Over the last decade, the Indian poultry industry has grown at an average annual rate of 6% for egg production and 10% for broiler production. Yet consumption, rising at only 1.43% for eggs and by 1.67% for meat, has failed to keep pace, despite population growth of 1.88% per annum, greater acceptance of these products and increasingly affordable prices.
Although the wholesale price index (WPI) for eggs rose to 173.8% in 2007-2008 (base 1993-1994), the real price of eggs (adjusted for the rise in the general price index) has been sliding at 2.9% per annum. For poultry meat, the situation is worse, with the WPI falling to 87.2% in 2007-2008 (chart).
At the same time, however, the WPI for major poultry feed ingredients increased sharply. Lower product prices and rising input costs together resulted in new integrated production systems along with improved feed conversion, genetically superior birds and improved technology, resulting in economies of scale, lower output costs and sustained margins.
Modernisation and expansion
This rapid modernisation and expansion has led to plentiful supplies, necessitating efforts to develop domestic consumption and expand exports if producers are to remain profitable.
Growing the home market can be achieved by penetration into rural and other untapped areas, aggressive marketing strategies and the development of processed products with an extended shelf life.
Rising per capita income 5.33% per annum along with high income elasticity for poultry products, growing urbanisation and consumerism, and increasing non-vegetarianism among India's 1,027 million population and 250 million middle class hold the key to rising consumption.
The Watt Executive Guide 2008-2009 shows the average Indian consumed only 1.9kg of poultry meat in 2007 while in the United Arab Emirates per capita consumption stood at 97.6kg, in the US 45.4kg, Kuwait 44.7kg and some 38kg in Hong Kong, Brazil and Malaysia. This means there is potential to raise poultry consumption in India, especially in rural areas.
The prices of poultry products in rural areas tend to be significantly higher than in urban areas. Poor infrastructure, lack of warehousing facilities and geographically scattered fragmented markets all contribute to these higher prices.
Need to export
India's poultry exports are mainly confined to table eggs, egg powder, frozen egg yolk and albumen powder, and were worth some $108.16 million in 2007-2008. Exports are growing due to a competitive price, improving hygiene standards and logistic advantages.
Poultry meat exports (frozen), however, were negligible worth only $1.52 million in 2007-2008 despite the country having logistical advantages and government subsidies for exporters.
India is an internationally competitive producer of poultry meat and while prices are higher than those of Brazil, they compare favourably with those of other Asian countries and the US.
The poor performance of India's poultry meat exports is primarily attributable to non-adherence to the food safety norms that have become mandatory in the major developed economies, along with the relatively smaller capacity of India's farms.
Following safety standards
Despite the government introducing the Food Safety and Standards Bill 2005, the Indian poultry-processing sector is yet to respond to it, so compromising export growth. The need to comply with the bill, and focus on gaining overseas markets, leaves the poultry sector with little choice but to follow global safety standards.
A few Indian integrators in the south of the country have implemented Hazard Analysis and Critical Control Points (HACCP) protocols, adhering to the safety regulations to capture export opportunities in the Middle East and Japan.
To achieve more of the global poultry market, particularly for chicken meat, the Indian industry must invest to produce quality processed products and also overcome hurdles, such as a lack of infrastructure, lack of quality consciousness on the home market, the absence of grading, packaging, labelling and branding.
One solution could be that the government invests in plants and machinery, which are then managed as a public-private partnership. The cooperative sector could also be encouraged and promoted, with development finance for implementing HACCP compliant poultry-processing facilities, in order to boost exports.
The issue of immediate concern is how best to achieve a supply of safer products. Regulations governing the production, processing, distribution and marketing of food products may create benefits by increasing safety levels and reducing the risk of illness but these regulations also entail cost for producers and may increase the prices of products.
It remains to be seen what will be the net effect of implementing HACCP or other quality assurance protocols in India and whether the industry will still be able to maintain the cost competitiveness needed to export.