February 11, 2010

AFTA may force Bounty Agro Ventures to shift to retail sales

Philippine poultry integrator Bounty Agro Ventures, Inc. may shift to retail business if Southeast Asian countries will export chicken to the country under the ASEAN Free Trade Agreement or AFTA.

Bounty Agro President Ronald R. Mascariñas said that while there is no immediate threat from neighbouring countries since they haven't begun exporting chicken, he noted that Thailand's production cost is fifty percent lower than that of the Philippines and it will jeopardize local products as soon as chicken shipments enter the country.

The manufacturer of Bounty Fresh Chicken's volume growth has already slowed down to 10% from the average 25% growth in the last five years, he said.

Mascariñas said the company is still a leader in the domestic market and is also the only accredited export processing plant in the country, but it has yet to look at the export market.

Under AFTA, tariffs on imported chicken and livestock were reduced to zero to 5% last month from 40% and 35%, respectively.

Mascariñas said he expects fast food giants like Jollibee Foods Corporation to buy Thai chicken. Bounty Agro Ventures currently supplies to all food industry segments, from fastfood outlets to the wet markets.

For this reason, Mascariñas said the company might change its business model, opening more rotisserie outlets instead of being a full poultry integrator.

He said the company's bulk of the revenue stream now comes from food retail business Chooks To Go. In a worst-case scenario and the company is no longer competitive in the chicken production business, Mascariñas said they will have to stop production or downsize.

There are 600 Chooks To Go stores nationwide and the company's plan is to end the year with 1,500 outlets. It has set aside PHP300 million (US$6.48 million) for this.

Bounty Agro plans to duplicate the concept in neighbouring countries like Vietnam, Cambodia and Indonesia, either this year or next.

Mascariñas admits that they are "adopting a wait-and-see attitude depending [on what the neighbouring countries like Thailand] will do".