Meat heavyweight JBS‘s announcement that it is to invest $2.5bn into six meat packing plants in Nigeria was surprising because of its scale rather than its empire-building intent.
Brazil’s JBS, one of the largest meat businesses in the world, is, after all, a truly global entity, present in more than 20 countries and employing more than 270,000 people.
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And it is no stranger to investing big abroad. However, given its last two notable overseas investments were $50m in a breaded chicken facility in Saudi Arabia and $73.6m in its Huon Aquaculture salmon-farming business in Australia, the Nigeria announcement seems especially significant. What makes the west African country such an attractive prospect and what’s in it for JBS?
The first one is all about potential. Nigeria is often highlighted as one of the most successful and well-governed economies in Africa but it is also one with tremendous growth prospects.
Tackling food insecurity
Just last week France and Nigeria signed a €300m ($315.4m) deal covering infrastructure, agriculture and food security at a ceremony attended by Nigeria President Bola Tinubu and French President Emmanuel Macron as well as “businessmen, captains of industry, governors, and some top government officials of both countries”.
A declaration document said the investment was a “commitment to support the socio-economic growth of Nigeria through financing sustainable projects in urban infrastructure development, transportation network, housing infrastructure, human capital development through improved education specifically in STEM [Science, technology, engineering, and mathematics], agriculture, food security and healthcare”.
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By GlobalDataIt would be naïve to think this is pure altruism on France’s part, any more than it is on JBS’s, although the meat heavyweight’s release announcing its intentions in Nigeria does tend to play up this aspect of its investment.
Citing data from the World Food Programme, JBS said Nigeria has “one of the highest rates of food insecurity in the world, with 24.8 million people going hungry”.
Gilberto Tomazoni, JBS’s CEO, added: “Our goal is to establish a strong partnership and support Nigeria in tackling food insecurity. The experience in the regions where we operate around the world shows that the development of a sustainable food production chain generates a virtuous cycle of socio-economic progress for the population, especially in vulnerable groups.”
Nigeria also has huge potential as a market for meat producers. As in other emerging and fast-growing economies, where there is increasing prosperity there is often a greater demand for protein.
Dutch investment bank Rabobank published its Africa Poultry Investor Outlook report a few weeks ago, with a short and long-term view on local markets and investments.
In recent years, Nigeria’s economy has had its ups and downs, with GDP growth at over 6% in 2013 and 2014 before growth slowed to 2.2% in 2019. Nigeria’s economy has expanded at around 3% a year so far in the 2020s but the country has proven a challenging place to do business in recent quarters, hit by a debilitating currency devaluation that drove up inflation and ate into consumers’ spending power.
According to Nan-Dirk Mulder, senior global specialist for the animal-protein sector at Rabobank rising awareness of governments on food security and creating local employment is an essential driver for change, Nigeria has been in a “challenging position”.
“The government prioritises food security, but foreign exchange volatility with a lack of feed ingredients has really challenged the local market context,” Mulder tells Just Food.
“Currently, local prices are very high, and more local ingredients and resources are needed, especially [as] small and mid-sized producers have left the business.
Some FMCG companies have been reassessing their position in Nigeria, with Heineken‘s local subsidiary making changes to production and Diageo selling its majority stake in the publicly-listed Guinness Nigeria in June.
Nevertheless, in September, Coca-Cola drinks bottler Coca-Cola HBC announced plans to invest $1bn into its business in Nigeria over the next five years.
JBS noted that “protein production” in Nigeria accounts for 10% of its GDP and only serves 40% of the domestic demand.
Nigeria’s long-term potential for meat groups
Announcing its investment, JBS noted that “protein production” in Nigeria accounts for 10% of its GDP and only serves 40% of the domestic demand.
Rabobank’s Mulder sees Nigeria’s potential. “In the longer term, the country is one of the high-potential countries in Sub-Saharan Africa for meat and poultry, with a large market, a fast-growing population, a growing middle class, a further rise of modern distribution and fertile local soil with the potential to expand corn and soybean production.”
John Baumgartner, a US-based analyst at Japanese investment bank Mizuho Securities, who follows JBS, agrees. “The macro lines up as one of the most affluent countries in west Africa. If you look over 30 years, it’s probably where you want to be,” he says.
Baumgartner stresses that this is a long-term play. “Nigeria is a country that is growing with a young population and a growing middle class and it [JBS] has seen opportunities for the long term.”
Announcing its investment in Nigeria, JBS, which generated almost $73bn in global revenue last year, said it plans to open three poultry plants, two for beef and one for pork.
Overall, the project is geared toward “sustainable production chains for food production” in Nigeria. JBS said it will support “small producers” and help foster “sustainable agricultural practices”.
Nigeria’s government will “ensure the economic, sanitary and regulatory conditions necessary for the feasibility and success of the project,” JBS added.
Baumgartner at Mizuho suggests JBS’s strong financial position gives the company the “flexibility to make some of these investments” whereas perhaps a few years ago it was not in the same position.
“I think it’s like JBS to position their business for the long term, if you look at the acquisitions they’ve made in areas like plant-based meat and aquaculture,” he says.
“Our view as a company is that it’s one of the best companies in the industry in positioning themselves for long-term growth.”
Questions in NGO circles
Global meat giants have faced criticism for the role they are playing in the climate crisis.
In October, environmental campaign group Greenpeace International called for big meat and dairy companies, including JBS, to do more to tackle methane emissions.
According to Greenpeace, the estimated methane emissions of five of the largest meat and dairy companies when added together – JBS, Marfrig, Minerva, Cargill and Dairy Farmers of America – exceed the combined reported methane emissions of five big fossil fuel giants: ExxonMobil, Shell, Total Energies, Chevron and BP.
In that context, NGO ProVeg International, which wants to replace half of animal products with plant-based and cultivated foods by 2040, has questioned JBS’s investment in Nigeria.
“The investment made by JBS will support the intensive animal agriculture industry which, as we have seen across the world, brings with it a huge array of problems,” Hakeem Jimo, ProVeg’s director in the country, says.
“ProVeg takes the view that Nigeria does not need to follow in the footsteps of Western countries and create an unsustainable and damaging system of the likes that JBS has contributed to in Brazil.”
JBS, which made a commitment in 2021 to achieve net-zero greenhouse gas (GHG) emissions by 2040, may have some work to do, then, to convince everyone that its Nigeria venture is a win-win for both itself and the west African country.
