Astral in firing lineComment on this story
Poultry producers would have to perform regular tests on brine levels to ensure compliance with the new limit in individually quick frozen (IQF) portions, the Department of Agriculture, Forestry and Fisheries announced last week.
The newly amended regulation will limit brine content in IQF portions to 15 percent, down from the 30 percent currently allowed. The change will take effect next year, giving producers time to bring their brine levels in line.
The department’s spokesman, Steve Galane, said the new brine limits were decided on by the department after consultation with the industry. The issue was tackled after concerns were raised about high thaw and cooking losses, leading to fears that some producers were injecting meat with brine levels above 30 percent.
“The department was consequently requested to address the issue as soon as possible.”
Galane said although brine regulations had always been in place, they had not been properly monitored.
“The regulations did not keep track with developments within the industry and no maximum treatment value was prescribed for the portions.”
Various consumer bodies as well as small and large poultry producers were consulted. However, a consensus could not be reached and the department reached a final decision to set maximum brine levels at 15 percent by weight.
Analysts said yesterday that if the brine limit did take effect, Astral Foods was likely to suffer more than its major rival poultry producers.
Jean Pierre Verster at 36One Asset Management said although all poultry producers would be negatively affected by the new brining regulations, Astral would suffer more than its competitors because IQF portions made up a larger part of its business.
He said Astral’s brining levels in IQF portions were about 25 percent and this would mean it would have to reduce the saline content by 40 percent.
He added that Rainbow Chicken parent RCL Foods and other poultry producers sounded less concerned about the 15 percent maximum limit because they did not rely as heavily on IQF portions.
Verster said the regulation would have an impact on the weight of the IQF portions, which would have to be reduced and sold to retailers at a less effective price per kilogram of meat than before. “If one looks at the gross profit of Astral, which is about 20 percent, if they do not increase the IQF portion price, then gross profit on IQF sales will halve.
“If they do not increase the price and sell the same amount of chicken then the gross profit on IQF will halve because cutting brining levels by 10 percentage points would lead to a 10 percent reduction in revenue.”
Verster said of Astral’s R8.5 billion revenue last year, R6bn was from the poultry business, which includes fresh chicken and IQF portions. He added that about 45 percent of Astral’s total business was in the IQF division. Should Astral increase its IQF prices, then it ran the risk of losing volume to its competitors, he said.
Astral has indicated that the 15 percent brine content limit would have a detrimental impact on the price and affordability of IQF products. Brine is injected to keep the flavour and succulence after thawing, according to the industry.
“Astral’s view is that the newly introduced brining levels should be challenged by the poultry industry through the SA Poultry Association or individual poultry producers, in order to ensure that brining levels are regulated at levels that will serve the best interests of all affected parties,” the company said.
RCL Foods said the new brine limit was reasonable.