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Bunge Brasil S.A.

Bunge Brasil S.A.

Av. Maria Coelho de Aguiar 215
São Paulo, São Paulo 05804-900
Brazil
Telephone: (55) (11) 3741-3575
Fax: (55) (11) 3741-7292
Web site: http://www.bunge.com.br

Wholly Owned Subsidiary of Bunge Ltd.
Incorporated:
1905 as S.A. Moinho Santista Indústrias Gerais
Employees: 10,578
Sales: BRL 23.2 billion ($7.92 billion) (2004)
NAIC: 212312 Crushed and Broken Limestone Mining and Quarrying; 212392 Phosphate Rock Mining; 212393 Other Chemical and Fertilizer Mineral Mining; 311119 Other Animal Food Manufacturing; 311211 Flour Milling; 311221 Wet Corn Milling; 311222 Soybean Processing; 311223 Other Oilseed Processing; 311225 Fats and Oils Refining and Blending; 311941 Mayonnaise, Dressing, and Other Prepared Sauce Manufacturing; 551112 Offices of Other Holding Companies

Bunge Brasil S.A. is the holding company for Bunge Alimentos S.A. and Bunge Fertilizantes S.A., vertically integrated subsidiaries that, in combination, form the biggest food company in Brazil, in terms of annual revenue. The latter entity produces and sells fertilizer for the crops that form the basis for the animal and human foods produced and sold by the former. Bunge Brasil's more than 300 installations in 16 states include factories, ports, distribution centers, and silos. Bunge brands such as Serrana, Manish, Iap, Ouro Verde, Salada, Soya, Delicia, and Primor have a presence that continues to resonate in contemporary Brazil. The company is a wholly owned subsidiary of the New York-based multinational corporation Bunge Ltd. Its assets come to about half that of Bunge Ltd., and its sales comprise about one-third of the parent company's sales.

POWERFUL BRAZILIAN CONGLOMERATE: 190890

The Bunge enterprise dates from 1818, when Johannpeter G. Bunge founded, in Amsterdam, Koninklijke Bunge (Bunge & Co.), to sell imported products from Dutch colonies abroad, including grains. Some years later, the company moved its headquarters to Rotterdam and opened subsidiaries in other European countries. In 1859, at the invitation of the king of Belgium, Bunge relocated its headquarters to Antwerp. Ernest Bunge, a grandson of the founder, moved in 1884 to Argentina, where, with partners, including his brother-in-law, Jorge Born, he established Casa Bunge y Born, with the object of participating in the export of the country's bountiful grain crops. Bunge y Born entered Brazil in 1908, when it became a minority shareholder in S.A. Moinho Santista Indústrias Gerais, a company engaged in the trading and milling of wheat.

This was the beginning of a rapid expansion in Brazil, with Bunge y Born acquiring a number of companies, mostly in the fields of food, agribusiness, chemicals, and textiles. The acquisition of Cavalcanti e Cia., for example, in 1923, led to the establishment in 1926 of Sociedad Algodonora del Nordeste Brasileno, or Sanbra S.A., an enterprise that first financed cotton growers, and then, the following year, began to produce and refine cottonseed oil. In 1929 Bunge y Born founded S.A. Moinhos Rio Grandenses (Samrig) from two companies previously acquired, and then built a big factory for extracting plant-based oils in Porto Alegre, Rio Grande do Sul. This product was widely used in cattle feed. Bunge y Born's first textile company in Brazil, acquired about 1930, was Fábrica de Tecidos Tatuapé S.A. Its participation in cement and fertilizers began in 1938, and soon after Serrana S.A. de Mineração was established for the exploitation of a limestone deposit. Tintas Coral S.A. put Bunge into the paints-and-dyes business in the mid-1950s.

Soybeans were just beginning to be an important crop in 1954, when Samrig began to buy them from Rio Grande do Sul farmers in exchange for fertilizer and pesticides (made by Bunge y Born enterprises in Brazil), seeds, and technical support. In 1969 Samrig opened the first factory in Latin America to extract soy proteins. Sanbra, two years earlier, had begun similar activities in the states of São Paulo and Paraná. Both companiesfierce competitorsmade and marketed an array of products from vegetable fats and oils, particularly margarine.

