Broiler chicken industry downturn lasts 3 years, then takes another heavy blow from the Fuxi incident

Aftermath of Fuxi incident lingers, broiler exports struggle to recover

Because of the emergence of some irregular factors, the downturn period of China's broiler chicken industry lasted an unusually long 3 years. Now, the deeply damaged industry has just begun to improve, but affected by the Fuxi incident, most chicken export enterprises have seen their overseas trade channels blocked, and to this day it is difficult to repair them.

New Finance reporter Sun Ruili

Orders plummet

In a normal year, the newly built office building of Qingdao Jiulian Group Co., Ltd. (hereinafter referred to as “Qingdao Jiulian Group” or “Jiulian”) should at this moment be frequented by figures of Japanese partners, and the international sales department of this, the country's largest exporter of cooked broiler chicken products, should also be bustling.

However, the real situation is completely the opposite; the fact is that most of the Japanese businessmen with many years of cooperative relations have gone to Thailand and other Southeast Asian countries to seek new partners, and the door of the international sales department on the 5th floor of the Jiulian office building is tightly closed. All of this shows that this enterprise, known for its chicken exports, has not had very ideal export orders this year. And the root of this fact must be traced back to the “Fuxi incident” that occurred in China half a year ago.

According to multiple industry insiders, Jiulian Group has always been an outstanding player among Shandong meat enterprises, and is also a large chicken enterprise integrating breeding stock propagation, broiler chicken farming, slaughtering and cold storage, cooked food processing, and domestic and foreign trade.

⟦NL> Jiulian Group's export business has always accounted for a relatively large proportion. On the 2013 list of China's top 100 agricultural products export enterprises published by the Customs Information Network, Jiulian Group ranked 5th, and first among poultry export enterprises.

In 2010, Jiulian's total export volume of cooked chicken products accounted for 25% of the country's total export volume, exceeding the combined total of the 2nd to 5th ranked enterprises in the same industry.

“Jiulian's partners are mainly Japanese enterprises; in addition, it also exports to more than a dozen countries and regions including the EU, Russia, the Middle East, the United States, South Africa, and Chile. Jiulian is also a supplier to Western fast-food enterprises such as KFC and McDonald's.” Wang Zhenqian, marketing director of Jiulian Group, told the New Finance reporter.

What cast a shadow over Jiulian's brilliance in the industry was the “Fuxi incident” that occurred last year. In July 2014, media exposed that Shanghai Fuxi Food Company, a supplier to KFC and McDonald's, used expired chicken. For a time, the public's focus all converged on chicken enterprises, especially the suppliers of KFC and McDonald's.

In addition to consumers' doubts, export enterprises such as Jiulian were also abandoned by their Japanese partners.

On the 5th day after the incident occurred, Casavar, president and chief executive officer of McDonald's Holdings Company (Japan), said externally that affected by reports related to Shanghai Fuxi Food Co., Ltd., customers' concerns about chicken products imported by McDonald's from China were increasingly intensifying. At the same time, McDonald's Holdings Company (Japan) also announced that the company had decided to stop selling all chicken products produced in China and switch to Thai chicken products.

Data from the Ministry of Commerce show that from January to March 2014, among the countries and regions importing chicken and products from China, Japan ranked first by value.

“This matter had a huge impact on the entire industry. The chicken market should have rebounded in 2014 after the downturns of 2012 and 2013, but this matter prolonged the industry downturn, causing many enterprises to suffer greater losses and deepening the damage to the industry considerably.” Poultry industry observer Xiao Baohua told the New Finance reporter.

Wang Dong (pseudonym), another relevant person in charge at Jiulian Group, also told the New Finance reporter that the Fuxi incident had the greatest impact on export-oriented enterprises. After the Fuxi incident, the change in sales volume of Chinese chicken in Japan's catering channels was not very obvious, but sales in supermarket and retail channels fell severely.

“We can repeatedly deal with Japanese distributors and prove that our products are safe; that is not difficult. But what is difficult is Japanese consumers. You cannot prove your products to them, because inwardly they have already begun to resist them.” Wang Dong said.

According to data provided by Wang Dong, China exports about 200,000 tons of cooked chicken products each year, but after the Fuxi incident, export orders fell by about 40%.

“How can I not be anxious?” In his office, speaking of the recent decline in overseas orders, Wang Dong smiled with his head down, and then said with considerable worry: “The decline now is not what is frightening; what is frightening is whether there will still be orders in the future.”

A series of misfortunes

Affected by the combined impact of market conditions and other factors, especially the sudden interference of external factors, many chicken enterprises have seen a severe imbalance between input and return over the past 3 years, and even huge losses.

Before the Fuxi incident occurred, China's broiler chicken industry, which had already entered an industry downturn, had suffered two disasters in succession, namely the “fast-grown chicken incident” in 2012 and the “avian influenza incident” in 2013.

In November 2012, media reported that for a chicken raised by Shanxi Suhai Group, a supplier to KFC and McDonald's, only 45 days were needed from hatching to being served on the table. With public attention and questioning, this kind of chicken was gradually characterized as “fast-grown chicken” fed with feed and drugs.

“Suhai was originally an enterprise with annual sales that could reach tens of billions, but after this matter, the enterprise completely changed.” an industry insider told the New Finance reporter.

Although later many industry experts and scholars explained the “fast-grown chicken,” saying that 45 days is the normal growth cycle of today's white-feathered chickens, consumers' doubts about the entire industry were not dispelled.