Protein-based businesses eye profits

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Tyson Foods beat out Pilgrim’s Pride in a bidding war for Hillshire Brands this week. One reason the meat mogul made the move for Hillshire is the fact that consumers around the world are eating more protein products than ever before.

The U.S. has recently seen a shift in what Americans are putting on their plates. Instead of carbohydrates like bread and pasta, consumers are upping the ante on animal proteins including meat, yogurt and eggs.  The United Nations' Food and Agriculture Organization forecasts 99 pounds of meat consumed per person, on average, in 2030, up from 86 pounds in 2007.

The recent shift in protein consumption prompted the rise of new meat-kingpins such as JBS and WH Group. China’s WH Group raised eyebrows when it bought Smithfield for $4.7 billion, the second-largest meat company purchase if the Tyson acquisition goes through. Brazil’s JBS, owner of the Pilgrim’s Pride – the unsuccessful Hillshire bidder, also made several acquisitions itself over the past ten years.

On the farm, increases in meat production and planting crops for livestock feed show that the entire supply chain is feeling the effects of worldwide protein demand.

According to The Wall Street Journal, Chuck Wirtz a 50,000-head pig farmer in Whittemore, Iowa said, “The protein business is a very good business to be in right now.” He added, “The farming industry benefits from changing diets world-wide.”

A worldwide trend

Some economies that meat and milk were considered rare in a decade ago are seeing a rise in incomes. China, Mexico and Central America all saw an increase in incomes, thus bringing beef into the diet. According to the USDA, world-wide meat consumption with rise 1.9% annually for the next decade.

In response to the UN’s predictions, the USDA predicted China and Hong Kong imports would jump 55% by 2024.

The pro-protein trend started in the U.S. when the fitness craze hit and many companies are taking advantage of the change. Kraft Foods and Hormel both came up with new portable protein foods for a quick, sustainable snack. According to The Wall Street Journal, U.S. sales of packed foods with protein-related claims on their labels rose to $7.5 billion, a 50% increase in four years (Nielsen).

Although Chobani recently experienced marketing backlash, their protein packed Greek yogurt exploded onto the scene, winning a $750 million investment from the private-equity firm TPG.

International expansions and acquisitions

Along with acquiring Hillshire, Tyson also invested in China. Because the avian flu is a concern abroad however, sales have been subpar.

Another major buy-up occurred in February. Saputo of Montreal, a dairy tycoon north of the U.S. border, purchased Australia’s Warrnambool Cheese & Butter for $412 million USD. Saputo looks to expand sales in Asia, a country with a rapidly rising dairy demand.

Source: The Wall Street Journal



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