I have been president of the National Chicken Council since 1972. In my 35 years with the organization, I have seen great changes in the industry and in the markets it serves. The industry is very different than it was when I started, but I think it is much stronger now, with a greatly improved position in the American food scene.
The structure of the industry itself has charged tremendously since the 1970s. Consolidation, of course, has been the rule. Changes in food consumption have also figured importantly in the industry's success.
Consolidation At Work
In 1975, the largest company, according to Broiler Industry magazine, was Holly Farms, with 8 percent of the business, followed closely by Gold Kist. Companies such as Valmac Industries, J&M Poultry, and Central Soya were among the top 10 in the Broiler Industry survey, and KFC was producing its own chickens. The top 10 companies combined had only 50 percent of total production. Today, according to WATT PoultryUSA, the biggest chicken company, Pilgrim's Pride, has 25 percent of production, and the top ten together have 79 percent.
The continuing process of consolidation is illustrated by the accompanying table, which shows the top ten companies in 1975, 1985, 1995, 2005 and 2007. The data is taken from the annual surveys from WATT PoultryUSA and its predecessor publication, Broiler Industry.
Every one of the companies listed in these years that is not in the business today, was eventually acquired by either Tyson Foods or Pilgrim's Pride, although some assets were later sold again. The chicken production and processing assets of five companies (Holly Farms, Valmac, KFC, Lane Processing and Hudson Foods) were acquired by Tyson Foods, and five others (Gold Kist, J&M Poultry, Central Soya, ConAgra and Seaboard Farms) are now with Pilgrim's Pride.
Of the top 10 in 1975, only Tyson Foods, Perdue Farms and Wayne Poultry (now Wayne Farms) are still in business. (Pilgrim's Pride wasn't even in the top 10 back then.) Other companies were also active in consolidation over the years, but Tyson and Pilgrim's led the pack. According to WATT PoultryUSA, these two companies combined now have 46 percent of industry production volume, and probably more than that in revenue due to their strong positions in value-added products. The smaller players in the top 10 are notable for their place in niche markets or regional identification, but I see no reason why consolidation will not continue for the foreseeable future.
Health, Lifestyle Trends Drive Consumption
The rise of the chicken industry over the past three decades is explained mainly by the steady increase in the consumption of its products. In the 1970s, red meat was the big player in the American diet. Americans ate 85 pounds of beef per capita in 1972, 55 pounds of pork and only 42 pounds of chicken. Imagine that people ate more bacon, ham and pork chops in 1972 than chicken. Chicken was only 23 percent of the consumption of the Big Three Proteins (beef, pork and chicken).
By 2007, the picture changed dramatically. Chicken now sits in the top spot in consumption, with 87 pounds consumed per capita, beef down to 65 pounds and pork at 50 pounds. Chicken holds a 43 percent share of the Big Three Proteins.
In my view, chicken has gained this strong position because it is the right food at the right time. Over the past 30 years, people became more aware of the health aspects of the foods they eat. Chicken has benefited from the fact that it is low in fat compared to competitive meats. That, however, doesn't tell the whole story. I think the lifestyle aspects are at least as important. Chicken simply fits the fast-paced, hectic lifestyle that so many Americans have today.
Five Keys To Chicken's Popularity
There are five major keys, in my view, to the popularity of chicken today. These are:
- Chicken offers good value and attractive prices.
- It has an excellent nutritional profile and is low in fat, recommended by nutritionists and dietitians.
- It is convenient and easy to prepare, a big plus today when people don't have much time to cook and many people have rather limited kitchen skills.
- Chicken is versatile. It fits in with just about every style of preparation.
- Chicken is a good fit with quick-service and casual-dining menus, tremendous growth areas for our industry.
Fast Food Example
Just to illustrate how important chicken is to the world of fast food once dominated by beef, consider that McDonald's now offers five kinds of chicken sandwiches, including the poplar new Snack Wrap; nuggets and strips; and four kinds of salads. McDonald's buys about 650 million pounds of chicken per year.
Four Current Challenges
New challenges will impact the future of our industry. Foreign trade, energy/feed, flock health and human resources loom large.
- Foreign trade. While continued growth in export markets is expected, no great breakthroughs appear to be on the horizon. This year, Russia continues as our industry's largest market, while China has taken its place as a strong No. 2. The biggest constraints on our foreign trade are not economic or market-oriented but political since every country wants to protect its agricultural sector. Our biggest competitor is Brazil, which has an advantage in cost of production. It is also allowed to export to the European Union, while the United States is not.At the present time, our foreign trade is almost entirely outbound. The only chicken imports into the United States consist of a small amount of product that comes from Canada. Several countries, however, are seeking authorization to export to the USA. Chile has just been approved to export poultry to the USA, although the trade impact is expected to be minimal.
- Feed and energy. The continuing problem with the price and availability of corn could impose restraints on the growth of the industry. It is well known that the ethanol demand results from federal policies ethanol subsidies and mandates. If bad weather or reduced plantings result in a shortage, companies could be forced to cut production. The chicken industry is in a better position to adjust production than other industries. Congress, however, should act and restore the necessary balance between food and fuel in the usage of corn and other grains.
- Avian influenza. Nearly all companies in the U.S. industry are participating in a program in which every flock is tested before it goes to market. This program went a long way towards maintaining customer and consumer confidence in the industry while concern over avian influenza was at a high point. And so far, H5N1 remains a serious threat to birds but not to humans. Researchers recently reported that there are 32 differences between avian and human influenzas. They think that an avian virus is not seriously threatening to humans until it experiences about 13 mutations. So far, the H5N1 virus has experienced only about two such mutations.
- Immigration. What happened on immigration in 2007 is truly a sad story. The Bush administration had its heart in the right place and supported a progressive approach that would have regulated the flow of immigrant workers and opened a path to legal status for the millions of people who are now in the country without proper documentation. Unfortunately, this approach did not get a simple majority in the U.S. Senate, much less the 60 votes that are really required to pass a bill. Hopefully, Congress will come back after the elections in 2008 and take a new look at immigration.
Future Remains Bright
The future is bright for our industry because companies continue to pay close attention to quality and work to meet consumer demands. Demographic trends also favor chicken. Today's younger generation tends to eat a greater variety of foods and eat more chicken than older people, and they will retain those habits as they themselves age. That younger consumer group also is much less inclined to prepare meals from scratch or to spend as much time cooking as their parents or grandparents. Convenience-based chicken products have tremendous appeal to this age group.
The chicken industry has earned a strong position in the American way of life. To keep, and even improve, this position will require the best efforts of all companies and personnel. We can't stand still but must continue to bring out attractive new products, find more efficient ways to operate and stay in tune with the needs of consumers. If we do that, the changing American chicken industry will continue to change for the better.