Bunge y Born, at the beginning of the 1970s, expanded into the Brazilian financial sector, purchasing a bank, a brokerage house, and an insurance agency. It entered real estate by constructing a corporate park and the information sector with Proceda Serviços Administrativos S.A. The following year the brothers Jorge Born III and Juan Born, sons of the chief executive, Jorge Born, Jr., were taken prisoner by leftist guerrillas in Argentina; the former was not released until nine months later, after the company had paid a ransom of $60 million. Bunge y Born headquarters then were moved from Buenos Aires to São Paulo, where the Borns took up residence. Gross sales in Brazil rose from 5.95 billion cruzeiros (about $850 million) in 1974 to 158.6 billion cruzeiros (about $1.5 billion) in 1981, when employment reached 26,395, and agroindustry and foods accounted for slightly more than half, chemicals for almost one-fourth, and textiles 14 percent, of sales.

In Brazil, as in Argentina, Bunge y Born was known for the secrecy in which it operated. Neither Jorge Born III, who became president in 1987, nor his successor in 1991, Octavio Caraballo, gave interviews; not a single photo of Caraballo, who, like Born, belonged to one of the shareholding families, was available. Company executives even habitually denied that the Bunge group existed in Brazil. The organizational structure of the group was also obscure. Bunge y Born's holdings in Brazil reached a peak of at least $3 billion in annual revenue during the 1980s, and one of its subsidiaries, Santista Indústrias Têxtil do Nordeste S.A., was designated by the Brazilian business magazine Exame as its company of the year for 1988.

SLIMMING DOWN: 19902000

By 1990, according to Exame, Bunge y Born was a worldwide group with $15 billion in annual sales and operations in nine countries. Its Brazilian holdings consisted of some 170 enterprises employing about 30,000 employees and yielding an estimated $2.3 billion to $2.9 billion in annual revenue. A chart in Exame showed a complex web of 20 companies tied to four larger ones: S.A. Moinho Santista Indústrias Gerais, Moinho Fluminense S.A. Indústrias Gerais, Moinho Recife S.A. Empreedimentos e Participações, and Sanbra. The first three were public and sold shares, while the last was private. Each was a holding company that also exercised operational functions, and each held shares in the others. A company executive later compared the organizational structure to a computer chip with both vertical and horizontal lines of connection.

COMPANY PERSPECTIVES

Bunge is committed to furthering the well-being of its clients, employees, shareholders, and the communities where it is present.

The Brazilian recession that began in 1989 took its toll on such Bunge y Born companies as Sanbra, Moinho Santista, Quimbrasil S.A. (or Química Industrial Brasileira Ltda.), Santista Têxtil do Nordeste, and Tintas Coral, all of which lost moneyreportedly for the first timein 1990. In all, Bunge y Born was said to have lost as much as $150 million in Brazil. The losses extended into 1991, resulting, near the end of the year, in a managerial purge that shook the traditionally paternalistic enterprise to its foundations. Brazil was now entering an era of free trade in which powerful corporate lobbies like that of Bunge y Born could no longer protect their products from foreign competition. With support from other shareholders, Caraballo ousted Jorge Born as chief executive but returned to Buenos Aires after appointing a German executive resident in Brazil, Ludwig Schmitt-Rhaden, to direct Brazilian operations. The sizable debt of $472 million was refinanced so that payments could be stretched over a longer period of time. The number of companies was reduced to 75.

One result of the restructuring was greater transparency. In December 1993, for the first time in the conglomerate's history, its executives presented themselves formally to an audience of journalists. They were told that the enterprise would henceforth be known in Brazil as Bunge Brasil, with the Bunge y Born name retained only in Argentina. This was followed by a two-hour presentation in which company executives explained that the enterprise was being divided into five areas: wheat, soybeans, textiles, paints, and cement, each with a president reporting to Schmitt-Rhaden. Restructuring had been completed with the whittling of companies to 30 and of employees to 20,000, including the dismissal of 400 managers and the reduction of levels among personnel from nine to five. The enterprise, it was announced, would earn an operational profit for the year, ending a three-year period in which it lost $176 million. Even slimmed down, the enterprise was a considerable one, with about $2 billion in annual revenue. It ranked third in Brazil in the food sector, third in textiles, and second in paints and dyes. (The enterprise was not officially named Bunge Brasil until years later. Most of the businesses not engaged in consumer foods were placed in 1995 under a holding company named Serrana S.A.; the rest became part of Santista Alimentos S.A.)

