JBS Swift & Co.

1. JBS Swift & Co. Sarah Reed Kayla Brown Rachel Barrios Misti McDowell Kevin Dimm Blair Haynes Brendan Sprague Colin Landry Carl (Webb) Holley Brandon Jeanpierre Jane Ingram Justin R. Bardwell

2. Introduction/Background of JBS Swift & Co. • Swift & Co. • Swift & Co. was a Greeley, Colorado meat packing company started in 1855 by GustavusSwift. • Later in 1897, ConAgra acquired Swift & Co. • Then in 2002, 51% was acquired by Hicks Muse. The company was no longer running at maximum capacity while at the same time losing market share and focus. Swift was later put up for bid due to their position. JBS Swift & Co. • In 2007, JBS Swift & Co. was the 3rd largest producer of fresh beef and pork in the U.S., averaging $10 billion in annual sales • Wesley Batista, middle son of the Batista family, they went from being a $2 billion company with operations in Brazil and Argentina to a $22 billion company with operations in U.S., South America, Europe and Australia.

3. Introduction JBS • In the 1950s, the Batista family began purchasing cattle to resell to slaughterhouses under the company name, Friboi. • The company was located in Anapolis, Brazil where it went from opening a small operation of only slaughtering 5 cows a day to later in the mid 1990’s when the family business expanded by acquiring twelve processing companies. • In 2005, Friboi made their first international acquisition, buying Swift Armour in Argentina. They restructured the company and renamed it JBS. With each acquisition JBS increased their processing capacity. • In April of 2007, JBS became the first meat packaging company to offer shares of stock on the Brazilian exchange, rising close to $800 million on its initial offering. • JBS then surprised the world by taking its priorities a step further by bidding an offer for the American meat company, Swift and Co. By bidding and eventually acquiring Swift and Co. JBS soon placed itself in the American meat market and decided to change its name to JBS Swift & Co.

4. Goals and Constraints • Goals: • Make all their acquisitions of subsidiary companies profitable during a time of economic downturn. • Increasing production, reducing costs, improving communication between farmers, feedlot operators, packers and retailers, thus allowing them to operate at full capacity • Operate internationally and domestically to offer products specific to each cultural norm, thus allowing them to increase exports to foreign countries. • Simplifying management, while maintaining consistent employee direction and work ethics. • Constraints: • Ensuring the cultural change and integrating it throughout a much larger and disperse operation was one of JBS Swift & Co.’s “Greatest Challenge.” • The newly acquired firms by JBS Swift & Co. produced a large amount of debt for the corporation as well as limited the number of packer’s cattle ranchers could gain bids from. • The economic concerns facing JBS Swift & Co. came directly from ranchers facing higher fuel & feed costs in 2007. This ultimately led to declining her sizes and overcapacity for packers.

5. Central Problem for JBS Swift The central problem for JBS Swift & Co. is simply taking on more acquisitions and mergers than the company could handle in a short period of time, resulting in more debt than it could financially handle.

6. Porter’s 5 Forces • Entering the international market • They gained the capital to enter the U.S. market by being the only company in Brazil to offer stocks on the Brazilian exchange. • Buyer power would increase as JBS acquires market share • Beef is considered a commodity product with many substitutes • Supplier’s power has decreased due to JBS increasing market share • Combination of low barriers to entry, low supplier power, high buyer power, and variety of substitutes led to increased rivalry between U.S. beef packers.

7. Alternative 1 • Restructuring the organization/management at a different time and manner • At the time of the merger, the existing beef industry faced obstacles in competition, aside from other companies. Outside forces were negatively impacting the industry as a whole. • In 2008, there were many concerns of safety and sanitation problems affecting the sales to hesitant consumers unsure of product quality. • Another came in late 2007, when over 21 million pounds of US beef were recalled due to E. coli contamination, the 2nd largest in US history. • Also, at that time, fuel and feed prices were rising, putting production costs at a high level, which was a difficult setback for an emerging company. • By entering the market and expanding as rapidly as it did, these external challenges were magnified and thus caused investors to view the huge losses as unworthy of their time and money. This was guided by Moody’s report downgrading the company’s long term sustainability.

8. Alternatives 2 • Maintain a stable position in the existing market. Instead of going global right away, capture a bigger percentage of their current meat market, making sure they were completely established. • In its plan for global expansion, JBS decided to purchase an Australian beef company, 50% stake in an Italian meat company, as well as three more American beef processing plants. • This plan of action went against the company’s original core values of “we focus only on what we can control and forget the rest.” • They expanded globally at such a rapid pace, instead of focusing on the current US market competition. • Its rivalry was weakened, as its main focus became divided between the current US market and the global beef market.

9. Alternative 3 • Diversify their marketing mix by acquiring pieces of different U.S. sectors such as poultry. • By choosing to expand/diversify their marketing mix they would have become more of an attractive investment to outside investors. • Substitutes would be reduced and they would gain more market share within the different sectors. • By JBS Swift controlling so much of the market it would be hard for other firms to enter because they would have to be more willing to invest large amounts of capital in order to survive and compete against JBS Swift. • Supplier power would still be down because they would not have one single supplier getting all of their business.

10. Best Alternative Maintain a stable position in the existing market. Become completely established in U.S. market, and then go global.

11. Implementation • To prevent this massive catastrophe from occurring, the smartest plan of action would be for JBS to continue competing in its existing U.S. market until it has maintained a stable position and established a majority market share. • This would give the company time to not only alleviate most of, if not all, its current debt, but also coordinate a full proof plan of action for entering the global market when the time is right. • JBS, and Batista, proved that its company and its management was well ahead of its time and prepared for the future like no other company within the industry. • It can therefore be said that if JBS Swift & Co. would have taken the alternative to acquire market share over a longer period of time the company, as a whole, might be in a better position than it is presently.

12. ANY QUESTIONS?