European poultry market growing and still has much potential

18 Aug 2010

However, nurse poultry producers also face intense price pressure and fierce competition – especially with the economic downturn such as from farmed fish. Meanwhile, store input costs – wheat, soya – are expected to rise. In this context, the challenge for producers and retailers is to differentiate and inject value into a meat that continues to be perceived as a low-value product.

The changing face of the poultry industry
As consumption patterns evolve from year to year, producers have to keep up. Back in 1970, 70% of poultry sold in the US was whole and only 11% was further processed. In 2009, only 4% was sold whole and 48% further processed. Meanwhile, fast food chains revolutionized the market in the 1980s by introducing nuggets, wraps, salads and such: foodservice outlets now account for 42% of chicken sales in the US.

The meat industry itself is transforming and consolidating rapidly. While a few years ago, all the biggest players were American (Tyson, Smithfield, Cargill, etc.), the number one group today is Brazil’s JBS. The largest Brazilian poultry producer employs no less than 110,000 people.

Three companies produce 22% of the world’s beef. Other species are more fragmented, especially in Europe. Nan-Dirk Mulder, the Associate Director Commodities, Feed and Animal Protein of Rabobank International, the world’s leading food & agribank, believes there is still plenty of potential for innovative poultry brands. “European poultry producers don’t make the most of the large EU market,” he pointed out. The future, he concluded, belongs to the companies who can tackle volatility.

On the retail side, the weight of major supermarket chains puts pressure on producers. In Britain, for instance, the five largest retailers account for 85% to 90% of poultry sales. Providing the distributor’s perspective, Metro Cash & Carry International’s Head of Meat Management, Bart Blomme, confirmed that volatility is a killer for retailers. “We cannot pass on the changes in input prices to our foodservices customers,” he said.

A globalized commodity
Nan-Dirk Mulder explained that the meat market has become much more turbulent since 2006, when globalization started in earnest. In 2008, volatility of exchange rates (e.g. with the Brazilian real) was added to commodity price volatility.

“The global meat market is slowly recovering from the recession, but is hampered by trade restrictions,” Nan-Dirk Mulder added. The Russian ban on imported broilers accounts for much of the 4% drop in the global poultry trade forecast by the USDA for 2010. Nonetheless, poultry production should increase by 3% this year, outperforming pork and beef (1.6% and -0.7% respectively).

The meat of the future?
“By 2030, poultry will overtake pork as the world’s preferred animal protein,” Nan-Dirk Mulder said. The meat market as a whole will increase by almost 40% in the next 20 years. 70% of the growth in demand will come from Asia, particularly China. Poultry, however, has a more international profile, with a larger share of demand growth coming from non-Asian countries: good news for the European poultry industry.

Philip Wilkinson, a director of the British Poultry Council, highlighted the role of poultry in feeding the planet. “There are 2.4 billion more of us today than in 1980 and there will be an extra 3 billion more by 2050. As more and more people reach income levels of $10/day or more, their need for more meat, especially processed and packaged forms, increases.”

The sustainable animal protein
Poultry is the most efficient animal protein, requiring only 2 kg of grain to produce 1 kg of meat in just 42 days. Pork requires 3 kg and 180 days, while beef needs 4 kg of grain and 365 days to develop one kg of meat. This efficiency explains both why chicken is more affordable and why its popularity is growing.

Although negative perceptions of packaging are still widespread, its contribution to food safety and shelf life will help face the global food challenge. In the UK, for instance, a third of the food purchased by consumers is eventually thrown out. Local authorities spend Ł1 billion every year collecting this food waste, which ends up rotting in landfills and emitting methane, a major contributor to the greenhouse effect. Yet producing and transporting this food requires ten times more energy than the packaging used to protect it.

The centralized food preparation of case ready also reduces waste within the supply chain itself. In the US, downstream yield savings for fresh red meat are estimated at 5% of total sales.

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