Polony wins at chicken’s cost in protein trade down
Chicken producers have cut back on volumes over the past two years as pressure on disposable incomes and strikes have forced some consumers to switch to other proteins such as polony and beans.
That’s the word of Izaak Breitenbach, MD of Afgri’s foods division, who adds that estimates were that domestic poultry producers had reduced volumes by about 52-million birds a year, or 4%, over two years, as cash-strapped consumers switched to cheaper protein sources.
Consumers tended to first substitute chicken for more affordable processed meats such as polony, before switching to plant proteins including beans and soya products.
Long strikes have had the trend worsen and could remove large numbers of poultry consumers for six to 12 months afterwards, requiring producers to reduce prices despite input costs rising.
Poultry producers are emerging from a difficult few years in which they have been under pressure from weak demand, soaring feed costs and competition from cheap imports.
ABSA’s agricultural unit data shows that individually quick frozen (IQF) poultry products, the cheapest local product available to consumers, traded at R18.65/kg last month, reflecting a 14.4% annual increase. Whole fresh medium bird prices rose 9.3% over the same period to R22.26/kg.
The IQF segment of the poultry market is also subject to new brining regulations that will cap the amount of salt solution allowed to be injected in frozen products. Producers such as Astral Foods have a high proportion of their product mix weighted towards IQF products.
South African Poultry Association CEO Kevin Lovell said consumers tended to switch to other meats such as Vienna sausages, polony, boiled eggs, pilchards and corned beef when chicken prices rose. The only substitute that provided the same levels of nutrition as chicken, and was affordable too, was eggs.
Mr Lovell said indications were that consumers were buying less of everything and also switching to less nutritious sources of protein. Imports of mechanically deboned meat, used to make processed meat products, were up 3% in the year to date in comparison with the same period last year.
Brining regulations would further increase the price of IQF products, pushing more consumers out of the market for chicken and making them worse off nutritionally, Lovell said.
Vunani Securities analyst Anthony Clark said there was a consumer shift to products such as tinned fish. Chicken prices had risen on higher input costs and on tariff protection, which made imported poultry more expensive.
Astral CEO Chris Schutte said he had not observed a clear switch to other protein products, but when households were under pressure they tended to “buy down” in the poultry category. They often opted for fresh products in smaller-portion or weight categories, or brined IQF products.
“The per capita consumption for the past three years has remained flat at around the 36kg-level,” Schutte said. “When there is a slight spike in discretionary spend over the festive season, there is a clear shift towards more expensive poultry offerings.”
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