Predictions by Rabobank show that the market for slow growing broiler concepts will grow by 8% now up to 20% by 2025.
During the 3rd Hubbard premium forum in Barcelona I was asked to shed a light on the economics behind broiler production and alternative broiler segments. The bottom line is that it is smart to be different, to move away from the bulk market. At least when you are a producer in Europe, because our continent is really different from the rest of the world.
EU: the most expensive production location
Recently I worked on an extensive dataset, comparing production costs of all main poultry producing countries around the world. And there is only one conclusion, Europe is the most expensive production location for regular broiler production. Producers have to comply with the most stringent set of rules and regulations, face pressure from animal welfare organisations and have to cope with high land prices as well as high labour costs. The average production cost of broilers is € 0.825 per kilogram live weight, € 1.46 including processing costs. Competitors like Brazil and Ukraine are able to produce the same chicken for € 0.38 less and have a cost price advantage of 22-24%. Even when these countries have to pay the full import levies into the EU, they are still able to be competitive and make a profit.
Slow growing broilers – will add value
With all the additional cost factors of producing in the EU, competition on cost price in the bulk market will always be an uphill struggle. Switching to slower growing broilers and higher animal welfare, gives the European industry the possibility to add value to their product. It is clear that these extra’s drive up production costs even further, to be exact 19% extra in the case of the Chicken of Tomorrow concept (48 days production) and 39% in the case of the Better life 1 star concept (56 days production). However, apart from being concepts that cater to societal demands, the farmers get paid for their efforts as well. With retail prices of € 8 per kilo fillet (CoT) and € 11 per kilo for Better life, the whole value chain can be profitable with ease.