Brazilian meat magnate Marcos Molina has tried for more than a decade to replicate his successful beef playbook in the fast-growing chicken market. Thanks to a stroke of luck and a shrewd recovery plan, he appears to have finally made it.
Since Marfrig de Molina took control of rival BRF — giving the world’s No. 1 beef burger producer ownership of one of its top chicken suppliers — the poultry company has made a remarkable turnaround. The company returned to profit at the end of last year after seven quarters in the red with cuts in low-performing product lines and increased factory productivity, with the shares having the second best performance on the Ibovespa this year.
BRF, which is behind more than one in four chickens exported from Brazil, is even discussing paying dividends again in November, after eight years of drought. BRF shares have more than doubled in the last 12 months, outperforming global peers such as JBS and Tyson Foods. Thanks to BRF, the Molina family’s 66% stake in parent company Marfrig is now worth around R$8.1 billion, compared to around R$4.2 billion a year ago.
READ MORE: Marfrig uses Sadia and Perdigão brands to boost its meats
“I believe there is greater confidence in BRF’s management model with Molina,” said Rafael Oliveira, equity manager at Kinea Investimentos. “And he surrounded himself with good people, including Miguel Gularte”, the hand-picked CEO. “If it weren’t for the new management, we think BRF would be benefiting much less from the cycle.”
Still, it’s hard to deny that the deal coinciding with a notable improvement in the global chicken market also offers a valuable tailwind.
If the chicken wasn’t performing so well, “perhaps it would even be easier to visualize the work it has been doing within BRF,” said XP analyst Leonardo Alencar about Gularte. “We cannot separate one thing from the other.”
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Selling the jewelry to keep the crown
BRF marks a rare M&A success in chicken for Marfrig de Molina, which was forced to abandon a series of previous attempts to diversify into poultry without the investments having a chance to fully pay for themselves. Over the period of about a decade, Marfrig bought and resold UK poultry producer Moy Park, Brazilian food company Seara Foods and US-based Keystone Foods, known primarily for its chicken nuggets.
Industry observers say the previously aborted poultry moves came at a time when the industry seemed to pursue scale at any cost. Each purchase added to Marfrig’s mounting debt obligations, with the company named in the early 2010s as the most indebted meatpacker in the Americas.
Molina “made decisions in the past where he had to sell the crown jewel in order to stay alive. But I understand that he has matured well in this sense”, said fund manager Oliveira, who holds just under 100,000 BRF shares, according to the latest records.
READ MORE: Brazil suspends part of chicken exports after case of Newcastle disease
One more chance
After previous attempts, Molina still wanted to give chicken another chance. Brazil’s lower labor costs, pro-export government policies and abundant corn supply give Brazilian meatpackers a global structural advantage, according to market observers. He turned his attention to BRF, which had just overcome a food safety scandal in 2017. In May 2021, Marfrig disclosed the purchase of a minority stake in BRF. Much of the stock purchased since then was acquired at bargain prices.
The following year, Molina was named president. He soon appointed a senior Marfrig executive, Gularte, as BRF’s new CEO — the company’s seventh in about 10 years. Initially called “the meat guy” by analysts, Gularte introduced an efficiency program aimed at saving hundreds of millions of dollars a year, including better inventory management to avoid deep discounts as products approached their due dates. of validity. The new administration also expanded the Sadia brand’s share of the halal market, secured more export licenses and raised funds, including from the Saudi fund Salic, now the second shareholder.
“Molina brought cohesion between the board of directors and the BRF board, today there is a clarity of purpose,” said independent member of the BRF board Pedro de Camargo Neto. “If Molina hadn’t come in, it would have been a company heading towards bankruptcy.”
The company declined to grant interviews.
Positive cycle for chicken
The global rise of chicken has also played a big role in BRF’s recent victories. Poultry meat has been increasing its lead over beef, representing 39% of protein consumption in 2023, OECD data shows. And it’s on track to continue gaining popularity, thanks to its lower price, versatility, and healthy appeal compared to other meats. Low chicken feed costs and tight cattle supplies have further widened the gap between the two.
“We are in a very positive cycle for chicken, not only in Brazil, but also in the United States,” said Renata Cabral, an analyst at Citi. Between lower grain prices, growing demand and the speed at which a producer can raise and slaughter a chicken, “that’s basically the recipe for success.”
The question now is where BRF goes from here.
“In these last two years, the company really needed to reorganize and perform. Now we will pay more attention to growth”, said CFO Fabio Mariano. “Starting next year, we will accelerate growth both in Brazil and in exports. We will position ourselves in markets where we believe we have the greatest demand opportunities, analyzing consumer habits, such as in Brazil, the Middle East and Saudi Arabia itself.”
R$1 billion in savings
The third phase of the company’s efficiency plan, currently being prepared and scheduled for next year, should bring more than R$1 billion in savings by 2025, Gularte said in an interview. The company will release its third quarter balance sheet in November. Analysts are forecasting a fourth consecutive profit, although the 2025 figures are seen as slightly lower than this year’s.
The new CEO’s path is clear, especially after having done this first at Marfrig: operational efficiency and focus on exports, said Alencar, from XP. “If he does the same thing at BRF, there’s already a script there.”
