South African poultry market weighs World Cup benefits

The South African poultry industry could present a mixed view of sales during the World Cup as groups such as Astral Foods and Country Bird catered to differing markets, reports Business Report.

Astral Foods CEO Chris Schutte said that his company did not expect an increase in sales during the World Cup, when an estimated 450,000 tourists would visit the country over a period of 6 weeks.

“If you take a look at the international per capita consumption rate of poultry, it is obvious that the World Cup will not have a major impact on our poultry outlook,” Schutte said, adding that Astral Foods fed 50 million people a week.

“The World Cup will hardly have an impact on our production capabilities and it might only impact stock levels by between 1% and 2%,” he added.

On the contrary, Robbie Taylor, the financial director of Country Bird, believes there will definitely be a benefit for his group because the fast food restaurant industry is one of its major customers. He said weak demand had put the poultry market under pressure during the past 6 months, but that the group expected a significant upturn during the World Cup.

“We have strategically important partnerships with quick service restaurants like KFC and Nando’s, which bodes well for our group as tourists will visit these restaurants during the tournament.”

Taylor added that Country Bird served a similar market to Rainbow Chicken, which also expected a sales surge in June and July. “It depends on the sales mix and market,” he said, adding that Astral Foods and Sovereign Foods, which traditionally serve supermarket businesses, would likely not experience a significant increase in volumes in that time.
Peter Wille, an equity analyst from BoE Private Clients, said poultry producers serving the fast food industry should perform better during the World Cup: “Rainbow and Country Bird would likely benefit,” he said.

Business Reports continued in saying that at the end of 2009, Rainbow reported that it had continued to invest in its Foodservice business, while the Rainbow Outbound Supply Chain had been wholly integrated with the primary and secondary warehousing and transport services. This service supplies goods to Spur, Nando’s and Chicken Licken, which are key franchises for the group during the tournament.

Schutte added that local poultry producers had a bigger challenge at hand in the managing of the distribution of the product.

“Because of all the hype about South Africa’s hosting of the event, we will need to be prepared to have the correct infrastructure for distribution,” he said.

Schutte maintained that the cost of feed, which is the biggest cost component in the production of chicken, had decreased in the past few months, which led to excellent results. “We’ve also received good national health status of our poultry, which had a direct positive impact on production,” he added.

Source: Business Report