The main elements of M. Dias Branco’s strategy to increase profitability and profitability are:
• National expansion of market leadership.
The Company is committed to expand and strengthen its leadership position in the markets where it operates. To achieve this, it intends to:
(i) continue the process of strengthening its brands through investment in marketing and institutional efforts at points of sale;
(ii) increase its already significant customer base through diversification of sales channels and geographic expansion, especially in areas where it does not have relevant market share, through organic growth or acquisitions;
(iii) develop and launch new products and products complementary to existing lines, for market areas where it already operates.
• Other categories.
The company is also actively seeking opportunities to expand into new categories in the food industry that have synergies with those in which it already operates, which may occur organically or inorganically, focusing on products with average prices and higher margins than the Company’s.
• Incresase international exposure.
The Company seeks to expand its presence in the global market through export growth and/or acquisitions outside Brazil, leveraging volumes, optimizing the use of its infrastructure, and improving its foreign exchange exposure.
• Improvement of operational efficiency and cost control.
The Company is committed to improve the efficiency of its processes and to advance its verticalization strategy to enhance margins. To achieve this, it intends to increase productivity by:
(i) optimizing the use of its infrastructure;
(ii) optimizing the flexibility of its production chain;
(iii) maintaining a modern industrial park with cutting-edge technologies and state-of-the-art operations;
(iv) increasing the supply of wheat flour and vegetable fat to its biscuit and pasta production units, aiming to meet 100% of its needs; and
(v) increasing the efficiency of its distribution network in the country.
In addition, the Company will continue to implement increasingly strict and modern cost controls to increase its profitability, including strengthening programs aimed at optimizing energy consumption and storage time for inputs through the more intensive use of purchasing and production planning tools.
- Leadership in the cookies and pasta markets in Brazil, and significant placing on the domestic market for flour.
Since 2003, the Company has been the leader in the biscuits and pasta markets in Brazil, both in terms of volume (measured in tons) and sales value, based on the market share research conducted by Nielsen. The Company has consistently increased its market share in Brazil in terms of sales volume, rising from 13.5% to 32.0% in biscuits and from 17.8% to 31.0% in pasta, according to Nielsen data for the years 2003 and 2022, respectively. It is important to note that until 2016, Nielsen’s market share data considered retail establishments, and from 2017 onwards, it also includes cash&carry establishments. The Company believes that this leadership and relevant position in its product lines are mainly associated with:
(i) the strength of its brand portfolio, recognized by its consumer base, with emphasis on Adria, Piraquê, Vitarella, Fortaleza, Isabela, Richester, and Finna;
(ii) the high quality of its products, along with their range to serve different markets (from popular to premium);
(iii) its distribution model, which allows for extensive coverage, especially in small and medium-sized retail;
(iv) national-scale production logistics.
- High level of integration of its production process.
The Company produces most of its key raw materials: wheat flour and vegetable shortenings. In 2022, 99.6% of all wheat flour and 100% of all vegetable shortening used in the production process were manufactured internally. The Company believes that no other competitor has this level of vertical integration in Brazil. Additionally, some of its industrial plants have mills within the same complex, eliminating transportation costs for wheat flour used in production. Its integrated production chain also provides conditions for better production planning, higher product quality (including healthiness), optimal use of key inputs, more competitive pricing for its products, and better management of production costs.
- Strong brands portfolio with national coverage and widespread distribution.
Through its main brands, highly recognized by its consumers, the Company operates nationwide in Brazil, both with national brands (such as Vitarella, Adria, and Piraquê) and regional brands (such as Fortaleza, Richester, Isabela, Pilar, and Estrela), which hold market leadership positions. Its distribution enables significant penetration in the small retail market, either through its direct distribution system or by means of distributors and wholesalers, contributing significantly to reducing its dependence on large supermarket chains. The Company believes that this approach allows it to reach consumers with different profiles, including those in remote locations, and provide the same level of service as in areas where it does not have production plants.
Please find below our brands and their hotsites:
- Modern industrial facilities with strategically located plants.
The Company currently operates 18 industrial units equipped with state-of-the-art technology for food production. All plants are strategically located near their main markets of operation (eight in the Northeast, five in the Southeast, four in the South, and one in Uruguay). This production structure allows for flexibility in choosing the best production plant to serve each market the Company operates in, contributing to:
(i) reduced transportation costs to customers;
(ii) efficient and timely delivery;
(iii) better understanding and regular supply to local markets;
(iv) a wider product portfolio.
The Company has strategically expanded over the years, through the planned construction of new industrial and commercial units across the country. In 2022, investments totaled R$ 280.2 million, with a focus on the implementation of the SAP system (Simplifique project) and machinery adaptation for reduced gram weight and flowpack.
- Solid financial position and significant cash generated to sustain the growth strategy.
The Company’s EBITDA reached R$ 900.4 million in 2022, representing a 3.3% CAGR compared to 2013. By the end of 2022, the Company’s net debt/EBITDA ratio stood at 1.8x. The Company believes that organic expansion and acquisitions will enable it to continue its growth strategy and establish itself as a key player in the consolidation of the national biscuits and pasta market.
- Production lines located mainly in tax incentive regions.
The industrial units located in the Northeast of Brazil benefit from state and federal fiscal incentives. These units were built and implemented under Investment Projects for new economic enterprises presented and approved by the respective states or, in the case of federal incentives, by the Superintendence for the Development of the Northeast (SUDENE), within the framework of state or federal public policies for promoting development. These incentives, granted as investment subsidies, provide capital resources for investment in business expansion and modernization. The granted fiscal incentives and benefits generated additional cash flow of approximately R$ 689.8 million in 2022 (R$ 538.5 million in 2021).
- An experienced management team and qualified employees.
The Company’s management team has extensive and solid experience in the sectors in which it operates, which the Company believes has contributed to its consistent market leadership growth, revenues, and results, despite occasional adverse economic conditions. The Company directly attributes its historical revenue growth and successful business expansion to the strategies executed by its experienced management team. Additionally, the Company has a workforce of over 16 thousand professionals as of December 2022, who are trained, motivated, and participate in a results-based incentive plan aligned with the Company’s strategic and budgetary plans.
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