Far away from the Rio-São Paulo axis, businessman José Carlos Garrote de Souza, or just Zé Garrote (or ZG to those closest to him), has been building a regional chicken giant in Goiás. Owner of São Salvador Alimentos, which has under its umbrella the brands Super Frango and Boua, the company earns around R$ 3 billion a year and wants to take bigger flights. Even though it was not able to go public last year, the company is still in contact with investors from Faria Lima, the nerve center of the national financial market, and has been drawing attention with its numbers.
Garrote, which, by the way, is not his surname at birth, but its origin is from a childhood nickname, is very well known in Goiás. One of the stories behind the company is that, on three occasions, Garrote sold all his assets to expand the business. That’s how it was in the 1980s, when he raised capital to have his slaughterhouse. One of the properties he sold was his house, which made him live with his father-in-law for a period. The owner of Super Frango was born in the early 1980s, exactly in partnership with his wife Flávia’s father, who already had a farm at the time.
The journey of José Garrote, now 64 years old, in the world of chicken was not, however, planned: his path was directed towards owning a drugstore, like his father. However, shortly after he got married, his father-in-law asked for his help in taking care of the business, after his son’s health problem took him out of the farm’s daily life. It was there that, together with his wife, Garrote decided to sell for the first time all his assets, including his house and car, to invest in the business. “I wanted to develop the pharmacy business, I had never thought about working with chicken,” he says.
Unlike large producers, São Salvador Alimentos decided to supply small supermarkets. To do so, it had to develop logistics to deliver faster, and in smaller quantities, to places far from capital cities. This “drip-drip” service prevents these retailers, who are short on cash, from being forced to place orders that are too large.
With this look at the regional networks, the prices of the products sold end up being higher and, with that, the profit margins grew – precisely the point that has drawn the attention of the financial market. The company’s Ebitda margin (earnings before interest, taxes, depreciation and amortization) has been consistently above 25%, while the index of the best-known company in the sector, BRF (owner of the Sadia and Perdigão brands), has remained around 10%.
In the early 1990s, the company slaughtered 2,500 birds a day. It was at this time that plans to grow accelerated. “And I decided to build a slaughterhouse for 8,000 and an infrastructure for 20,000 birds a day. No one at Faria Lima would be able to understand this account”, jokes ZG. And over the years, with more investments, the company grew and cut out the middlemen.
Today, years later, the company’s daily slaughter is around 430,000 birds. Recently, São Salvador Alimentos opened a new production complex to reach 730,000 birds per day. The company is present in 14 states, in the Federal District and exports to 75 countries. The second industrial plant is also located in Goiás, in the municipality of Nova Veneza.
Last year, accelerating its growth, it opened a new animal feed factory. Going forward, the entrepreneur guarantees there is plenty of room to grow. But he says he’s not in a hurry. “I could see a lot of people who walked fast and fell,” he recalls.
To those who think that the life of the owner of Super Frango was a road without mishaps, the businessman insists on making it very clear that it was not quite like that. Before being recognized by the empire he built in Goiás, Garrote got rid of all his assets three times. First, in the early 1980s, he sold a car, a house, and drugstores; years later, an apartment purchased on the plant was also invested in the farm; and, finally, the father-in-law’s house met the same fate. “It all paid off,” he says.
Keeping an eye on the market
With growth and profitability data under its arm, the company is this week holding a “non deal roadshow” – an expression that, in financial market jargon, defines meetings between companies and investors without a specific market operation. The demand for the company was so great that a second day of meetings had to be arranged.
Despite continuing as the strong name within the company, Garrote is currently on the board of directors. Despite this, he goes to the office every day, according to a source close to him. In the pandemic, his son, Hugo Perillo e Souza, 37, took over the company’s main executive position.
“The company, not knowing what corporate governance was. already had a whole structure organized for a long time”, comments a source close to the company. The son was prepared to take on the post, having studied abroad and worked in other companies. The company has been audited for years by one of the largest audits.
In addition to Hugo, Garrote is also the father of two daughters, Ana Cláudia and Ana Flávia, who also work in the family business. He has four grandchildren, who carry the surname adopted by their grandfather on the certificate: Garrote. “I’ve also moved all my documents. If you ask who José Carlos de Souza is, nobody knows”.
It is with an eye on the continuity of São Salvador that Garrote wants to make the company’s initial public offering (IPO). “The IPO is not based only on cash, but a way to make the company more exposed to the market and ready to receive capital flexibility, with the objective of bringing more growth”, says another source close to the company.
After the IPO did not take off, São Salvador has already made its debut in the capital market, with two operations of Certificates of Agribusiness Receivables (CRAs), fixed-income securities that have become popular with investors due to the Income Tax exemption (IR ). A group of about 20 fund analysts went to see the company’s day-to-day activities in person. “The feedback was very positive,” says a market source.
Stock market debut ‘at the right time’
And Garrote guarantees that the IPO will still come, when the time is right. That’s why it has maintained a governance structure for years. The dream of going public was born in 2005, a time when the Brazilian Stock Exchange went through a “wave” of debuts. With the arrival at B3 as a goal, he hired one of the main audits operating in Brazil, the law firm Pinheiro Neto and the consultancy Falconi to put the house in order. On the investment bank side, he recruited XP.
“I will have more options if I do an IPO,” says Garrote. Now, when he shows his business to investors again, the businessman says that he will deliver what had been promised in terms of profitability. “We deliver the 2021 result to the letter”, he says. With the house tidy, the businessman says that, when he returns to the market, “there will be no surprises”.
Recently, after leaving the executive position of his company, Garrote assumed the presidency of the Associação Pró-Desenvolvimento Industrial do Estado de Goiás (Adial). In an election year, Garrote says he has confidence in Brazil. “I understand that Brazil has great opportunities ahead. Brazil has a solid democracy. I believe in democracy and institutions in Brazil. We need management that is more aligned with world trends. It will help us grow bigger and bigger,” he says.
Consultant specialized in agribusiness, Carlos Cogo says that the farm sector is experiencing a moment of “heated domestic market and a good pace of exports, which are expected to grow between 6% and 8% in 2022”. “The greater domestic demand supports the prices of live chicken this August, while the inputs used in the poultry industry decline, relieving the cost of production. There is a stabilization of the production costs of live chicken, with the cheaper corn in this second half of 2022”, he says.
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