Brazil has a large and growing food and beverage market driven by positive macroeconomic trends. The middle class is expanding rapidly, increasing consumers' purchasing power. The document outlines several high-growth food categories and trends in Brazil, including organic foods and ready-to-eat products. It also discusses the food and beverage industry's large contribution to the Brazilian economy and lists some of the major players and M&A activity. Issues to consider for companies operating in Brazil include inflation, currency fluctuations, and increasing beverage taxes.

1. Brazil: Food and
Beverage Market

3. Outlook
Although inflation and interest rates will continue to fluctuate over the
coming years, we believe that positive macro trends will drive sustained
growth in Brazil’s food and beverage industry and even more attention
from multinational companies and private equity investors.
Interest in Brazil is predicated on strong fundamentals and a market
too large to ignore. In a country famed for income inequality, extreme
poverty was cut in half between 2003 and 2008, and Brazil’s C class
alone now represents a larger market than the entire population of
Germany, France or the United Kingdom.
While effective social programs have received a lot of the credit,
substantial increases in real wages and the lowest unemployment in
Brazil’s history have been significant factors. Moreover, the expansion
of consumer credit has fueled a new class of consumers eager to
enjoy what for so long has been out of reach.
In the coming years, demographic trends will only accelerate these
consumers’ aggregate purchasing power. Unlike the United States,
where baby boomers are now retiring, or China, where the one-child
policy has caused the working-age population to shrink, Brazil is
entering its prime. The percentage of people between 25 and 50 is
expected to grow 30 percent over the next 10 years.
The impact on the food and beverage industry of more consumers,
with more money and more credit cannot be overstated.

4. Domestic Market Overview
Outperforming Food Categories
- Organic foods
- Snacks
- Nutritional foods
- Diet and light products
- Ready-to-drink fruit juices
Lifestyle Trends
- Increasing demand for chilled frozen and ready-made products
- Increasing proportion of meals consumed outside of the home
Food Retail
-2nd wave of private label introductions, with image adjustment, quality
improvement, and price slightly under the brand leader
-Emphasis in economic mergers to increase competitiveness

5. Distribution
Channels

6. The downstream end of the food industry is comprised of the In 2010, 70% of sales to the domestic market were distributed
domestic and import market distribution industry (including milling through food retailers, and 30% through food service providers.
and processing firms which purchase grain and other commodities), As seen by the chart below, food service providers have played
wholesalers and distributors, importers, international distributors, an increasing role in the distribution of industry product (25% of
retail chains, national and international food service segments, domestic sales in 2002 vs. 30% now) as out-of-home dining has
such as fast food chains, restaurants and hotels. increased in prevalence in Brazil.

7. Production
Brazilian food production: global rankings and share
#1: sugarcane, coffee, tropical fruits, orange juice, beef (cattle herd size),
alcohol, tropical fruits
#2: soybeans (behind the US), poultry (moved up from 3rd place in 2010),
candies and confectioneries
Important producer of pork (4th-largest), corn (4th-largest), cotton (5th-
largest), chocolate (5th-largest), tobacco, pulp, milk (6th-largest), seafood
Further market share gains are expected in the near-term driven by
favorable domestic and global trends

8. Brazilian Food &
Beverage Companies By Revenue
By Revenue R$ Millions
R$ Millions
BRF Brasil Foods
BRF Brasil Foods 15,905.8
15,905.8
Bunge Alimentos
Bunge Alimentos 15,779.5
15,779.5
Cargill
Cargill 13,489.0
13,489.0
JBS-Friboi
JBS-Friboi 5,148.8
5,148.8
LDC Brasil
LDC Brasil 4,720.3
4,720.3
Amaggi
Amaggi 3,963.0
3,963.0
A survey published in Exame magazine (2010) on the 500 largest
Seara
Seara 2,771.9
2,771.9
companies in Brazil showed that 40 are food industry companies
Marfrig
Marfrig 2,624.6
2,624.6
and seven are beverage producers. Among the larger companies,
Aurora
Aurora 2,518.0
2,518.0
foreign capital’s share of the food industry stands at 59% (based
Minerva
Minerva 2,507.2
2,507.2
on total sector sales), while foreign capital’s share in the beverage
industry stands at 19%.
By Profitability
By Profitability EBITDA Margin
EBITDA Margin
The sector employs 1,521,000 workers in Brazil and includes (Largest Companies)
(Largest
Companies)
38,128 companies: 81.1% are very small (1-19 workers), 13.5% Garoto 22.5%
Garoto 22.5%
are small (20-99 workers), 4.0% are of average size (100-499 M. Dias Branco 19.6%
workers), 1.4% are big (+500 workers). – Source: Labor Ministry/ M. Dias Branco 19.6%
Marfrig 15.2%
Rais – 2009 Marfrig
Moinhos Anaconda
15.2%
14.8%
Moinhos Anaconda
Nutron Alimentos 14.8%
14.5%
Astor Group’s extensive Brazilian network includes small and large Nutron Alimentos 14.5%
Laticinios Jussara 14.4%
companies across Brazil.
Laticinios Jussara
Coniexpress 14.4%
13.3%
Coniexpress
Yoki 13.3%
13.2%
Yoki Foods
Kraft 13.2%
11.0%
Kraft Foods
GDC 11.0%
10.0%
GDC 10.0%

