Poultry sector sizzles up with large-scale consolidation drive
The dull world of the country’s poultry sector has suddenly sizzled up with top farms embarking on an investment spree never seen in the country’s history, the industry said.
Thai poultry giant CP has triggered the battle with a war chest of $60 million, forcing top player Kazi Farms to throw the gauntlet with its own two-year expansion scheme in feed, meat processing and retailing.
Their nearest rivals Aftab, Nourish and Paragon have also spread wing in newer segments amid the largest consolidation drive that experts fear would snuff the life out of the country’s tens of thousands of smaller farms.
Top players talking to the FE said the investment drive is aimed at hedging their businesses against unforeseen dangers like the deadly bird flu, which in the past two years have wiped out some 20 per cent of their revenues.
CP officials would not comment on its investment plan, but industry sources said the company — the largest in the world — has rented series of sick farms and have in the past few weeks launched its branded fried chickens with its own specialized shops.
The company, which produces 1.2 million day old chicks per week, has also moved aggressively in fish feed and poultry feed and in vaccine, making it a fully integrated poultry farm like its parent company in Thailand.
Its aggression has worried Kazi Farms, which has been dominating the sector for the past half a decade through its day-old chick business located in about a dozen top districts in the country.
Managing director of the company Kazi Zahedul Hasan said the company would roll out a two-year expansion in which it would scale-up broiler and layer production, spread its chick business and go into processing and retailing.
“We cannot match the resources of CP. Our resources are limited. But we are moving into newer segments in the poultry business to consolidate our position and combat bird-flu like dangers,” Hasan said.
Set up in 1996, the Tk 7.00 billion Kazi Farms produces some 2.0 million day-old chick a week, making it the largest player in the most lucrative segment of the sector with a share of over 30 per cent.
Hasan said the company would go into marketing and distribution of processed chickens such as cooked nuggets, sausages and also open its own specialized stores such as Aftab’s to sell the products.
The company, which is ranked low in the poultry feed business, would also open two feed plants to meet growing demand in the business.
Aftab Bahumukhi, the country’s first integrated poultry farm with a turnover of Tk4.00 billion, last month launched the country’s first “floating fish feed,” to capture a large pie in the fast-growing sector.
Aftab, a pioneer in the sector and now ranked third in the pecking order, is also exploring Halal meat market in the Middle East in a bigger way after two minor attempts in 2006-7, its director Habibul Haque said.
“We have to export to sustain our growth. The Halal meat market in the Middle East is huge and mostly controlled by Brazil. If we can cut our prices further, we can easily grab the market,” Haque, an industry veteran, said.
Nourish, the largest feed producer in the country, has focused on feed, launching fish-feed while ramping up poultry feed production.
Another top feed player, Paragon, launched its own Tatka brand processed chicken items last month after it cut its day-old chick business following the bird flu in 2007 and 2008.
While consolidation is seen as a natural progression in the industry, critics said it would drive out tens of thousands of smaller players from the market, already hit hard by the deadly H5N1 Avian Influenza.
“It’s a dangerous sign the way big players are expanding in the market. It will force small farms to fold up fast,” said Moshiur Rahman, chief of Bangladesh Poultry Association and the owner of Paragon.
“They cannot compete with bigger players unless protected by the authorities,” Rahman said, calling for overhaul of government policies to safeguard the interest of smaller farms.
MM Khan, another expert in the sector, said some 70 per cent of the market is now controlled by top six companies, up from around 30 early this decade.
“The latest expansion drive by the big players and their entry into processing, further processing, retailing and in all segments would leave a little room for growth for the bits and pieces players,” he said.
“In the past big players concentrated only in day-old chick, parent and grand parent stock and feed business, while the broiler and egg production were left to the small farms,” he said.
“But now there are trying to gobble up everything.”