industry’s momentum.
