In our series of insights into the poultry industry, Gary Arnold from Astral Foods, South Africa’s largest poultry producer, explains how the company dealt with the huge setbacks from last year’s bird flu outbreak, and how its actions can show the way for others.
After the disasters of load shedding and avian influenza (bird flu) which hammered the South African poultry industry in 2023, Astral has implemented a cost-focused “back to basics” approach.
Astral is South Africa’s largest poultry producer, and part of an industry facing significant risks and challenges. Two threats stand out: the pervasive danger of bird flu, and the weakening financial strength of the South African consumer.
Bird flu has caused a global crisis within the poultry industry and is regarded as the foremost risk to Astral’s operations.
South African poultry producers first encountered the devastating effects of bird flu in 2017, emphasising the importance of enforcing biosecurity programmes such as strict personnel access control to the chicken houses (while wearing the necessary personal protective equipment), coupled with rigorous sanitation and disinfection processes (like footbaths for personnel entering the poultry house, or wheel washes for vehicles entering the farm), can go a long way from insulating the flock from the spread of these pathogens.
Yet despite the strictest approach to biosecurity – from controlling access and movement of people, equipment and livestock, to careful environmental management, ongoing employee training and awareness, and good poultry stockmanship – the 2023 outbreak revealed the limitations of even the most stringent biosecurity protocols, especially with new strains of the virus that spread through densely populated poultry areas.
The situation is further exacerbated in South Africa due to several critical factors. The unavailability of insurance cover for this disease, the absence of government compensation for mandated disease control measures such as culling, and the lack of regulatory approval for vaccination against bird flu have created a precarious environment. With biosecurity as the only viable defence, the potential for significant financial impacts looms large.
Astral’s approach to this threat has been comprehensive and proactive. The company has invested significantly in enhancing biosecurity measures across its operations, recognising that prevention is the only practical strategy in the absence of vaccination or compensation options. By focusing on rigorous biosecurity protocols and continuous monitoring, Astral is working to minimise the risk of outbreaks and safeguard its operations from the potentially catastrophic impact of a new bird flu outbreak.
Equally concerning is the financial strain faced by South African consumers. Record-high unemployment rates, dependency on social grants and rising costs of living, compounded by high interest rates, have severely weakened consumer purchasing power. This presents poultry producers with a dual challenge: maintaining affordability for consumers while managing the escalating input costs driven by infrastructure failures, localised water and electricity supply interruptions, and deteriorating road networks.
The poultry industry operates on thin margins, and any supply-demand imbalance places significant pressure on producer prices. This means a relentless focus on cost management and operational efficiency to remain competitive while ensuring that its products remain accessible to consumers.
In this context, Astral’s ambition to become the “Best cost integrated poultry producer” is more than a strategic goal; it is a necessity. To achieve this, Astral must excel in areas within its control, such as optimising poultry farming processes and performance. Given that poultry feed constitutes up to 70% of the cost of producing a broiler chicken, the efficient conversion of feed into live weight gain is critical. This efficiency, combined with prudent procurement of raw materials, forms the foundation of a best-cost integrated model.
Beyond feed, every aspect of Astral’s operations must embody a low-cost culture. From employee costs and energy consumption to distribution and processing plant efficiencies, Astral is committed to meticulous cost management. By continuously reviewing workplace improvement targets, the company strives to optimise operations and reduce costs.
The successful implementation of this strategy will have far-reaching implications for the average South African. By achieving its goal, Astral can provide affordable, high-quality protein to the market, supporting the nutritional needs of the population while also contributing to job creation and economic growth. In a country where many consumers are struggling, the ability to offer cost-effective poultry products is vital.
Astral’s recent journey of “Re-set, Re-focus, and Re-start” offers valuable lessons for both large and small producers. After a challenging year marked by external shocks like load shedding and bird flu, Astral recognised the need to return to the basics. This back-to-basics approach was essential to refocus the company’s energy on the fundamental drivers of the business, which had been overshadowed by crisis management.
By assembling teams of specialists and directing their focus towards key areas of the business, Astral was able to turn around its performance and rebuild its balance sheet. The emphasis on self-sufficiency, improving farm performances, optimising processing plant uptime, and managing costs rigorously, exemplifies the practical steps that can lead to a successful recovery.
For smaller producers, the takeaway is clear: in times of crisis, returning to the core principles of efficient management and cost control is crucial. Poultry farming demands the highest standards across all inputs, and inefficiencies can quickly erode profitability. By adhering to a disciplined, back-to-basics approach, producers can navigate challenges and position themselves for long-term success.
Astral’s “best cost” strategy supports local production, job creation, and affordability of chicken, a key protein source for South Africans. The company continues to invest in expanding capacity and improving efficiencies. It benchmarks itself globally, competing well on technical efficiency but struggling with cost competition against the U.S. and Brazil due to infrastructure challenges and subsidies.
Astral remains committed to supporting food security and economic growth in South Africa; its journey underscores the importance of resilience, strategic focus, and operational excellence in the face of significant industry challenges.
Whether dealing with the threat of bird flu or the economic pressures on consumers, Astral’s proactive and disciplined approach serves as a model for others in the industry. By continuing to innovate and refine their operations, poultry producers will safeguard their own future while contributing to the well-being of South African consumers and the broader economy.
