Tyson invests in chicken farms in China to tackle food safety
Tyson Foods is spending hundreds of millions of dollars to build its own chicken farms in China instead of relying on third-party suppliers for its chicken supply in the name of food safety, reports the Wall Street Journal.
In China, where small-scale poultry farms, which may have only a few hundred birds each, dominate the market, it is hard to prevent disease and deter excessive use of the feed additives that speed animal growth. Such food-safety issues hinder Tyson's efforts to tap a growing demand for meat in China's emerging middle class.
Instead of buying chickens from independent farmers, as Tyson's usual practice worldwide, Tyson aims to run 90 chicken farms in China by 2015 and supply its processing plants in China almost exclusively with broilers raised by Tyson. Today the Springdale, Ark., company has 20 farms in China. The goal is to double production in China to three million birds a week for supermarkets and restaurants.
China's chicken market is central to Tyson's plan to increase its sales from international production by at least 12% annually over the next few years. Tyson, which generated $34 billion in global revenue for fiscal 2013, has processed chicken in China since 2001.
Tyson says that while operating farms raises costs, it also gives the company direct oversight of production, enabling it to use biosecurity measures. The company hasn't turned a profit in the country recently because of its investments in new farms and processing plants. The company expects to be profitable in China by the fourth quarter of fiscal 2014.
The bulk of Tyson's chicken sales in China today are to wholesalers and other meatpackers that use the meat in sausage and other products. About 20% of its sales by volume is for the fast-food sector.
Tyson aims to expand retail sales to 20% of its volume in China from 10% today. This, however, will require building name recognition and persuading consumers to buy packaged breasts and wings instead of whole birds recently slaughtered at market—and to pay more for chicken billed as higher quality.
