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CONCENTRATION: ECONOMIESOF SCALE BUT LESS DIVERSITYEconomic imperatives are the driving force behind the consolidation of theglobal meat industry. This may mean more efficient production, but it alsoconcentrates market power in the hands of just a few, much to the detrimentof smallholders. And it may be risky for consumers, too.Tight marginsexpose the businessto volatile marketprices and tradetensionsIn September 2013, Shuanghui InternationalHoldings Ltd. – the largest shareholder of China’sbiggest meat processor – completed a 7.1billion-dollar purchase of US-based SmithfieldFoods, Inc., the world’s biggest pork producer. Thesale exemplifies a new kind of consolidation that ishappening across borders. The direction of investmentis changing: it is now heading North fromthe global South. This reflects related shifts ineconomic growth, consumer demand, managementskills and corporate assertiveness over thelast two decades.JBS SA, a beef company based in Brazil, setthe stage in the late 2000s, when it acquiredmeat companies and poultry producers in theUnited States, Australia and Europe, as well asin Brazil. JBS is now the world’s biggest producerof beef. With its 2013 acquisition of Seara Brasil,a unit of rival company Marfrig Alimentos SA, itis also the world’s largest chicken producer. JBS isamong the world’s top ten international food andbeverage companies, with food sales amountingto 38.7 billion dollars in 2012.It also has business units in leather, pet products,collagen and biodiesel. Though JBS is not ahousehold name, its annual food revenues arehigher than those of major global food playerssuch as Unilever, Cargill and Danone. These figuresgive us an idea of what JBS’s size means on theground or at the slaughterhouse: its worldwidecapacities can slaughter 85,000 head of cattle,70,000 pigs, and 12 million birds. Every day. Themeat is distributed in 150 countries as soon as thecarcasses are “disassembled” , i.e. when the flesh isseparated from the bone.Because profit margins are tight in the meatbusiness, companies chase after economies ofscale. This means that they try to produce morewith greater efficiency and at a lower cost. For thisreason, the meat sector is concentrating in twosenses. Companies are getting bigger throughmergers and acquisitions – expanding across bordersand across species. And meat production isintensifying, so that more animals are housed togetherand are processed more quickly and withless waste. However, some market analysts pointout that the meat business is inherently risky andthat, based on recent financial performance, themulti-species strategy may be backfiring due todifferent cultures and processes that pose challengesto newcomers. In other words, knowinghow to grow, slaughter, process and transport cattlemay not translate easily into managing poultryoperations.Volatile feed-grain prices add to the financialrisk in the meat sector: higher-priced feed meanshigher production costs and lower profits. Withthe deregulation of commodity markets at theWorld meat prices comparedWorld food prices comparedIndices, 2002–4 = 100FAOIndices, 2002–4 = 100FAObeef, vealpoultrypigssheep, goatsFAO220220190190160130100160130100meatdairy productsfood70702007 2008 2009 2010 2011 2012 2013 2006 2008 2009 2010 2011 2012 201312MEAT ATLAS