Is Dunbia (Dungannon Meats) next for 'The Man'?

A member of the CALNI protest team from the Sial food expo in Paris drew my attention to the similarities between the new Moy Park logo and the logo for Brazilian beef.

It raises the question whether Moy Park is the centerpiece of a strategy to channel South American beef and poultry into the European market?

... and what would it mean for our local producers if they are?

One learns that its always good to explore all the options in business.  Very often rivals signal one strategy to confuse the competition, while aggressively working to a different plan behind the scenes.  Could this be what Marfrig (a.k.a 'The Man') and CEO Marcos Antonio are doing in Northern Ireland?

Could all the fuss over the Moy Park Incinerator really be a distraction drawing attention away from the real agenda?

Lets compare the rhetoric with the facts.

Over the last few years the rhetoric has been clear:  seven thousand jobs are in immediate peril if the Moy Park Incinerator is not given planning permission immediately.  The industry has been in this state of immediate peril since January 2008 and probably before.  Obviously it's almost three years on and the sky hasn't fallen in yet.  But anyone listening to the rhetoric would be forgiven for thinking that Moy Park could collapse at any moment; Marfrig share holders should be running for the exits!

The Marfrig Group's annual reports and analyst coverage of the company paint a different picture.  Moy Park is the centerpiece of the group's European business and poultry segment.  Returns in beef have been a bit depressed recently, and in 2010 the analysts see poultry as the leading part of the business.  Curiously while the rhetoric in Northern Ireland has been all doom and gloom, step up a level and poultry is presented as a great business!... which is it to be?

Similarly, from an investment standpoint, Marfrig have spent circa $1bn in the last few years to take control of their Northern Ireland based European centerpiece and transfer the debt offshore to HQ.  They made further strides this year, acquiring O'Kane Poultry and in doing so creating an effective monopoly over the NI poultry growers.  Not really the actions of a company who thinks the core Moy Park business could hurtle over the precipice at any moment.  It does, however, fit the profile of a business trying to aggressively penetrate the European market.

This apparent contradiction between the rhetoric and the facts should put both the politicians and InvestNI in a very difficult predicament; but they seem oblivious.

For example, InvestNI can justify robust action to protect jobs but the business case would wear very thin indeed if it was actually just subsidizing Marfrig's efforts to create a monopoly.  The problem with a monopoly over the growers is that it will inevitably lead to a significant reduction in the price per bird paid to the farmer; thereafter erosion of margins, inability to cover finance payments, destruction of businesses, bankruptcy, and the loss of family farms long held dear. 

Then there is the issue of import vs export.  InvestNI rightly gives priority to supporting export businesses.   What happens if the real strategy is to build a beach head to deliver South American beef and poultry into the UK and European Union? 

If it is inevitable that the monopoly over the growers will lead to a collapse in prices per bird; we can also infer that a conduit to channel South American beef into Europe via Northern Ireland could be the death knell for our beef farmers. 

Unfortunately, I'm not privy to Marfrig board room discussions, so I can only guess at what 'The Man' is actually thinking.  Perhaps he got sold a 'pup': the Moy Park business is in peril, and he's trying to make the most of a bad deal.  

Alternatively, Moy Park is the centerpiece of a his strategy to dominate Europe with imported South American beef and poultry. 

For me, the ultimate proof point would be if Marfrig were to acquire one of our leading beef processors to extend the European channel.  Dunbia (formerly Dungannon meats) would seem like the natural fit.  It is a high quality outfit located close to the center of gravity of the existing Moy Park business.  Could they be the next acquisition?

Watch this space!!

Best,

Danny

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t: dannymoore_ni

Notes;

1)  The National Farmers' Union (NFU) has previously expressed fears that Marfrig's acquisition of Moy Park would 'turn out to be a "Trojan Horse" for cheap Brazilian poultry imports'?  (Poultry International, 4 September 2008).

2)  For more information on Dunbia see:  www.dunbia.com 

3)  For more information on CALNI including the Paris protest see:  www.glenavy.com

4)  Brazilan Beef home page:  www.brazilianbeef.org.br/ 
5)  Moy Park logo:  www.moypark.co.uk/
6)  There are a number of online references to NFU fears that the Marfrig acquisition makes Moy Park "Trojan Horse" to channel Brazilian beef and poultry into Europe.   For example;

http://business.timesonline.co.uk/tol/business/columnists/article4380820.ece

'the deal provoked a protest from the National Farmers' Union in Britain, which gave warning that the purchase of Moy Park should not become a "Trojan Horse" for the import of Latin American carcases into Europe.'