Smithfield Foods increases influence in European meat production

US processing giant Smithfield Foods has increased its share of Spanish pork processor Campofrío Alimentación to 22.4 per cent from 15.2 per cent, further strengthening its influence in Europe's ever-consolidating meat processing industry, writes Anthony Fletcher.​Campofrío is the largest meat processor in Spain and one of Europe's largest diversified meat processors, with annual sales of about €1 billion. Primarily a processor of pork and further processed pork products, Campofrío is the market leader in Spain and has operations in Portugal, Russia, Poland, Romania and France, and exports to over 40 countries.

Smithfield acquired the Campofrío shares at a discount to Thursday's closing price on the Madrid Stock Exchange. The $49 million acquisition of the shares has been therefore seen as a canny business move by industry experts.

The acquisition can also be seen as part of a concerted effort from Smithfield to exert greater influence in the European meat market, and suggests that the meat industry is undergoing further consolidation. Many in the industry point out that the ongoing consolidation of European supermarket chains means that they are inevitably seeking big meat suppliers.

Those on the processing side therefore, have little choice but to merge if they are to survive.

This strategy of safety in size certainly appears to have been adopted by Smithfield. Last June, the US-based processor purchased French company Jean Caby for €27.4 million, plus the assumption of certain liabilities.

The company has now been merged with Smithfield's French unit, SBS, creating a first tier processed meat company in France with sales of approximately €380 million. The combined company operates under the Jean Caby brand name.

"This acquisition provides us with a strong brand and an expanded product range to compliment our existing strengths in sliced meats, pre-cooked bacon and lardon,"​ said, Smithfield's president of international operations Robert A. Sharpe II at the time. "We expect to realise this potential in continued strong growth of sales both under the Jean Caby brand as well as under the brand of our customers."​

In 2003, sales under the Jean Caby brand grew 16 per cent and overall company sales grew 5 per cent to reach €130 million.

And in February, Smithfield Foods announced that it had completed acquisitions of two complementary meat companies in the UK, the Norwich Food Company and Ridpath Pek. The newly acquired companies have now been combined to form Smithfield Foods, which the group expects to generate 2004 revenues of US$65 million.

"The establishment of Smithfield Foods Ltd. continues our strategy of participating in attractive markets through dedicated, resident companies with strong, local management and the resources to be successful,"​ said Sharpe.

"Norwich and Ridpath Pek are nearly perfectly complementary to each other, with virtually no overlap in products or customers, which creates attractive opportunities for providing our customers with a full range of high quality meat products. Moreover, Smithfield Foods Ltd. will gain a dedicated supply relationship from Smithfield's Polish subsidiary, Animex, and its French subsidiary, SBS, assuring Smithfield Food Ltd.'s customers of consistent quality."​

With annualised sales of $9 billion, Smithfield Foods​ is the leading processor and marketer of fresh pork and processed meats in the United States, as well as the largest producer of hogs. But following these acquisitions, the group is well on the way to becoming truly globalised.