9. Mergers and
Acquisitions
Food and Beverage Industry M&A (R$ Millions)
Food and Beverage Industry M&A (R$ Millions)
M&A volume remained strong during 2010 (following a record year
in 2009) as the economy expanded, lending markets loosened and
consumer confidence rose.
If commodity price increases taper off and the economy continues
to improve, we will likely see further credit market loosening and
heightened deal activity.
As developed markets continue to experience incremental growth
we believe that companies will increasingly look toward growth
opportunities offered by developing economies such as Brazil.
Transaction Buyers Target Target Seller
Date Segment
02/03/2011 Coroa Participacoes Usina da Barra S.A. Açúcar e Distillers and Usina da Barra S.A.
Ltda Álcool, Non Sugar Food Production Vintners Açúcar e Álcool
Lines
07/20/2010 Alothon Group, LLC Casadoce Indústria e Comércio de Soft Drinks Usina Cerradinho -
Alimentos Ltda Açúcar e Álcool S/A
06/30/2010 (open market Companhia de Bebidas Das Brewers Soros Fund
purchase of shares) Americas (AMBEV) (NYSE:ABV.C) Management LLC
05/14/2010 Citrosuco Paulista SA Citrovita Agro Industrial Ltda. Soft Drinks Votorantim
Participacoes S.A.
10/06/2009 Miolo Wine Group Almaden Wine Brand Distillers and Pernod-Ricard SA
Vintners (ENXTPA:RI)
08/07/2009 Pepsico, Inc. Amacoco Nordeste Ltda. and Soft Drinks -
(NYSE:PEP) Amacoco Sudeste Ltda.
06/01/2009 Santa Clara Indústria Unilever Brasil Ltda., Powder Drinks Soft Drinks Unilever Brasil Ltda.
E Comércio De Business
Alimentos Ltda.

10. Issues to Consider in Brazil
Increasing Food and Inflation Exchange Rate Brazilian Beverage Taxes
Commodity Prices
(global issue)
Causes: Demand: increased global Brazil’s inflation-tracking consumer price Rising interest rates (high yields), used Recently enacted 15% federal excise
demand (led by emerging markets: China); index, the ICPA, is currently above 6%, to slow inflation, and rising commodity tax hike (IPI and PIS/COFINS) on non-
Supply: short-term shocks (weather), which the highest since November 2008 prices, have attracted foreign investors to alcohol and alcoholic beverages (previous
duties (domestic food costs have a 56% weight the market, who have bid up the Real (The tax hike of 15% in January 2009)
in the metric), driven by commodity prices Real has advanced 46% since the end of
In Brazil: food inflation was 10% y-o-y in and credit-driven demand side pressure 2008) Tax hike will likely be passed on to the
Q1 2011 (largest culprits: protein, sugar on domestic production consumers – will be offset by 2-3% price
and soft commodities), faced similar issue Brazil has used spot market purchases increase
in 2008 Interest rates have been the main tool of US dollars and taxes on inflows (for
used by the Central Bank to reel in inflation purchasing bonds / interest-bearing Beverage taxes in Brazil represent 1/3
Near-Term Forecast: significant further (SELIC interest rates now at 12.25% vs. accounts, equities) to prevent further Real of the retail price (of that amount, 1/3 is
appreciation in commodities pricing is not 9.5% in April 2010), although many believe appreciation federal and 2/3 are the state value-added
expected, although the global supply of interest rates hikes were enacted too ICMS tax)
grains (specifically, corn and soybeans) slowly and too late We expect the end of US quantitative
could remain tight going forward easing in July 2011 should curtail further
Government expects inflation to decrease Real appreciation against the dollar
Impact: price increases passed on to the in 2H’2011 as the interest rate hikes take
consumer- could make the consumer effect
pull back on discretionary spend (non-
essential food and beverages, goods and
services)

11. Astor Group has a unique combination of merger and
acquisition, food & beverage and Brazil experience.
Astor Group Expertise in Brazil We maintain ongoing contact with a deep network of
companies within the food & beverage sector. This
enables us to quickly identify the most desirable partners
and reach those companies that are not on the market.
Our partners have a successful track record building,
growing and selling brands within the food & beverage
markets.
We recognize why Brazilian food and beverage
transactions are different than other types of deals and
we prepare our clients so that there are no surprises.
When exploring transactions in Brazil, it is critical to
have a local partner with deep relationships and cultural
understanding. With offices in New York and Rio de
Janeiro, Astor Group helps companies from The Carlyle
Group to DeVry University better navigate Brazil.

