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Sales chicken out on flu fear

Arti Sharma | February 07, 2004

For 29-year-old Aslam Waqif, proprietor of a 200 sq ft A-1 Broiler Shop in suburban Mumbai, business has been slow in the last week.

From selling 45-50 broilers a day, Waqif's business has dropped to half. His little shop is packed with live chicken and he doesn't know what else to do except hope that things will change soon.

At this time of the year, post Bakri-Id, Waqif's business usually slumps for three or four days, as customers are finishing off the mutton in their refrigerators. But soon after, clients flock back for the white meat and Waqif is back to selling 45-50 chicken broilers a day.

This time, however, that hasn't happened. Id has long gone and Waqif is still waiting for things to normalise. Though he doesn't like to admit it, he acknowledges that the news of bird flu (as avian influenza is also called) spreading to nine countries in Asia has driven some of his clients away for the time being.

In India, the bird flu panic started only after the avian disease reached Pakistan. Things quickly got so bad that smaller poultry farmers were ready to sell the perishable commodity at any price possible.

Anuradha Desai, chairperson of Pune-based Venkateshwara Hatcheries (Venky's) and chairperson of the National Egg Co-ordination Committee says that the worst affected was the Delhi market, where traders took full advantage of the panic and bought chicken from smaller farmers at extremely low prices. Overall, in the last two weeks there has been a 10 per cent to 15 per cent reduction in chicken prices from Rs 46 per kg for a live chicken.

"The change in price and slump of domestic demand has been noticed only in certain pockets like the north and west," says M B Desai, chairman (Mumbai zone) of the NECC.

Clearly, it is a situation where even larger players in the Rs 7,500-crore (Rs 75 billion) chicken market have been hit. An organised player like the Rs 14 crore (Rs 140 million) family run Mumbai-based Prabhat Poultry, which has been in the business for over 40 years, has seen a 35 per cent reduction in chicken sales in its four outlets across Mumbai.

Out of its total business, eggs account for 60 per cent, broilers account for 30 per cent and the remaining comes from fast food and the processed division. Some others have seen volumes drop 5 per cent to 6 per cent. "Consumers have been asking questions and we've been telling them there's no need to worry since there is no bird flu in India," says Sudhanshu Naik, general manager, Prabhat Poultry.

The official line, of course, is that it's business as usual. Mumbai-based Hybro Foods Private Limited, which supplies broilers to mainly five star hotels like the ITC Grand Maratha and flight kitchens like the Ambassador Sky Chef, says it's still supplying 8 tonnes to 10 tonnes daily to customers. Says Shaikh Shawkat, managing director of Hybro, "Institutions are not really affected, we think it must be the retail consumer that is scared."

The other branded player is Rs 800-crore (Rs 8-billion) Godrej Agrovet (Rs 65 crore of its business is from poultry). The company sells 55 per cent of its produce to institutions and 45 per cent is sold in the retail market under the Real Good Chicken brand.

"We haven't really felt the pinch since we're into processed chicken, not live chicken," says Balram Singh Yadav, general manager -- integrated poultry business, Godrej Agrovet. Sales data of the last three weeks shows that while there was a 3 per cent drop in the first two weeks, sales improved by 7 per cent in the last week.

What exactly is the cause for concern? Bird flu, as it is commonly known, has been around for over 50 years. But the difference now is that it has jumped species and people who have been in contact with infected birds have caught the illness. Several deaths have already been reported from countries like Vietnam.

In fact, the 1997 Hong Kong outbreak led to the culling of the entire chicken population of 1.5 million birds in three days to bring the situation under control. In the latest attack, the flu has spread to countries like Vietnam, Thailand and even Pakistan.

Customers in India are definitely worried. Even institutions like the Taj group of hotels say customers have changed their eating patterns. At The Taj Mahal Palace & Tower, Mumbai, the food and beverage department has noticed a 10 per cent reduction in chicken consumption in the last two weeks.

This hotel alone buys about 450 kg to 500 kg of chicken from Godrej Agrovet and it's now waiting to see if guests and banquet orders take chicken off the menu before altering its purchase order. Currently, out of the hotel's total meat consumption, chicken accounts for 25 per cent to 30 per cent.

"The slight reduction is only because we have a large number of foreigners as guests who are very cautious, but it's not really significant yet." says Rajiv Kaul, vice president, Mumbai hotels and general manager -- The Taj Mahal Palace & Tower.

While menus have not been re-jigged, hotel staffs have been briefed about how to handle queries about the chicken and the flu.

So what happens to poultry companies? Most are optimistic that the situation will improve by the end of this weekend as more consumers gain confidence in the organised players. Also, players like Venky's, which has the capacity to process 25,000-30,000 birds a day is now looking at export orders in a big way.

In some parts of the world imports from bird flu hit countries like Thailand have been banned and that, says Desai, presents a huge opportunity for India. "Even if domestic demand slumps in the short term, export demand is huge," she says. Chicken prices in the global market have shot up from $950 per tonne to $ 1,400 per tonne, the highest ever reported price.

So Venky's, which was earlier utilising only 50 per cent to 60 per cent of its processing plant capacity is now running full steam. There is an order for 20 containers of 20,000 birds each from the Middle East, out of which two containers will be completed this week. In order to cater to the export market, Venky's is also roping in 25-30 smaller farmers in and around Pune.

Other players like Godrej are waiting to see whether the processed chicken market picks up in a big way as consumers shift away from buying live chickens.

Currently, out of the total market, live chicken accounts for 93 per cent of the market. Already, Godrej has seen an 8 per cent increase in the last three weeks of Real Good Chicken in 14-15 retail outlets that stock both live as well as processed chicken.

All players big or small are keeping their fingers crossed that the situation doesn't worsen. If that happens, the larger players will be able to bear the brunt of a dip in the market. But the smaller, unorganised players will be roasted.

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