Our strategy is to strengthen our position in the South American food industry by consolidating our regional leadership, which we believe is the result of our business model based on a broad portfolio comprised of leading brands in different product categories and a solid distribution platform in the regions where we operate, combined with the efficient management of those operations. To this end, we intend to implement the following strategies:
Over the past six years, we significantly increased our share of the Brazilian rice market and held 9%1 market share . This market is highly fragmented and has been driven towards consolidation. In the metropolitan zones of São Paulo and Rio de Janeiro, largest consumer centers in Brazil, our Market participation in rice is of 38%1.
We intend to use our leadership position in the São Paulo market, the force of our leading brand Camil, our solid distribution structure and our experience with successful acquisitions and integrations, as well as our complete product portfolio, to grow in the regions where we already operate by expanding our leadership in the Brazilian rice and bean markets. We also work on gaining market share in regions where our market share is less relevant, such as the countryside of the states of São Paulo, Northeast, Minas Gerais and Goiás.
¹Bimonthly data – Nielsen Retail Index – August and September 2018
Supported by our industrial plants, synergies and economies of scale provided by the strength of our brands and the reach of our distribution platform, we intend to continue our solid organic growth by expanding within the product categories and regions where we operate and increasing our operational efficiency.
In Brazil, our position in the grain market with the brand “Camil”, the sugar market with the brand “União”, and the canned fish market with the brand “Coqueiro” put us in a privileged position to achieve the expected growth. In addition to the growth in market shares on regions where we already operate in, our brands allow us to invest in other segments which are related to the market. For example, through the sugar brand “União, we developed a portfolio with sweeteners, cake mix, and healthy products.
In the international segment, the Peruvian market, where 85% of rice sales are in bulk, according to Kantar Worldpanel, given our absolute leadership in the Peruvian packaged rice market, we may benefit from the migration of sales from bulk to packaged and higher value-added products.In Chile, our position and growth of revenue with products recognized in the market and presenting high added value allow us to occupy a privileged position for the growth of our current operations and expansion of new product lines and categories.
We intend to apply our proven capacity of identifying, acquiring and integrating operations and strategic assets in the expansion of our brand and product portfolio in Brazil and South America, by means of mergers and acquisitions, brownfield projects or brand acquisitions, taking into account consumer preference for leading brands in terms of Top of Mind and market share. We intend to expand our product lines by acquiring companies or assets that operate in non-perishable food segments and that present opportunities for synergy with the products in our current portfolio. We also intend to add economies of scale to our business model by adding product categories such as starches, canned food, coffee, biscuits and pastas, among others.
Our activities depend on our broad and structured distribution platform. We intend to continue investing in training our sales team, as well as strengthening our sales and distribution structure. We manage our activities in an efficient, integrated and low-cost manner. We intend to increase our efficiency by means of economies of scale in the supply and logistics chain and by expanding our coverage and presence in the regions where we operate. We intend to reinforce our partnerships with large and medium-sized retail companies to encourage combined sales and other marketing efforts and to adhere to a specialized logistics strategy, combining our marketing and communications with the efficient distribution of our products.
Our Company also has a focus on successfully identify acquire, and integrate new structures and operations to our business model quickly and with an increase of operational efficiency, upon approval of synergies, rationalization of costs and expenses, and economies of scale as brands, products, distribution centers, and plants are included in our business model. We believe that our wide, proven experience acquired in these process gives us a unique position which not only helps us to correctly identify possible acquisitions but also helps us to quickly acquire new brands to our business model, generating a gain of scales and efficiency.
Our competitive advantages are based on:
We have a portfolio of leading brands in different product categories, which is a result of our experience, solid marketing strategy, know-how and national coverage in the countries where we operate. In Brazil, our brand Camil is number one in the rice market, with a market share of 9%1, according to Nielsen/Scantrack in May 2017, and 60% of Top of Mind2, according to Top of Mind Camil Ipsos in 2016, considering the metropolitan region of São Paulo. Our brand União is also the leader in Brazil’s refined sugar market with a market share of 32%2, according to Nielsen/Scantrack in May 2017, and 83% of top of mind, according to Top of Mind União Kantar Vermeer in 2016. In the canned fish market, our brand Coqueiro is number two in terms of market share for sardines and tuna, with 43% and 23%, respectively, according to Nielsen/Retail Index in May 2017, and 47% and 37% of Top of Mind2, respectively.
