China’s poultry industry poised to compete with pork
China's poultry industry is beginning to develop its own growth path out of the shadows of the pork industry, a new report from Rabobank suggests.
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 million tonnes of annual output which accounts for 18% of global production (second only to that of the US). Chenjun Pan, analyst commented, "Low current per capita consumption rates and a growing acceptance for eating poultry meat amongst the younger generation, creates a strong growth potential that should enable the industry to take a meaningful share of meat consumption away from pork".
Much of the growth will come from the burgeoning quick service restaurants (QSR) sector 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. China's leading QSRs, KFC and McDonald’s, have increased their outlet numbers to 4,000 and 1,500 respectively, with KFC claiming 39% of the fast food market. Even if the QSR segment fails to maintain this rapid growth rate, there is still considerable opportunity in China's nascent frozen or processed food market.
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.
China, however, lags behind 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. In 2012 alone, avian influenza and other diseases have affected the industry several times. Similarly, the feed model has come under fire with consumers raising concerns over the use of growth promoter and medicines in poultry production. It will take a considerable amount of time for poultry companies to rebuild trust among China's consumers.
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