Chicken up in arms

For chicken lovers, nothing could be more worrisome than the increasing price tags on their favorite chicken delights.
With policymakers planning to impose RGST on poultry feed and other inputs, which now sounds more threatening than bird flu, officials at Pakistan Poultry Association fear that it will further reduce the share of poultry products in the family consumption basket.
Around 15 percent RGST on poultry feed, that currently cost around Rs37,000/ton, would increase feed prices by Rs5600/ton, and in turn lift chicken meat cost by at least Rs31 per kg, according to Khalil Sattar, Chairman Pakistan Poultry Association (PPA). That would be an increase of 15 percent over current chicken meat prices, for both packaged and unpackaged chicken meat.
The rise in feed prices, which accounts for 70 percent of cost components, has also stoked concerns among packaged/processed chicken manufacturers. Even though both packaged and loose chicken sellers are competing in the same industry, rising input costs will be more backbreaking for the former, which already incurs heavy overhead and miscellaneous expenses to maintain their standards of hygiene and quality.
Packaged chicken suppliers have termed the RGST as highly discouraging, arriving at a time when the packaged industry is already finding it difficult to compete.
Realising the fact that the processed chicken industry is currently at its nascent stage, capturing only around 1 percent of the market share (broiler); the withdrawal of zero rating on processed branded chicken, along with growing inflationary pressure, will not only increase consumer prices but would also discourage further investment in the industry.
Tough competition in the processed chicken industry can also be gauged from the fact that previously many players in this industry had failed to survive. However, at present two players, K&Ns and MENU, are sharing grocery shops refrigerators.
The establishment of the packaged meat industry is crucial to boost modernisation in the livestock sector, since it not only helps rationalise pricing through increasing yield, but also ensures uniform supply to markets. Moreover, the development of this industry would also pave the way for poultry products export from Pakistan to the Middle Eastern countries and help target the global Halal food industry.
With the RGST-implementation date drawing closer, consumers and manufacturers are still far from clear on whether their woes are enough to convince policymakers to remove basic food products from the RGST list. But given the IMFs strong stance over RGST, packaged chicken suppliers must start thinking how to operate in the new dynamics.