Bunge International Ltd. was created in 1994 as the main holding company in which the Bunge y Born shareholding families held stock, and Schmitt-Rhaden became its president. The structure of the Brazilian operation was simplified further. By 1995, Santista Alimentos was responsible for all foods, Moinho Santista for both cement and textiles, and Tintas Coral for paints. By late 1995, Coral had been combined with Bunge's similar holdings in Argentina (Alba) and Uruguay (Inca) to form Bunge Paints, which now had eight factories and was the leader in its field in Latin America. But Schmitt-Rhaden had decided to exit sectors that it considered outside Bunge's core businesses. The following year he sold Bunge Paints for $390 million, and in early 1997 he sold Serrana's cement business for $430 million. Schmitt-Rhaden also sold Proceda, Banco Santista S.A., and Vera Cruz Seguradora S.A., an insurance company. Bunge diluted its textile segmentnow called Empresas Têxteis Santistain 1994, maintaining only a minority holding in a joint venture with São Paulo Alpargatas S.A.

KEY DATES

1908:
Argentina-based Bunge y Born enters Brazil by taking shares in a wheat miller and trader.
1926:
Sanbra is founded, and soon begins producing cottonseed oil.
1929:
Samrig, which, like Sanbra, begins producing fats and oils, is founded.
1938:
Bunge y Born begins participating in Brazilian cement and fertilizer production.
1954:
Samrig starts buying soybeans from farmers in exchange for fertilizer and pesticides.
1969:
Sanbra and Samrig are both heavily engaged in soybean processing, a major industry.
1974:
Bunge y Born moves its headquarters from Argentina to Brazil.
1981:
The company's gross sales in Brazil have reached $1.5 billion.
1990:
Bunge y Born's holdings in Brazil consist of 170 companies employing 30,000 people.
1993:
After losing $176 million in three years, Bunge y Born has cut back its Brazilian operations.
1997:
The company's Santista Alimentos S.A. has become Brazil's largest food producer.
1999:
Now called Bunge International, the company moves its headquarters to the United States.
2000:
Bunge has become the largest and only vertically integrated fertilizer producer in Brazil.
2002:
Bunge consolidates its Brazilian operations in publicly traded Bunge Brasil S.A.
2004:
Now totally owned by Bunge Ltd., Bunge Brasil remains the nation's top food company.

Meanwhile, in 199596, Santista Alimentos added $1 billion in annual revenues by purchasing 13 companies. Among them were three soybean-processing factories, five wheat mills, a bread producer, and a margarine manufacturer. And, in 1997, parent Bunge swallowed a giant in the Brazilian food sector: Ceval Alimentos S.A., a company with sales of $2.7 billion in the previous year and the leader in the processing of soybeans and production of soy meal and oils in Brazil. Purchased for about $700 million from Companhia Hering, the acquisition turned Santista Alimentos into the largest food producer in Brazil, with 48 industrial units turning out an array of goods from margarine, frozen meat, and bread. It was also the world's fifth largest processor of soybeans into meal and the national leader in vegetable oils and pasta as well as margarine. Ceval's third-place position in frozen meat filled a gap in Bunge's food holdings. At the same time, Bunge was investing heavily in fertilizer. Between 1996 and 2000 the company acquired eight Brazilian fertilizer companies to become the largest and only vertically integrated fertilizer company in Brazil, with holdings that included two phosphate-rock mines.

Oscar Bernardes, a protege of Schmitt-Rhaden, succeeded him as president of Bunge International in 1997. One of his first acts was to transfer Santista Alimentos' activities in soybean processing to Ceval, so that the former would be free to concentrate on consumer products, including Ceval's margarine and vegetable-oil brands. Ceval's meat division became an independent company called Seara Alimentos. Many analysts expected these actions to be a prelude to another sale that would put Bunge International out of consumer products entirely, and the company itself announced this intention in 1998. Bunge International was not interested in any offer made for Santista Alimentos, however, which was losing money, despite annual sales of BRL 2.2 billion (about $2 billion).

FOCUS ON AGRIBUSINESS AND FERTILIZERS: 200005

In 1999 Bunge International moved its headquarters from São Paulo to White Plains, New York. The following year Santista Alimentos and Ceval became parts of a new entity, Bunge Alimentos S.A. Fertilizantes Serrana S.A., Ouro Verde Ltda., and the recently purchased companies IAP S.A. and Manah S.A. were among the units placed in newly formed Bunge Fertilizantes S.A.

By this time Bernardes had been succeeded as president by Alberto Weisser. Twice a month Weisser flew to São Paulo from New York, since Bunge's Brasil operations accounted for half the group's $10 billion in annual revenues. Santista, with its more than 100 food brands and 20 factories, was still part of Brazil operations and still considered a headache. This division had lost BRL 104 million ($57 million) in 2000, and in any case group headquarters wanted to integrate its holdings internationally, an endeavor impossible for consumer products, because each country had its separate brands. When a buyer could not be found, Weisser looked to eliminate the most poorly performing brands. Others, it was thought, could be directed to institutional clients, such as bakeries, not only in Brazil but in the United States.

