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Bacon-sizzling

Global hunger for protein fuels food-industry deals

Consumers from Beijing to Boston are gobbling up more meat and dairy products, fueling multibillion-dollar mergers in the food industry and reshaping global agriculture.

This intensifying appetite for protein is one of the main forces driving Tyson Foods’ planned $7.7 billion acquisition of Hillshire Brands.

Increasingly wealthy consumers in emerging economies are piling more meat on their plates and feeding their children more milk products.

In the US, meanwhile, some health-conscious consumers are replacing carbohydrates like bread and cereal with more animal protein, including meat, yogurt and eggs.

The trend has given rise to new meat-industry giants such as Brazil’s JBS and China’s WH Group, and is propelling sales by US companies such as Hillshire, maker of Jimmy Dean sausages and Ball Park hot dogs, and Chobani, the country’s biggest Greek yogurt brand.

It is also prompting farmers around the world to expand their production of meat as well as the corn, soybeans and other crops used to feed livestock.

“The protein business is a very good business to be in right now,” said Chuck Wirtz, who raises about 50,000 pigs a year on a farm near Whittemore, Iowa. “The farming industry benefits from changing diets world-wide.”

Companies are rushing to secure critical assets, from milk powder for infant formula to billion-dollar brands that dominate supermarket meat cases. The Hillshire deal, if completed, would be the meat industry’s biggest merger, topping last year’s $4.7 billion acquisition of Smithfield Foods by WH Group, then known as Shuanghui International Holdings. That deal ranked as the biggest-ever Chinese takeover of an American company.

JBS of Brazil has made a string of acquisitions over the past decade to transform the company into what its executives say is the world’s biggest meat processor, with sales of $41.7 billion last year. JBS also bid for Hillshire, through its Pilgrim’s Pride Corp unit, but lost to Tyson.

Meat, eggs, dairy products, beans and grains are among the principal sources of protein, which the digestive system breaks down into amino acids that replace existing proteins in human cells. Because the body can’t produce some amino acids on its own, protein is considered an essential part of the human diet.

Protein deficiency remains a problem for millions of people in poorer countries but, as incomes grow, meat typically becomes a bigger part of peoples’ diets.

World-wide meat consumption will rise 1.9% a year over the next decade, according to projections from the U.S. Agriculture Department, as rising incomes in places like China, Mexico and Central America allow consumers to afford more pork, chicken and beef.

The UN FAO has projected that by 2030 the average person will consume about 99 pounds of meat a year, versus 86 pounds in 2007 and 73 in 1991. The USDA predicts that China and Hong Kong will boost beef imports by 55% by 2024….

…. In the US, most people already consume more protein than they need, according to the US Centers for Disease Control and Prevention. Average US consumption of meat, measured by weight, ticked up in 2013, after falling in recent years, according to the Agriculture Department. Sales of fresh meat—the cuts sold shrink-wrapped in the supermarket—have suffered in part because of record beef and pork prices. Those prices reflect the drought and disease that have reduced US livestock supplies. Sales of mass-market milk also have waned.

But sales of many processed meat and dairy products are soaring, as many Americans shift away from carbohydrates and companies come up with new and more-convenient products and packaging that tap into the pro-protein trend.

US sales of packaged foods with protein-related claims on their labels rose to $7.5 billion in the year ended Feb. 15, a gain of more than 50% from the like period four years ago, according to research firm Nielsen…

Wall Street Journal: Read the full article

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