Changing landscape
HIDDEN AGENDA - Mary Ann Ll. Reyes () - December 8, 2002 - 12:00am
The Philippine poultry industry, especially as far as the big integrators are concerned, is undergoing very drastic and dramatic changes.

Two years ago, there were at least five major poultry integrators – San Miguel Foods, Swift Foods, Purefoods Corp., Tyson-Agro, and Vitarich Corp. Today, the competition has been narrowed down to among three players, San Miguel-Purefoods (SMC has acquired Purefoods from the Ayalas, including the poultry business), Swift Foods Inc. of the Concepcion family, and Tyson Agro owned by Tennyson Chen.

Vitarich Corp. is a goner. It has made very serious mistakes in the past and is paying for them at a very high price. Vitarich, which is now predominantly owned and managed by that branch of the Sarmiento family that includes Rep. Roger Sarmiento, over expanded during the time when it was being run by Renato Sarmiento. It even went into businesses, such as the Texas Chicken franchise, which it did not know anything about. Its debts have piled which fortunately have been restructured. In fact, there was a time when Vitarich was paying suppliers with gift certificates which can be exchanged for dressed chicken.

Highly placed sources in the group say that Vitarich's production of chicken is very negligible and is instead selling chicks.

Swift on the one hand has decided to focus its operations in Cagayan de Oro, which actually makes a lot of sense because of its nearness to the corn-producing provinces in the South as well as to the suppliers of chicks. It has significantly pared down its operations in Luzon, and if plans push through, production of dressed chicken will be focused in Cagayan de Oro and Isabela, which is also a major corn-producing area.

Sources from the RFM Group likewise confirmed that Swift is now in talks with San Miguel which wants to buy existing contracts with poultry contract growers, especially in Luzon where Swift is starting to move away from.

The drawback though of producing dressed chicken in Cagayan is that the chicken may not arrive in Metro Manila on the same day that they are produced so that they have to be frozen stiff.

But RFM top honcho Joey Concepcion is so sure about Swift's new strategy that it is no longer willing to sell the brand and instead is expanding its operations.

But the biggest surprise of all is the way Tyson has been dramatically changing the landscape of the poultry integration business. From an obscure player a few years back, Tyson is becoming a real threat to the major players. It is said to be attracting many contract growers of other integrators into its fold. Tyson has also spun off a new company that is taking care of chicken production outside of Luzon while the parent firm will be in charge of the Luzon operations. The new company, Bounty Foods, is being run by the former head of Purefoods' poultry division.

Right now, Tyson is still no match to the combined forces of San Miguel and Purefoods which presently account for the biggest share of dressed chicken production in the country. But of course, who can tell what the future holds? There are rumors that a very influential business tycoon who is related to the owner of Tyson is putting in money into the business, although Tyson officials deny this. The other version of the rumor is that this tycoon is interested in investing not in the local Tyson but in the giant US firm Tyson, also a chicken producer which has no relation whatsoever to the Filipino namesake.

Amidst all this optimistic view of the poultry industry's future though is the ironic situation that the sector is in right now. Chicken production at present is low and so are prices, which does not make sense. Production and prices are supposed to have an inverse relationship in the poultry industry such that when production is low, prices go up and when prices increase, producers are given the incentive to produce more. But because of the entry of smuggled agricultural products including dressed whole chicken and chicken parts, this relationship is muddled. As a result, producers have to contend with producing less and earning less from every unit that they produce.

For comments, e-mail at maryannl@yahoo.com

BOUNTY FOODS CHICKEN JOEY CONCEPCION LUZON METRO MANILA ORO AND ISABELA POULTRY PRODUCTION TYSON VITARICH VITARICH CORP
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