July 11, 2011

Brasil Foods may have Perdigao brand restricted up to five years

Brazil's antitrust regulator Cade could prevent Brasil Foods from using its flagship Perdigao brand for up to five years in some market segments, as a condition for not breaking up the world's biggest poultry exporter.

Negotiations between Cade and Brasil Foods will continue until the agency board's July 13 meeting, reported Brazilian national newspaper O Estado de S. Paulo.

Both parties agree on partial restrictions on use of the Perdigao brand, but company executives are concerned over the extent and scope those restrictions, according to the newspaper.

Cade is reviewing whether the creation of Brasil Foods in 2009, through a takeover of Sadia by rival Perdigao, resulted in a company with too much pricing power in the food processing market. A councilor at Cade recently said the takeover would harm competition and lead to higher prices, stoking concerns the transaction could be rejected.

Several Cade councilors have said that BRFoods, as the company is known, is too dominant in most markets it operates, such as cold cuts and frozen foods, but the company is reluctant to give up some of its flagship brands.

By ordering Brasil Foods to stop using the brand for a certain period, it could entice competition in segments where its market share is above 70%, such as some cold cuts, frozen pizzas, turkey, and other poultry.

Regulators are trying to prevent Brasil Foods from creating a new premium brand should they restrict Perdigao, Estado said. Sadia and Perdigao are the company's main brands, with Sadia being preserved because its price tags are above those of Perdigao.