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Retailers downplay chicken price fears

Rainbow Chicken .Chicken prices hike.Photo Supplied 6

Rainbow Chicken .Chicken prices hike.Photo Supplied 6

Published Oct 2, 2013

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Johannesburg - Chicken producers and grocery retailers offered some comfort to consumers yesterday about the impact that the new poultry import tariffs will have on the price of what is South Africa’s major source of protein.

Pick n Pay said that the full impact of the tariffs, which increased by 8.75 percentage points on average, was likely to be felt sometime closer to the first quarter of next year.

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The retailer said it sourced over 90 percent of its groceries and most of its poultry products from South Africa, and only where this was not possible, due to unavailability of leg portions without brine, it then imported those portions.

Peter Arnold, the merchandise director at Pick n Pay, said that the prices the retailer charged for chicken were no longer profitable but as most South Africans got their protein from chicken, the retailer would continue to bear the cost.

“Chicken is a loss leader to Pick n Pay, and in fact our margin is almost zero – that’s how popular it is. We make sure that prices are kept as low as possible knowing full well that most South Africans buy chicken to supplement nutrition. This we will continue to do, given how popular poultry is with our customers,” Arnold said.

Pick n Pay’s chicken imports are quite small as a percentage of its total poultry stock and these come from the EU, whose exports were exempted from the tariff changes announced by the Department of Trade and Industry on Monday.

According to unconfirmed research, South Africans eat more than 1 billion chickens a year, which is eight times more than the quantity of beef consumed in the same period.

Woolworths, which sourced 90 percent of its food locally, said that it was in the process of assessing the impact of the new import tariffs. But it said the majority of its chicken was sourced locally and only a small percentage came from abroad.

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Fast-food chicken outlets, Nando’s and KFC, also expected no price increases as they sourced their chicken locally and would not be affected by the new tariffs.

KFC’s managing director for Africa, Doug Smart, said that all the firm’s chicken came from the Rainbow Chicken Farms, Supreme Poultry and Afgri, which most retailers also stock.

Spar could not give comment at the time of publication, while the views of poultry producers, including Rainbow and Country Bird, were represented by the SA Poultry Association.

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The association’s chief executive, Kevin Lovell, said retailers and big meat outlets actually set the price for poultry products and that given the competition in the South African retail sector, they were unlikely to push up the price.

As tariffs are levied at the point of import, not of sale, the association expected that the effect would be hardly noticeable at retail level, especially as the new tariffs would only apply to about 6 percent of local consumption.

But that would only be so if the wholesale and retail chains did not take this opportunity to secure some extra margin.

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“But I don’t think they will. Retailers compete for market share and they set the prices. With so much competition in the market currently, it will not be easy for them to push the higher prices through.

“If we [chicken producers] do get any increases they will be very small,” Lovell said.

His expectation was that increases would be in the order of 15c a kilogram for cheaper poultry cuts such as carcasses and offal that low-income households relied on for their protein intake.

The local poultry industry recorded a loss of R24.7 million last year, a significant downward trend compared with operating profit of R56.6m the previous year. Producers blamed the slump on an increase in cheap imports particularly from Brazil and the EU.

But with EU exports not affected by the new tariffs as a result of the SA-EU Trade Development Co-operation Agreement, Lovell said conditions for local producers were not going to improve much.

“We need a comprehensive approach. Until we’ve dealt with the dumping from the EU effectively, we haven’t ticked all the boxes,” he said.

Trade and Industry Minister Rob Davies said on Monday that the department would probe claims that chicken exports from elsewhere came into South Africa via the EU. If this proved true, those imports would be regarded as illegal. - Business Report

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