In China, poultry producers have long lived in the shadow of the pork industry, which remains the meat of choice throughout the nation. Whilst this trend is evident in the highly correlated prices between each market, a new report from Rabobank suggests that China's poultry industry is beginning to develop its own growth path.
The poultry sector has great growth potential thanks to changing food preferences and growing demand from the ever-increasing quick service restaurants (QSR) sector. To capitalise on this potential, producers must address a number of barriers that constrain the industry at present, namely concerns around food safety and poor farm management.
Fast growth expected
Poultry production in China is expected to continue to grow faster than pork thanks to the efficiencies it offers to both producers and consumers. The poultry industry is already the most industrialised protein segment, producing some 17 mill. t of annual output which accounts for 18% of global production (second only to that of the US).
Much of the growth will come from the burgeoning QSR and emergent frozen/processed food sectors. At present, QSRs are the major driving force for poultry demand thanks to a double-digit growth rate and menus biased to poultry. Barriers
Poultry production in China is still much less industrialised than in other leading producers such as the US, Thailand or Brazil. Vertical integration is quickly gaining popularity (a model adopted by poultry leading players including Fujian Sunner and Shandong Nine-Alliance), but contract farming is likely to remain the dominant business model as a result of prohibitive capital requirements, a lack of experience and rising land costs.
In addition to production scale, China lags other poultry producing countries in terms of farm management, productivity, food safety and disease prevention. Disease outbreaks have brought serious consequences to producers and processors in the past few years; outbreaks as far back as 2003's combined Sars (Severe acute respiratory syndrome) and the H1N5 scares have caused panic about poultry consumption.
China’s poultry market has more growth potential than any other meat industry. The current product portfolio has not fully reflected the advantages of poultry meat and poultry companies are expected to benefit from growth in new segment, especially the development of a wider range of frozen processed products.