Brazil Joint Venture
Justin Guiles
John Hand
Tyler Hollenbach
Lindsey Johnson
Ben Ottenhoff
Investment
• Tropicana is a subsidiary of PepsiCo and is the world’s
leading producer of chilled juice.
• Citrosuco is the largest orange producer in Brazil and is a
subsidiary of the Fischer Group.
• Tropicana will enter into a joint venture with Citrosuco to
source a greenfield investment in Bahia, Brazil.
• Location strategically selected based on incentives offered
by “Agência de Desenvolvimento do Nordeste” (ADENE)
Investment, Cont’d
• Tropicana to vertically integrate a key component of their
United States operations value chain – FCOJ
• Investment will allow Citrosuco to expand their current
market share as a global orange producer.
• Contribution to the LLC by the Partners will be 90/10 with
profit sharing percentages at 50/50
Market Analysis
• Brazil exported $2 billion worth of orange juice to
international trade partners in 2008, representing 80% of
the world’s orange juice
• 60% of Brazilian orange juice went to the European Union,
20% to the U.S., and 10% to Japan
• Brazil exports 95% of their production
Regulatory Environment
Brazil
• Stable political/regulatory environment
• Foreign investment in Brazil is not subjected to government
authorization or approval.
United States
• As a protectionist measure, the U.S. uses zeroing, an ad valorem tariff
based on comparison of costs.
• Due to the fluctuation in the price of orange juice, the tariff rate tends
to be between 27% and 49%.
Currency/ Spot Markets
• Brazil was plagued by hyperinflation from 1980 – 1995, but
has since taken up monetary policy to significantly lower
that risk.
• To mitigate against unexpected currency fluctuation, we
propose that Tropicana purchase currency futures to hedge
against possible inflation/deflation.
• Proposal will reduce Tropicana’s exposure to FCOJ spot
market rates on the NYBOT.
Recommendation: Pursue the Joint Venture
1) The ability to realize profit despite U.S. tariffs
2) Diversification of product sources as a hedge against
natural disaster
3) The ability to use oranges for product sold outside of
the U.S. as those markets grow despite the current
regulatory conditions in the U.S.