Low costs, abundant rain make moment ripe for Bonduelle expansion to Latin America, even as the French firm eyes Green Giant takeover

via flickr

BRASILIA –- From a bird's eye view, the landscape resembles the geometric paintings of Vassily Kandinsky. Circles upon circles are etched into the deep red laterite-coated earth. In Brasilia's savannah, where Bonduelle has just opened its first canned peas and corn factory, the fields are often cut in circular configurations. They call them "pivots' here, after the sprinklers that rotate clockwise around a central axis. Crop irrigation has expanded so quickly in Brazil that three harvests are now possible every year, without depleting water reserves.

The water used for irrigation is in fact rainwater, collected during the four-month wet season. It supplies enough water to keep the factory running all-year round, compared to Europe's four months. "No need to issue stocks -- the working capital requirements are negligible and the costs are unbelievably low," says a Bonduelle official. The company expects to recoup their investment three times faster in Brazil than they would across the Atlantic.

That was enough to convince Benoît Bonduelle, who scours the planet in search of new markets for the French company. The new Brazilian site, based about 100 kilometers southwest of the capital, will give the group a solid foothold into the South American market.

Brazil represents an Eldorado of sorts for the vegetable giant, which was coming off of a 2009 fraught with natural disasters and economic uncertainty. Christophe Bonduelle, who heads the company based in the Northern French town of Villeneuve-d'Ascq, has meanwhile confirmed Bonduelle's interest in a potential purchase of US vegetable maker Green Giant, which General Mills has indicated it may be looking to sell.

In the meantime, here in Brazil things seem simpler. The Cristalina factory is an exemplar of modernity, having been built in a record eight months for 15 million euros, half the cost of the comparably sized Krasnodar factory in Russia.

"Investors here are given an expressway," says Benoît Bonduelle. "You don't have to deal with corruption problems like in Eastern Europe." In a country blessed with two meter-high corn stalks -- twice the height of Old World corn -- there is little resistance to change and much enthusiasm. And the minimum wage is 510 reals per month, (216 euros).

There is still much to do though. Bonduelle, a French company, has been in Brazil since 1995, but only controls 0,5% of the market. The company's offer has been limited to frozen vegetables and imported canned products sold to wealthy clients at a price five times higher than its competitors. By producing locally, Bonduelle will be able to lower its prices and offer better quality products, with just a 20% of a mark-up over other manufacturers. Tropical varieties of peas and corn have been adapted especially for the Brazilian market.

Initial product launches have been a success with customers who previously had access to little but dried peas and corn soaked in juice, which retain scant nutritional value. Their differences in the taste and texture of the "supersweet" pea, a variety patented by Bonduelle, as well as other canned products, is notable. With a burgeoning middle class, the 157-year old company figures it can "win an additional 10 million consumers per year", putting it in control of 10% of the processed vegetable market within five years.

With the Cristalina plant, Bonduelle will be able to service the entire distribution chain, from the five leading distributors, which control 50% of the market, down to the smallest retailers. A frozen food unit will follow in 2015, with exports into neighboring Latin American countries expected to start in 2018. "The adventure has only just begun," says Benoît Bonduelle. If one compares the 2.7 kilos of canned vegetables consumed by Brazilians yearly to the 50 kilos of French households, the potential seems undeniable.

But success is not guaranteed. In 2005, European consumer food giant Unilever, once the market leader in Brazil, sold its operations back to Brasfrigo, a Brazilian company that is struggling today.

Read original article in French