Cargill acquires second Colombian poultry producer

Xavier Vargas, president of Cargill Protein Latin America, tells Agri Investor the acquisition reflects a company-wide focus on protein and is part of $100m investment earmarked for Colombia in 2017-20.

Building upon its first protein acquisition in the country last year, Cargill has purchased Colombian poultry and protein product producer Campollo for an undisclosed price.

Announced last week, the deal follows Cargill’s June 2017 acquisition of Pollos El Bucanero, a chicken and processed meat producer headquartered in the southwestern city of Cali.

Xavier Vargas, president of Cargill Protein Latin America, told Agri Investor that both acquisitions are part of the $100 million Cargill has planned to spend on purchases and capacity upgrades in Colombia between 2017 and 2020.

It took about 18 months to integrate Bucanero into Cargill’s regional operations, Vargas said, and while its business is largely concentrated near Cali, the Campollo acquisition adds presence in the central and northern regions of the country.

Colombia’s poultry sector is a fragmented one, explained Vargas, who estimated there are currently about 100 relevant companies.

“We saw a unique opportunity for Cargill to consolidate that industry and to get the critical mass, volumes and efficiencies to compete,” said Vargas. “Having key operations in these three different parts of the country will allow us to serve our customers better,” he added.

Vargas said Cargill plans to add a hatchery to an existing Campollo facility near the northern city of Cartagena that already includes a processing plant, chick farm and feed mill.

“We do have a hatchery in Cali and we have another in Bucaramanga, but it’s very important that you have a hatchery right next to your farms, because you don’t want the chicks to be travelling long distances, because the mortality is very high,” said Vargas.

Poultry consumption in Colombia averages about 70 pounds per year, according to Vargas, compared with 50 pounds per year in Central America and more than a 100 pounds per year average for Peru and the US. Biosecurity regulations and other barriers limit intra-regional trade in much of Latin America, according to Vargas, helping create a poultry market that is increasingly localized.

“You see less and less the whole chicken being sold and you see more value-added products that need to have the local taste of the consumer,” Vargas said.

Poultry consumption in Colombia, a country of 48.1 million people, has doubled over the past decade, according to a June USDA report that also highlighted the influence of consolidation in the country’s broader food industry and the introduction of large, Western-style supermarkets.

Chicken is well-positioned to take advantage of growing interest addressing obesity in Colombia and throughout the region, Vargas added, due to its status as a healthier, lower-cost alternative to pork and beef.

Room to grow

Cargill’s expansion in Latin America, according to Vargas, reflects the company’s efforts to supplement established positions in commodity trading and animal nutrition with a stronger focus on protein. In addition to the Latin American business he leads, the poultry segment of that effort, according to Vargas, includes units focused on China, Southeast Asia and Europe.

After a decision to expand its Central American processed meat business into the wider Latin American region about two years ago, Vargas said, Colombia was the first country that Cargill chose to focus on. Vargas said that Cargill has enjoyed a good relationship with Colombia’s government, adding that its agriculture minister is familiar with the poultry industry and is working to provide the clear rules needed to grow in the region.

“It is interesting to see a government is trying to formalize the poultry industry,” said Vargas. “We get more and more guidance from the authorities around food safety, around human safety and the environment and those are places where we as Cargill like to play.”

Though recent years have included periods when Brazilian and Mexican investors were active in the region, Vargas said that more recently the competition has come largely from local players.

“In Central America and other parts of South America besides Brazil, I haven’t seen any big companies entering or competing to buy,” Vargas said. “You still have room to grow in Colombia.”