Reconquering the Saudi market
Following a ban lift, Brazilian meat packers resumed selling beef to the Gulf country. Sales volumes are close to matching 2012’s and new players have found their way to buyers.
São Paulo – As of when Saudi Arabia banned Brazilian beef in late 2012, the Gulf country was Brazil’s second biggest buyer, trailing only Egypt. It took three years of talks between the governments and Brazilian organizations looking to resume selling. The embargo was lifted in November of last year, and now that business is back on track, shipped volume are already close to matching pre-ban levels.
Interestingly, the ban lift sparked renewed interest from Brazilian businesses in exporting beef to the Arab country. Out of four meat companies ANBA spoke with, three hadn’t begun selling until this year. According to the Association of Brazilian Beef Exporters (Abiec), at this time 78 Brazilian plants are accredited to export to Saudi Arabia.
“Several parties have put in a great deal of effort. It was a tandem effort from the embassy, the Arab Chamber, the Muslim Federation, Abiec, Brazil’s Foreign Ministry and Agriculture Ministry. It was a set of concerted efforts stemming from the Saudi market’s relevance and the influence it bears on the region. Proof of which is the fact that since the ban ended, Qatar, Kuwait and Bahrain have also given us the green light,” remarks Abiec president Antônio Jorge Camardelli, mentioning the embassy of Brazil in Riyadh, the Federation of Muslim Associations in Brazil (Fambras) and the Arab Brazilian Chamber of Commerce.
In December 2012, the Arab country put its imports on hold following the Brazilian federal government’s announcement that an animal which had died in 2010 in the state of Paraná carried the causative agent of spongiform bovine encephalopathy (BSE), aka mad cow disease, although it did not develop the condition. Other Arab countries, including the ones mentioned by Camardelli, echoed the Saudi ban. Now, after much discussion regarding the health and safety of Brazilian cattle, the matter has finally been put to rest. “Our relations are back to normal. The guarantees that the Brazilian government has offered proved sufficient. That issue has been overcome,” says Camardelli.
In the wake of the ban lift, sales volumes corroborate Camardelli’s statement. From February – when sales began again – through May, 11,555 tons were shipped from Brazil to Saudi Arabia. In the comparable period of 2012, sales were only slightly higher at 13,928 tons. “For the past few years, the average was 4,000 tons a month. We are back on track and sales volumes are expected to increase when compared with previous years,” the executive asserts.
He believes the safeness of halal slaughter was a major factor in ending the embargo. Halal certification ensures that items are in keeping with Islamic law. “Another crucial point in resuming sales was the legitimacy of the halal process, the guarantee of a 100% halal process. That is of the highest relevance,” he says.
Back to exporting
The Saudi ban was lifted on November 9, 2015 as the then-Brazilian minister of Agriculture, Livestock and Supply Kátia Abreu and then-vice president for Foods of the Saudi Food and Drug Authority (SFDA), Salah Almaiman, signed on to an international sanitary certificate.
Ever since, Brazilian meat packers have been reaccredited to sell to Saudi Arabia in a process that involved submitting several documents to the SFDA. After that, the actual sales talks finally began.
Prior to the Brazilian beef embargo, meat packer Frigorífico Mondelli, of São Paulo, used to derive the bulk of its revenue from Saudi Arabia. This year, the company travelled to Saudi Arabia before the opening of Gulfood, the Middle East’s biggest foodstuffs expo, held in Dubai, the United Arab Emirates, and sat with old buyers as well as prospective new ones.
“In the past we used to work with three clients. Now we work with one. It used to be our main buyer and remains so now, and it has offered us an exclusivity deal,” says Export manager Carlos Travain.
He claims that accepting the deal, which came from a supermarket chain, enabled the company to set a higher price point, although revenues are nowhere near matching pre-ban levels. “Before the embargo, we used to gross USD 1.5 million on average from Saudi Arabia. In June, we are expecting to see USD 800,000,” Travain reveals.
Agroindustrial Iguatemi struck its first deal with Saudi Arabia in April. Now, it’s shipping 200 tons a month of chilled beef. “We have five or six Saudi buyers, including distributors, supermarkets and wholesalers,” says Douglas Domingues, who’s in charge of Sales and Exports at the meat packer from Mato Grosso do Sul state.
The company also went to Saudi Arabia while Gulfood was taking place. “We spent a couple of days in Riyadh and got in touch with people there,” he explains. According to Domingues, the fact that Brazilian beef is back on the market was hailed as good news. “When it comes to quality and acceptance, they had been wanting to buy [Brazilian beef] for some time now, because they were left with Australia and New Zealand, and Australia has a limited capacity to supply beef,” Domingues points out.
Half the company’s total monthly exports go to Saudi Arabia and it hopes to expand even further, in the country and in the region as a whole. Iguatemi also ships product to the UAE, Egypt, Jordan, Qatar, Kuwait and Oman. It is also working on breaking into Bahrain and Algeria. “We hope to get to a point where we’ll ship 1,000 tons to the Gulf alone. We are working on achieving that by the end of the year,” he says.
Another meat packer, Frigorífico Vale do Sapucaí (Frivasa), from Minas Gerais, sold to Saudi for the first time last March via agents. “We sell to distributors and industries. We have sold to six different Saudi clients,” says commercial director Emerson Germiniani. He said that so far, Frivasa has shipped 300-plus tons to the Arab country.
Prices, however, are not as good as they could be, the executive notes. “The market as a whole pays a reasonable price,” he says. Looking at Abiec’s numbers, one realizes that indeed, beef exports to Saudi Arabia could yield more.
From February through May, 2012, exports from Brazil to Saudi reached USD 66.27 million; that number dropped to USD 43.78 million from February to May this year, a USD 969 drop per ton. The average price of a ton of beef was USD 4,758 from Feb-May 2012 and USD 3,789 from Feb-May 2016.
Frigorífico Sul (Frigosul) also had its first sales to Saudi Arabia in March. “We are working with Saudi distributors. We haven’t looked into supermarkets or industries yet,” explains the commercial director Diego Riva. Also from Mato Grosso do Sul, the company has four clients in the Arab country and ships 200 tons of beef a month to them. “Saudi Arabia is a new market to us. We are aware of its potential,” the executive asserts.
Riva has a different take on the prices the Saudis pay. “It’s a country that pays well because it demands quality. It demands beef that’s produced with all due care, it demands outstanding quality. Saudi Arabia is replacing Australian beef with Brazilian beef,” he ponders.
According to him, Saudis demand cattle that’s 30 months old at most. “Saudi Arabia wants the best there is, and they will pay for it,” he says. Frigosul’s director believes Saudi Arabia is “a strict market, and Brazil is perfectly able to live up to their expectations.”
*Translated by Gabriel Pomerancblum