A crucial component of SA’s animal protein consumption, the poultry industry continues to battle challenges that threaten its long-term sustainability.
While some companies have managed to weather the storms, the sector remains vulnerable to a combination of economic pressures, logistical challenges and an ongoing avian flu crisis.
With an estimated value of R65bn and employing nearly 58,000 people, the industry’s performance and outlook for the short and medium-term will depend heavily on the resolution of these issues and support from the government.
Quantum Foods, a prominent player in the poultry market, is facing a difficult start to 2025. Despite an 80% surge in its valuation over the past year, the group’s stock has plunged by 23% over the last six months and 22% in the past three months.
The bulk of Quantum’s struggles stem from the devastating effects of avian flu.
In 2023, the company reported losses of R155m due to the bird flu outbreaks and incurred an additional R37m in losses in 2024.
The outbreaks led to the culling of 90% of Quantum’s layer breeder flock, devastating production and inflating costs. Quantum also faced workforce challenges, including the retrenchment of 157 employees and the layoff of 459 more.
The group is also facing internal conflict after the Western Cape High Court ruled that the removal of independent non-executive director Tanya Golden in May 2024 was unlawful and violated the Companies Act.
Golden was dismissed without explanation after demanding access to legal advice related to a shareholder request for a special meeting.
The court found the removal process unfair and ordered her reinstatement. This controversy has fuelled tensions between leadership and shareholders, particularly Braemar Trading and Country Bird Holdings, which have called for governance changes.
Astral Foods, another key player in the sector, remains volatile, though its recovery efforts have been more promising. The group’s performance in 2024 showed resilience, with margins improving thanks to cost-saving measures and operational efficiencies.
However, Astral remains vulnerable to the same challenges faced by the industry at large, including the lingering effects of bird flu, load-shedding and water supply disruptions.
Despite a strong focus on normalising operations through its Project 3R initiative, Astral’s long-term performance has been underwhelming, with only a 6.9% gain over the past three years and a 14% decline in the past five years.
Rainbow, which was recently unbundled from its parent company RCL Foods and listed as a stand-alone entity, appears to be on a more positive path. Since its listing, Rainbow has gained 6% in both the past six months and month-to-date, indicating a strong market reception and investor optimism.
The unbundling, which was part of RCL’s strategy to focus on its branded foods business, allows Rainbow greater flexibility in navigating the volatile poultry market.
RCL Foods, for its part, has shown steady recovery despite the challenges, with a 5.9% increase over the past three months, 3% in 6 months, and 10% over the past year.
The group reported a 6.8% increase in group revenue for the 2024 financial year, driven primarily by its sugar business, but its performance in the poultry segment remains constrained by high input costs, weak consumer spending and difficult market conditions.
RCL Foods’ strategic decisions, including the sale of noncore businesses and the focus on its core operations, have positioned the group for long-term sustainable growth.
The broader poultry industry remains in a state of flux, grappling with a perfect storm of challenges. The impact of HPAI is far-reaching and estimated to have cost the industry a staggering R9bn.
This is compounded by high feed costs, which have been worsened by a weak rand and the global demand for raw materials. The sector is also faced with logistical issues, electricity shortages and the increasing competition posed by cheap imported poultry, particularly from Argentina.
To mitigate these risks and safeguard the future of the industry, the SA Poultry Association (Sapa) last week called on the government to take immediate action.
The association is pushing for the fast-tracking of bird flu vaccinations and financial support to help local producers remain competitive.
Sapa has also proposed a VAT exemption on frozen chicken cuts to reduce the pressure on low-income households, many of whom are already struggling with inflated food costs.
Despite all the challenges, however, there is hope on the horizon.
Groups such as Rainbow and RCL Foods have shown an ability to adapt to challenging conditions, and the poultry sector remains a vital part of SA’s food security and agricultural economy.
With the right support from both industry players and the government, the poultry industry could emerge from its current difficulties in a stronger position.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.