Poultry major Astral Foods is pushing back against the recent rise in canned fish popularity with plans to explore canned chicken as an offering.
Speaking after the release of its interim results on Monday, CEO Chris Schutte said Astral was on the prowl for a canning company with spare capacity to run trials of its canned chicken offering, which is set to be at a lower price point than its bagged frozen chicken.
He said chicken remained the better value proposition compared to fish when considering the rand value of a gram of protein.
“No, fish is not replacing chicken; however, we saw the sale of canned fish and pilchards increasing while chicken consumption is slightly down,” Schutte told Business Day. “One of the things we are looking at more recently is canned chicken.”
He said the group was looking into innovative ways to balance production costs to produce reasonably priced canned products.
“We will not put up a canning plant in the next 12 months but we will try and contract canning through somebody else to do it as a trial and see if there is potential, can we swing people from canned fish to canned chicken,” he said. “We will most probably put it next to fish on shelves, to test the environment and at what pricing point you can sell it.”
According to the Competition Commission’s most recent Essential food price monitoring report published in early May, though chicken remains SA’s favoured protein source, canned pilchards gained renewed popularity in 2023.
The most affordable protein according to the report was dry beans at R0.32 per protein gram, followed by eggs at R0.48, then individual quick freezing (IQF) chicken costing R0.91 per protein gram. Canned pilchards cost R1.12 in December while beef was the most expensive source of protein at R2.81 per protein gram.
The commission’s report stated that although not the most affordable, canned pilchards had an advantage through being sold in smaller quantities, which gave consumers some flexibility regarding their purchasing patterns. Moreover, pilchards are easy to stack and do not need refrigeration.
The shift towards tinned fish has also been evidenced in the results of large players in the canned fish industry such as Oceana, which owns Lucky Star. Its sales volumes grew 9% across local and export markets, going from 8.8-million cartons in 2022 to 9.6-million in the 2023 financial year.
In April, Cape Town-based Oceana told shareholders it expected half-year earnings to almost double after a pleasing Lucky Star result with improved canned food sales in the first half.
However, Schutte said chicken did have an edge over fish, pointing to the sustainability of the source. He highlighted that already low fishing stocks were being depleted in the long run in the ocean, unlike chicken, which was almost without bounds.
“So we don’t believe that it is as sustainable as poultry production,” said the CEO, adding that the development was still in its infancy. “It will be baby steps ... but it is on our radar and we are currently looking for a decent canning company with spare capacity.”
For the six months to the end of March, SA’s biggest poultry producer reported headline earnings rising 441% due to higher sales volumes and an improvement in sales from its poultry division.
Headline earnings per share (HEPS) surged to R8.84 from R1.63 at the halfway stage last year.
Group revenue was up 4% to R10.36bn, with R8.7bn of that contributed by the poultry division. Profit for the period jumped to R355m from R62m a year ago.
The group reported an operating profit increase of 461.2% to R550m attributable to the poultry division reporting an operating profit against a loss of R283m in the comparable period.
The poultry division was supported by higher sales volumes over the comparable period, when demand slowed on a change in the product basket given the effects of load-shedding disrupting the poultry processing and sales mix at the time.
Selling prices improved for the period under review, as an effort was made to recover input costs, after an extended period which saw Astral subsidising the cost of producing chicken and posting substantial losses in 2023.
The group cited several factors that might affect the business and sector, including embedded diesel costs due to ongoing load-shedding, though at lower levels for the past few months.
It added that El Niño weather patterns had had an effect on local grain crops due to dry weather in a critical period of the growing season, leading to a smaller crop and higher Safex prices, as well as weak economic growth and depressed consumer spending.
Additionally, bird flu remains a major risk to the local poultry industry with slow progress being made towards approval for the vaccination of broiler-breeding stock.
COO Gary Arnold said while Astral was quite well advanced in its applications, the department of agriculture, land reform and rural development’s approval of permits was taking longer than anticipated, while the onerous nature of the thresholds for approvals would be quite restrictive, particularly in the commercial layers sector.
“We thought the industry may at least be vaccinating by May or early June and that’s not the case, but certainly it is not off the table yet,” said Arnold. “We continue engaging with the department and their various representatives dealing with the vaccination applications.
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