Where to now for poultry farmers who supply Ingham's?
There will be pain and gain for poultry farmers who supply Ingham’s, as they are pressured to help the company cut $200 million in costs over five years.
The stock market float of Australia’s largest chicken producer Inghams Group Limited (ASX:ING), landed on one of the most jittery trading days, with uncertainty about the US election and Brexit.
Ingham’s owners TPG raised about $440 million, 25 per cent lower than earlier expectations.
Now meat analysts say Ingham’s and its contract poultry farmers face some cost cutting and the company must develop new processed chicken lines and exports, to stay ahead.
The poultry industry is tightly held by several families and private business, so the listing of Ingham’s has finally given investors a slice of the chicken meat market.
“There’s going to be cost cutting everywhere. Look it’s a high cost, high tech industry,” said Peter Bedwell owner of Poultry Digest.
“It’s always developed using technology to build new more efficient sheds.
“As energy is a huge cost, renewable works really well because the huge shed roof space is good for solar panels.
“It will force people to grasp those opportunities sooner than people would have liked.”
Rabobank’s senior analyst Angus Gidley-Baird said poultry meat had seen a massive rise in Australia, growing to be our most popular meat.
But he forecasted a smaller growth rate of 3.5 per cent for the next five years.
“The Australian poultry industry has experienced some phenomenal growth rates, of 5 per cent per year over the last five years,” Mr Gidley-Baird said.
“But the challenge is how much can the Australian consumers consume, and how it’s marketed.
“Already we’re among the largest chicken consumers, there is still capacity to grow, but given 95 per cent stays in the domestic market we will push up against that.”
Rabobank says value adding, can add 50 per cent in value, and exporting to Japan and Singapore are ways forward.
Growth in chicken ready meals
One family-owned poultry company Cordina, has opted for the ready meal growth option for all meats, not exclusively chicken with a new processing plant at Wyong on the Central Coast of NSW.
“The facilities in Australia until now, have really not been suitable to do these types of products,” CEO Louise Cordina said.
“We wanted to set up a world-class best in-country operation that genuinely could tackle the type of products that our customers wanted to launch.
“Being ready to eat products, there’s a whole new level of food safety required.”
She explained the history of Cordina dating back to exporting chicken meat to Britain during severe rationing in World War IIs where innovation began.
“As a business we’ve always tried to understand what the consumers are looking for, that’s in the DNA of our business.”
She agreed the market was very crowded and that posed a risk to Ingham’s float.
“Yes it’s extremely competitive, it has a high-volume low-margin mentality, that means business expect growth each year, and with the volume of chicken produced if people get their numbers wrong it has a massive flow on effect for the whole industry.”