In Uruguay, our rice brand Saman is number one in terms of market share, with 48%3, according to the Uruguay Rice Harvest Report for 2015/2016. In Chile, our brand Tucapel is number one in the rice market, with a market share of 33%, according to Nielsen/Scantrack in May 2017, and 50% of top of mind, according to Cadem in December 2016. In Peru, our brand Costeño is number one in the rice market, with a market share of 33%, according to Nielsen/Scantrack in May 2017, and 72% of top of mind, according to Mercadeo y Opinión in April 2016.
Our brands are traditional and recognized by consumers in their respective product categories and regions, which allows our products to carry price premiums that range from 3% to 12% above average retail prices for rice and sugar, respectively4.
¹Dados Nielsen Retail Index de Agosto e Setembro 2018; ²Top of Mind Camil Ipsos; Janeiro 2019; ³Market share total (Mercado local + exportações) – Consecha Comision Sectorial del Arroz 2016/17; 4Índice de preço Nielsen INA e Cash and Carry de abril 2017 à novembro 2018
Our distribution platform consists of 18 distribution centers geographically located close to the main consumer centers and import and export channels in Brazil, Uruguay, Chile and Peru. Additionally, six of our 27 industrial facilities also operate as distribution centers. Through our distribution platform and third- party distributors, our products are sold at over 20,000 customers by means of sales and distribution platforms, making our products present in approximately 285,000 points of sales, according to Nielsen. Additionally, we export our products to over 50 countries. Additionally, we export our products to over 50 countries. We service our sales channels directly, which allows us to develop strong and long-term relationships with our customers.
Our distribution platform grants us a broad footprint and coverage in the markets where we operate, allowing us to distribute our products efficiently and with agility and flexibility. Consequently, we gain access and proximity to a higher number of customers of different sizes and profiles. We believe we benefit from our distribution platform when we add new products to our portfolio or expand the geographic reach of our operations, which allows us to capture organic growth potential and strengthen our presence in the Brazilian and South American food industry.
Our business model is based on three pillars. The first is our diverse portfolio of leading brands in different product categories. The second is our strong and extensive distribution platform that provides us with broad geographic and consumer reach. The third is our operational focus on the higher value-added stages of the supply chain, mainly processing, packaging and marketing. This supply chain positioning, combined with our diverse portfolio of products and brands, reduces our exposure to price and volume volatility and enables us to transfer cost variations onto our product prices, even under adverse economic conditions. Our net income was R$105.0 million, R$110.8 million and R$201.5 million in the fiscal years ended February 28, 2015, February 29, 2016 and February 28, 2017, respectively, and our EBITDA margin was 9.8%, 10.0% and 11.1% in the fiscal years ended February 28, 2015, February 29, 2016 and February 28, 2017, respectively, while the Brazilian GDP contracted 7.2% in 2015 and 2016.
Over the past 20 years, in order to expand our portfolio of brands, product categories and geographic areas of operation, we have implemented a successful expansion strategy by means of acquisitions, both in the Brazilian and foreign markets. As part of this process, since 2007, we expanded our rice operations to Uruguay, Chile and Peru and, in Brazil, we added the canned fish category to our portfolio with the brands Coqueiro and Pescador, and sugar category with the brands União and Da Barra, in addition to other brands with regional relevance. Our processing quality, product blend and pricing have enabled acquired companies to grow significantly in market share since our acquisition. Our acquisitions have significantly contributed to the growth of our results of operations, mainly due to our ability to successfully identify, acquire and integrate new operations into our business model quickly and without sacrificing the quality and competitiveness of our other brands and products. Our process for integrating acquired companies has allowed us to increase operational efficiency at these companies through synergies and lower costs and expenses from economies of scale. We believe our acquisition experience has given us a unique position to not only correctly identify promising acquisitions, but to speedily integrate acquired businesses into our business model. The diversity of our business reduces our risk exposure, increases our structural and cost synergies, allows for greater distribution expertise and strengthens our bargaining power for cross-selling initiatives.
We have an experienced and professional management team and high corporate governance standards that allow us to stand out in the markets in which we operate. Since 2008, we have independent members on our board of directors and for over 20 years we have been audited by one of the internationally recognized big four audit companies. In the late 90s, we had our first contact with a private equity fund, and since 2011 we have had private equity funds as significant shareholders that have worked with our controlling shareholders in making strategic decisions for our Company. As a result of our experience with investor relations, we have developed an agile, transparent and efficient management and governance model that has allowed us to implement our strategies in a professional, accurate and secure manner.
Updated at 04/10/2019 at 08:02 pm