SuKarne a force in North America’s beef industry

SuKarne a force in North America’s beef industry

 SuKarne as Mexico’s largest meat processor and a North American powerhouse.

By Michael Fielding, Meating Place

Pieced together as an integrated business model – SuKarne controls every step of the process from cattle purchasing to distribution – the result is a feverishly successful company, which is anticipating $787 million in exports alone in 2013 (at $1.3 billion in sales domestically, it is the fifth largest grain-fed beef supplier in North America. It’s been so successful that it has logged a compound annual growth rate of 20 percent for two decades.

Though the model is rare in the United States, it’s not unheard of. The 2007 merger between JBS and Swift & Co. created the world’s largest meatpacking firm, marking a milestone for vertical integration in the beef sector. (Though in 2009 the U.S. Department of Justice blocked a JBS offer to acquire National Beef, stunting the giant’s further growth.)

Seizing opportunities

The progress of SuKarne – and of the Mexican beef industry as a whole – has paralleled that country’s rise of middle class, the emergence of working women, and the supermarket.

In just the last decade Mexico has transitioned from a carcass-based system to a boxed beef system. The appetite has shifted from a freshly broken down side of beef to boxed beef, chilled and at the ready for the contemporary Mexican consumer.

And all along, SuKarne has been there, growing exponentially from its base in Culiacan. The 500-year-old city is rimmed by an erratic, expansive patchwork of tomato fields and pepper farms that stretches 10 miles to the Sea of Cortez. It’s symbolic of this protein company’s (pork and poultry also are among its product) aggressive plans to build up, build out and build often.

Its Integrated Meat Production Unit serves as the model for the entire company: From feedlot to fleet, every piece of beef in the production chain is traced back to a single location.

The model takes its cue from the 20-year-old facility in Culiacan. Demand for Mexican-fed beef in Mexico has grown in the last 10 years.

“The economy of scale, consistent quality and flexible processes allow us to customize different cuts for clients,” says Raul Carrillo, Communication and Corporate Affairs Vicepresident, pinpointing three growth markets that he hopes will help the company double its exports by 2015: customized, value-added products to the United States; specialty products such as offal  for the Japanese market; and further-processed (as opposed to commodity cuts) for the international markets.

With the projected completion date of its newest facility in 2014, the company is on track to maintain a constant supply of more than one million head of fed cattle. The $110 million facility in Tlahualilo, Durango, follows its model of an alliance with regional producers.

It will be the largest processing plant in the Western Hemisphere and one of the most efficient and modern facilities in the world, surpassing even a massive JBS plant in Brazil.

It all starts on the feedlot

Even the largest U.S. feedlots barely exceed 100,000 head, and the typical feedlot numbers around 80,000, but by virtue of its size SuKarne has overcome issues related to the acquisition of feeder cattle.

Nearly 50,000 cattle suppliers sell their cattle – a mix of Cebu and European breeds – at 200 “buying stations” spread across the country.

To the company’s credit, the massive feedlot size allows it the flexibility to buy wherever cattle are available and to take advantage of differences in production at any given time.

“Whereas other processors have to wait until there’s enough mass to buy, we buy all sizes, weights and ages of cattle,” Carrillo says. “Other companies have to wait to make their selection because they don’t operate on such a large scale.” And positioning the feedlot adjacent to the slaughtering operations reduces stress, transportation costs and pollution, he adds. It all adds up to a steady supply of cattle and beef of consistent quality.

“But the integration is not just from feedlots. We also have that model for our cattle from buying stations and our processing,” Carrillo says. “The idea was to be practical, to have the most processes in line for maximum efficiency.”

Its competitors (regional, mostly) haven’t followed SuKarne’s lead partially because the company has built most of its plants from the ground up. That’s one challenge to its steady, consistent growth: the need for a building design – and enough land – that’s tailored to its business model.

That’s an understatement. The company’s achievements read like a list of superlatives for a Mexican company: its cattle-on-feed numbers will nearly doubled to 515,00 in 2013 from just 292,000 in 2010; it produces 1.4 million tons of its own feed for its five feedlots; with a partial company-owned distribution fleet, SuKarne boasts the largest sales and distribution network in Mexico; and more than 70 percent of Mexico’s beef exports to the United States, Japan originate on a SuKarne feedlot.

Mexico’s fed-cattle sector has only taken off in the last decade or so, evolving much more recently than its neighbor to the north. SuKarne also benefits from a subtle but key difference in the characteristics of its final product: Since Mexicans (and immigrants living abroad) typically don’t have the preference for marbling that Americans do, the middle meats exported to the United States don’t directly compete with American beef.

SuKarne is producing a distinctly a Mexican product going into Mexican marketplaces in the United States. Like everything at this 44-year-old company, it all starts on the feedlot, where the rations are less intensive than in the United States.

Sustainability in the mix

It can be challenging to manage half a million cattle, from feed to waste, but SuKarne has built four compost processing plants that convert manure into compost, which is sold to producers the company sources from. Each year it sells 250,000 tons of fertilizer.

SuKarne doesn’t even outsource its scraps. After offal processing, the bones, fat and blood are sent to three company-owned rendering plants. Sustainability Vicepresident Jorge Siller is even lobbying for an in-house hide processing unit. Why not? Last year SuKarne dressed 1 million cattle.

But gem of its sustainability program is a three-year-old biogas pilot project – a first for the cattle industry. Under contract with two Canadian manufacturers, SuKarne has installed bio digesters that convert manure, corn and grease with the company’s lagoon water into gas that – if all goes well – will be compressed to power its distribution fleet and to provide heat and power to its facilities.

“The idea is that each plant will be self-sufficient in both electricity and thermal energy,” Siller says. A commercial-scale project will require 24 chambers at 500 tons each – a big step from the dual chambers currently in use at the Vista Hermosa facility. “We hope to build a commercial-scale bio digester project by end of the year.”

More than 700,000 liters of biogas is produced each month, and Siller expects each plant to generate 3 megawatts of electricity and 3.5 Mw of thermal energy (the equivalent of enough power for 3,000 homes). Like food safety, there isn’t much of a competitive advantage with sustainability. In the near future, Siller predicts, consumers will regard a company’s sustainability policies as highly as the final products they’re buying. “This is a model that will help us survive in the future,” he says.

“We don’t say ‘no.’ We say, ‘how can we do this?” says Jesus Fierro Lopez, Director of certification regulations. “We’re a company run by people who want to do a lot.”