Bunge International became Bunge Ltd. in August 2001 and began selling shares on the New York Stock Exchange. In Brazil, all Bunge Fertilizantes and Bunge Alimentos shares were exchanged for shares of Serrana, which, in 2002, was renamed Bunge Brasil S.A. (and was 83 percent owned by Bunge Ltd.). This reduced the number of Bunge Ltd.'s publicly traded subsidiaries in Brazil from four to two: Bunge Brasil and Fosfertil S.A., a leader in raw materials for fertilizers that soon came to be controlled by Bunge Brasil. Bunge Brasil retained its position as the leading Brazilian agribusiness company. With ten million metric tons of soybeans and two million tons of wheat sold in 2002, it was the nation's fourth largest exporter and also the principal producer of fertilizers, comestible oils, wheat flour, margarine, and vegetable fats in Brazil. It was the leading company in Latin America in the processing and exportation of soybeans and wheat. The company had 79 units, ports, and distribution centers and 185 silos in 14 states.

Bunge Alimentos, in 2003 and 2004, resumed its effort to concentrate on agribusiness rather than food production and consumer food sales. Seara, its frozen-meat unit, was sold. Bunge Alimentos transferred to J. Macédo S.A. its consumer flour, pasta, and cake-mix brands and operations. In return, it assumed flour and cake-mix brands for industrial-size bakeries. It took a minority share in the establishment of Solae do Brasil Indústria e Comércio de Alimentos Ltda., which was founded in 2003 with Du Pont do Brasil Ltda. to furnish ingredients for producers of soy-based drinks and yogurt. In August 2004, Bunge Ltd. decided to take Bunge Brasil private, buying all the outstanding shares. When this was accomplished, Bunge Brasil was delisted from the São Paulo Stock Exchange.

In 2005, Bunge Alimentos was buying soybeans from 30,000 growers. It was also buying and processing wheat, corn, and cottonseed. For commercial clients, it was producing flour, premixes, margarine, and fats under the Bunge Pró brand; mayonnaise and margarine under the Soyua and Primor brands; and texturized soy protein under the Maxten brand. For retail consumers, it was producing margarine under the Cyclus, Delicis, Mila, Primor, and Soya labels; oils under the Soya, Primor, and Salada labels; and mayonnaise under the Delicia, Primor, and Soya labels. All Day and Cyclus were the names of its beverages. Bunge Fertilizantes was a vertical enterprise engaged in all steps of producing and selling fertilizers and mineral supplements for animal feed. It also was selling nutrients such as bicalcic phosphate, extracted from its own phosphate mines, for use in animal feed. A number of brands were being produced and sold to more than 60,000 customers by the four units of this company: IAP, Manah, Ouro Verde, and Serrana.

PRINCIPAL SUBSIDIARIES

Bunge Alimentos S.A.; Bunge Fertilizantes S.A.

PRINCIPAL COMPETITORS

Archer Daniels Midland Co.; Cargill Agrícola S.A.

FURTHER READING

Caetano, José Roberto, "Mexeu, mexeu e voltou ao ponto de partida," Exame, July 1, 1998, pp. 56-61.

Caplen, Brian, "Decline of an Argentine Dynasty," Euromoney, January 1999, pp. 51-52, 54-56.

Green, Raúl, and Catherine Laurent, El poder de Bunge & Born, Buenos Aires: Editorial Legasa, 1988.

Majul, Luis, Los dueños de la Argentina, Buenos Aires: Editorial Sudamericana, Vol. 1, 1992, pp. 249-303.

Mano, Cristiane, "Não sei," Exame, March 7, 2001, pp. 74-76, 78.

Netz, Clayton, "O mistério começa a ser desvendado," Exame, December 22, 1993, pp. 20, 22-26.

"O outro plano da Bunge y Born," Exame, July 10, 1991, pp. 96-98.

Paduan, Roberta, "O poder do Bunge," Exame, September 29, 2004, pp. 68-70.

"Sunset Over the River Plate," Economist, June 6, 1998, p. 63.

"Um império está no olho do furacáo," Exame, May 13, 1992, pp. 42-44.

Vassallo, Cláudia, "Por que o Bunge quer a Ceval," Exame, September 10, 1997, pp. 48-50.

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