12. Sample Targets The following companies are illustrative of
the types of introductions that Astor Group
provides:

13. Snack foods Location
Sao Paulo, SP
Total Revenue
R$100m
Description
Produces range of confectionary products from
chocolate bars to lollipops. Operates multiple
domestic plants and produces products suitable
for domestic and international markets.
State in the Over R$2 Engages in manufacturing, selling, and
Northeast billion distributing of wheat derived products under a
variety of brand names. Products include
crackers, cookies, pasta, biscuits, vegetable fats
and margarines.
State of SP R$200m Manufactures and markets bakery products.
Specifically, it offers flavored wafers, biscuits,
cookies, crackers and other snacks. The
company maintains distribution centers in the
region.
State of SP R$100m Produces, distributes, and sells confectionery
products in Brazil and internationally. Its products
include chocolates, peanuts, chewy candies,
bubble gums, jelly beans,gumdrops, lollypops,
stick toffees, mints, and chocolate sprinkles

14. Fish processor Description
Leading national brand of processed fish with high penetration in
most domestic supermarket chains
High degree of vertical integration:
The company owns a fleet of fishing boats and delivery trucks; material
portion of revenue comes from the processing of fish caught by their
own operations with balance from suppliers all over the world
Financials
2010 sales of US$150M with substantial revenue growth over past
five years
Historical EBITDA is 10% of sales
The deal:
Owner is looking to sell equity to a strategic partner - ideal partner would
have aquaculture experience and international distribution

15. Supermarket chain Description
Top 20 supermarket chain in Brazil with nearly 100 stores spread
mostly across middle/low income class neighborhoods of Sao Paulo
Serves neighborhoods with high population density and areas of large
flow of people; target customer profile comes from income class C,
D and E
The group has been experiencing a positive impact of rising real
wages of the population, encouraging consumption of higher added
value products and causing a shortening of the average distance to
the supermarkets
Financials
Closed 2010 with revenues approaching R$1.5 billion (US$900
million), representing an average annual growth of 20% over the last
four years
The deal:
The partners are seeking capital to strengthen its balance sheet and
would consider the sale of the enterprise

16. Diversified sauce, Description
Producer of fruit juices, condiments, alcohol beverages, and other
juice company
sauces
Family owned business located in São Paulo State
Other key products:
Sauces (ketchup, mustard, mayonnaise, hot sauce, tomato sauce,
Worcestershire sauce, chocolate sauce), fruit juices, ice cream,
professional foodservice line
Financials
2010 revenue: approaching US100m
The deal:
Seeking a minor equity partner

17. Leading Description
Production and distribution of national and international brands of
drinks and foods; recognized as one of the most efficient food and
manufacturer beverage companies in Latin America, with a diversified portfolio and
highly synergistic, broad distribution network
and distributor of Key brand segments distributed:
Energy drinks, acai, coconut water, orange juice, vodka, potato chips
global beverages Distribution:
The company has a national distribution network serving supermarkets,
convenience stores, bakeries and bars in all regions of Brazil
The Company employs regional sales teams and serves nearly
5,000 supermarkets; through its network of accredited vendors,
the company’s products reach more than 200,000 points of sale
throughout Brazil
Financials
Revenues: R$150M (US$100M)
The deal:
Seeking growth capital

18. Coconut milk Description
The company distributes coconut products all over Brazil and the
world, conducting research and employing state of the art technology
and juice company in facilities in the Northeast
Runs the largest coconut farm in Brazil and produces coconut derived
products (coconuts and coconut water for direct consumption and
the husk as an agricultural substrate) from modern factory facilities
The company’s factory, storefront and headquarters and management
team are also based in the Northeast
Financials
Revenue: over R$100M (US$70M); EBITDA: above industry average
The deal:
Seeking equity investment

19. Coffee producer Description
Based in Rio de Janeiro, the Company operates in the coffee market
in two segments: green coffee, and roasted & ground coffee, where it
and exporter is considered the 2nd roaster in Rio, and one of the biggest in Brazil
The Company has a full compliment of facilities for the green coffee
process and is known for excellence in quality by the main foreign
roasters in the world
Exports
The Company exports to some of the world’s leading food and
beverage companies around the world, in Germany, Italy, the US and
Japan
The deal:
Seeking growth capital

20. Preserved food Description
Based in the state of Rio Grande do Sul, the company engages in
the production and sale of preserved food products including meat,
products vegetables, fruits, sauces, pickles, tomato products, mayonnaise and
fruit preserves
Meat products:
Meatballs, beef, sausage, beef cold cuts.
Vegetable products:
Olives, corn cream, peas, pea and green corn, beans, chick peas,
cucumbers, sweet cucumbers, homemade cucumbers, and vegetable
salads
Tomato products:
Tomato sauce, Bolognese sauce, tomato pulp, and gravy of chicken;
Condiments:
Ketchup, standard mustard, hot mustard, spice with pepper, spice
without pepper, and spice for poultry; and mayonnaise products.
Exports:
The company exports to 47 countries
Financials
Revenue of R$250M (US$150M), EBITDA of R$20M (US$12M)
The deal:
Seeking growth capital

21. Rio de Janeiro New York
Avenida Ataulfo de Paiva, 5 East 57th Street,
255/302 ∙ Leblon, 16th Floor ∙ New York,
Rio de Janeiro 22440-032 New York 10022
Telephone: +55 21.3592.6955 Telephone: +1 212.633.1399
www.theastorgroup.com