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Case study: India’s middle class boosting poultry output

Broiler production in India is projected to increase by approximately 8% to 4.2 million tonnes in 2016 on rising demand from the growing middle class.

Local estimates believe that demand for processed chicken meat is growing between 15-20% per year, according to a recent USDA GAINS report.

The organised sector produces an estimated 80% of total chicken meat production, and is mainly concentrated in Tamil Nadu, Andhra Pradesh, Maharashtra, Karnataka, and West Bengal. The live poultry market constitutes 90 to 95% of total sales since most consumers prefer freshly culled chicken meat.

Vertically integrated poultry sector

Within the last ten years, many broiler enterprises have vertically integrated their operations, especially in southern and western India. Approximately 60-70% of all operations use the integrator model, while the remaining are smaller backyard operations. Integrators own all the hatcheries, feed mills, and slaughter facilities, and contract with multiple smaller farmers who raise the chicks to slaughter weight primarily in open air sheds. One integrator may have as many as 20,000 contracted farms, however, in a few cases integrators may sell chicks or feed without requiring a contract.

Some integrators also provide credit, extension services, and veterinary medicine. At the end of the production cycle, the live birds either are purchased by the integrators for slaughter and further processing, or by a middle man/wholesaler, eventually arriving at a live bird wet market for local sale.

Popular broiler breeds

Cobb is the most widely raised broiler; according to sources it constitutes at least 65% of total broiler market. The grandparent stock for Cobb is owned by only one major enterprise; it sells parent stock to multiple integrators throughout India.

The Cobb breed is generally preferred since it is can withstand temperature fluctuations (which mean it can be raised in various climates throughout India). Other breeds in India include Ross, Marshall, Hubbard, Hybro Avian, and Anak.

Layer production forecast at 80 billion eggs

For 2016, egg production is forecast at 80 billion eggs, up 5% from last year. In order to mitigate rising transportation costs and better maintain quality control, poultry companies are reportedly establishing more layer farms near highly urbanised areas.

Andhra Pradesh, Tamil Nadu, Haryana, and Punjab are major egg producing states; and layer farming is also expanding in Uttar Pradesh, Bihar, and Chhattisgarh due to higher urban demand. According to industry sources, the Babcock layer breed constitutes about 80% of the market share; other breeds include Lohman, Bovans, and Hyline.

Poultry Feed Industry sources in India estimate that feed consumption in 2016 will be between 17-18 million tonnes, which includes corn (12 million tonnes), soybean meal (4 million tonnes), and pearl millet, broken wheat, and broken rice.

80% of India's total chicken meat production is mainly concentrated in Tamil Nadu, Andhra Pradesh, Maharashtra, Karnataka, and West Bengal.

Incidences of HPAI

India reported three highly pathogenic avian influenza (HPAI) outbreaks to the Organisation for Animal Health (OIE) in 2015. Industry sources believe that because the HPAI outbreaks were localised, the total poultry population was not largely affected, although demand for chicken meat allegedly fell for a temporary period in some states. These outbreaks occurred in the states of Uttar Pradesh, Manipur, and Andhra Pradesh.

The GOI issued an advisory to all affected states to contain the HPAI outbreak as per the Action Plan which restricts access to the infected premises and provides standard operating procedures for culling and disposing of birds and infected materials, among other activities. India has had a series of avian influenza outbreaks recently in 2011, 2012, 2013, and 2014.

Consumer behaviour
Most consumers prefer buying freshly culled chicken meat at live bird markets, or wet markets, which means that birds are culled only after they are sold.
Wet market prices are generally a lot lower than processed chicken sold at retail outlets, which command a price premium of at least 30 to 40% or more depending on the locality or cut. According to contacts, at a wet market one whole culled bird can be sold between 80 to 150 rupees.

The processed chicken meat sector is growing at a rate between 15-20% per year due to the growing middle class, which reportedly has positively affected sales not only in retail, but quick service restaurants and the hotel, restaurant, and institutional sector. A few major poultry companies have started expanding their slaughtering and processing facilities, and are beginning to offer a wider range of processed chicken meat products for the retail sector like frozen chicken burgers, salamis, nuggets, sausages, and tikkas.

India's per capita consumption of poultry meat is estimated at around 3.1 kg per year, which is low compared to the world average of around 17 kg per year. India's per capita consumption of eggs is estimated at about 62 eggs per year.

Modernisation of the industry

The Ministry of Food Processing Industries (MFPI) is providing assistance to establish modern abattoirs and modernise existing abattoirs through a program entitled: Modernization of Abattoirs. MFPI's program on Cold Chain, Value Addition and Preservation Infrastructure provides assistance to create integrated cold chain and preservation infrastructure facilities. It covers pre-cooling facilities at production sites, reefer vans, mobile cooling units, as well as value addition centres.

India permits 100% foreign direct investment in the food processing sector. Only a few multinationals have entered the Indian poultry market to date.

Source: USDA

Consumer behaviour

Most consumers prefer buying freshly culled chicken meat at live bird markets, or wet markets, which means that birds are culled only after they are sold. Wet market prices are generally a lot lower than processed chicken sold at retail outlets, which command a price premium of at least 30 to 40% or more depending on the locality or cut. According to contacts, at a wet market one whole culled bird can be sold between 80 to 150 rupees.

One comment

  • Velo Mitrovich

    I was talking to an Indian friend about this who had just returned from visiting family. He said what people forget is that they look at the percentage of middle class in India and see a low number like 10-15%, but when you factor in a population that's around 1 billion, that 10% suddenly becomes a very large number.

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