Lactalis fights for top position in Brazilian cheese market

Since it arrived in Brazil in August 2013, France’s Lactalis gave clear signs that it had big ambitions for the country’s cheese market. Nearly three years later, the company, founded in 1933 in the western French town of Laval as a small producer of artisanal cheese, is taking two important steps to imprint its brand and consolidate its position as leader in Brazil.

The company, which in 2013 acquired Brazilian dairy producer Balkis and in the following year the dairy assets of BRF, in addition to plants of LBR, has begun to produce in the country the Galbani fresh mozzarella, traditional both in Italy and in other European countries. Moreover, it is starting to produce mozzarella and “quejo prato”, a widely consumed Brazilian soft cheese, with the renowned French brand Président in Brazilian units.

The fresh mozzarella is being produced at Lactalis’s plant in Santo Antônio do Aracanguá, São Paulo. Président-branded mozzarella and prato cheeses are manufactured at the Ijuí and Três de Maio plants in Rio Grande do Sul and also at the Aracanguá unit.

Marek Warzywoda, CEO of Lactalis in Brazil, provides little information about the new production lines in the country, but doesn’t hide his enthusiasm with the growth potential in the Brazilian cheese market. “The group has a giant ambition … of being number 1 in cheese in Brazil. It is exactly what the group is doing around the world,” he said in an interview with Valor. Mr. Warzywoda said that to ensure this position in Brazil, Lactalis plans investments for five years. But he didn’t disclose how much the company would invest.

To produce Galbani in Brazil, Lactalis reorganized the Santo Antônio do Aracanguá plant, where it installed equipment imported from Italy. Mr. Warzywoda said the French group plans to follow in Brazil the same strategy it adopted in other countries where it operates.

Lactalis acquired Galbani, a leader in cheese in Italy, in 2006. Today, the French group has 20 factories in the world producing items of the Italian brand. “The strategy is to have local production, make here part of the Galbani portfolio, of fresh products, and at the same time import other cheeses of the brand produced in Italy, like Grana Padano,” he said.

Lactalis is not daunted by the current Brazilian crisis. Mr. Warzywoda says interest for Italian-style fresh mozzarella is growing all over the world, regardless of the economic situation. “We are certain that there is a market for this product. What is under analysis is how this market will develop. We know we have a great opportunity with this type of cheese, but we also have to analyze the development speed of this category here in Brazil.”

In a first stage, Lactalis will have capacity to produce 300 to 400 tonnes per year of the Galbani mozzarella. But Mr. Warzywoda reckons there must be room for higher volumes and said the company has flexibility to produce more if there is demand. The product will be sold both in retail and for food-service providers. Initially, it will be distributed in São Paulo state, but the plan is to have national reach.

As for the production of Président mozzarella and queijo prato, Mr. Warzywoda said little. He said the company invested in equipment at its units and also had to adapt existing production lines. The high consumption of mozzarella in Brazil surprises Mr. Warzywoda, who admitted, without elaborating, that the production capacity of Président mozzarella is high. “We have the possibility of producing in three plants, but we have flexibility to adapt to the demand.”

He added that the two products fit the commodities category and will be sold in retail in pieces to be sliced or already sliced. Président-branded fine cheeses, like Brie and Camembert, will continue being imported from France.

Lactalis, Mr. Warzywoda said, considered that “to be number 1 in the local cheese market you need to have the possibility of producing local brands and also international ones in that market.” Moreover, it is necessary “to take the opportunity of using local raw material, to have competitiveness,” he added.

Indeed, the decision of starting producing mozzarella and prato cheese with the Président brand in Brazil was a natural step for Lactalis. This is because when it acquired BRF’s dairy assets it agreed to use the Sadia brand for these cheeses for a certain period. When this transition is over, Lactalis will no longer carry the Sadia brand in its cheeses.

In the sector, Lactalis is already estimated to be leader in volume terms in the Brazilian cheese market. In value, though, the company is behind Bongrain, which produces cheese with the Polenghi brand and is controlled by Savencia Fromage & Dairy, another French company.

According to Euromonitor, Bongrain had a 10.5% market share of cheese revenues in the retail market in 2015, whose total sales were R$19.4 billion. Lactalis accounted for 8.2% of that amount. Laticínios Tirolez came in third place, with 4.9%. Such values don’t include the food-service market.

Lactalis produces cheeses in 5 of its 17 dairy plants in Brazil and has two local brands, Balkis, concentrated in São Paulo state, and Boa Nata, with presence in Minas Gerais and Rio de Janeiro, mainly.

The largest cheese producer in the world, Lactalis, also owner of Parmalat, processed 15.6 billion liters of milk in 2015 in the 42 countries where it has 200 industrial facilities.

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