Poultry International - June 2017 - 22
22 ❙ PoultryInternational
GLOBAL FOOD COMPANIES WILL CONTROL THE POULTRY INDUSTRY
businesses. To become an internet business is to coordinate
business relations with suppliers and customers in real time.
Web-based relationships may help create virtual integrations in countries without vertical integration and result in
some disintegration in highly integrated industries.
The coordination of business relations could be described
as the development of a three-way information partnership
with suppliers and customers. The partnership is dedicated
to creating value across a chain of production based on realtime market research and complex number crunching by
powerful computers and optimization programs.
The development of web-based relationships may have
some surprising effects on the world poultry industry. For
example, in countries where the poultry industry is highly
vertically integrated, the internet may act as an incentive for
disintegration. It may create virtual integrations in countries
without vertical integration.
Poultry to be produced by food companies
If Tyson can be considered a bellwether for the future, the
recent history of the company shows a company moving rapidly away from being a chicken company. First, it purchased
significant assets in the processing of beef and pork, thereby
becoming a protein company rather than a chicken company.
This tactic is one adopted by other large multinational companies such as JBS in Brazil, the largest protein company in
the world. JBS moved in the other direction from pork and
beef into chicken.
Then, Tyson purchased Hillshire Brands for $8 billion
in 2014. That purchase moved the company in the direction
of branded-protein packaged food and even further away
from its origins as a chicken company. In effect, Tyson is
becoming a food company.
Another intriguing aspect to the recent history of
Tyson Foods is the increase in the amount of raw material chicken purchased outside the company. The hassle of
live production appears to be not nearly as interesting as
the marketing opportunities of further processed products
such as the ones brought on board through the acquisition
Horizontal integration in poultry's future?
This sets up the possibility that food companies of the
future may engage in horizontal integration at the level of
further processing and marketing and discard earlier stages
of production. That would, of course, create a business opportunity for specialized firms to provide raw material to
the food company in the form of live chickens or perhaps
chickens that have gone through primary processing. An
internet food company like Tyson could seamlessly coordinate with a new kind of company, an internet live production company, to create a virtual vertical integration.
As goes the broiler industry, so goes the turkey industry
through the same development from small companies to
giant firms and eventually becoming part of a larger food
Who will supply China's growing
appetite for poultry?
company. However, the consolidation into companies that
produce several kinds of protein started earlier in the turkey
industry than in the chicken industry.
For the moment, the table egg industry is the outlier in
the headlong globalization of the poultry industry. Table
egg production may be the last poultry industry to disappear into global internet food companies.
Food companies may engage in horizontal integration
at the level of further processing and marketing and discard
earlier stages of production. ■
Paul Aho, Ph.D., is owner of Poultry Perspective and economist
and consultant. To contact Aho, email email@example.com.
This is the sixth article in WATT Global Media's 100-year anniversary series, which considers bird welfare. The next
article in the series will explore industry structure.
www.WATTAgNet.com ❙ June 2017