Food supply chain under stress as loadshedding wreaks havoc

Loadshedding is threatening the sustainability of the country’s poultry supply chain. 

The fast-food industry is battling to manage supplies of chicken, with some stores having had to temporarily close their doors. Producers have been forced to cull millions of chicks, and smaller farmers are struggling to keep their businesses afloat. Consumers face the prospect of higher prices.

The impact of loadshedding on fast food restaurants:

Two weeks ago, KFC – one of the largest fast-food chains in the country – was forced to temporarily close around 70 of its stores due to the shortage of “chicken on the bone” supplies.

KFC announced that load shedding had impacted the supply of some essential menu items. The company said that it had more than 1,000 outlets in the country, with 600 of them having back-up generators. However, some suppliers have experienced immense operational disruption due to consistent and intense loadshedding throughout 2022, which has resulted in some constraints in the supply chain and impacted some of the restaurants. 

Similarly, Nando’s, another popular fast-food chain, is also facing difficulties in managing supply across its national footprint with seemingly nonstop loadshedding. The CEO of Nando’s South Africa, Mike Cathie, said that while none of its restaurants have closed due to chicken shortages, it continues to be tough to manage supply with the intensifying blackouts. He added that as long as loadshedding remains, so does the significant threat to the supply of fresh food.

Yesterday News24 reported that KFC had got to grips with its supply disruption and that it was “happy to confirm that in the coming days our customers will again be able to get all their KFC favourites at any of our more than 1 000 restaurants across the country”.

The impact of loadshedding on the poultry sector:

Astral Foods, the country’s largest poultry producer and supplier to restaurants such as KFC, Nando’s and Spur, said that power cuts are making it increasingly difficult to do business. 

Izaak Breitenbach, general manager of the South African Poultry Association, told News24 this week that its members had to cull more than 10 million day-old chicks in the past six weeks due to escalating loadshedding. 

“There is no shortage of chickens. The chickens are standing on the farm and we can’t get them through the slaughter process to get them to the restaurants.”

“We had to cull more than 10 million day-old chicks because they have to go into houses that are still occupied by birds that should have been slaughtered.” 

Breitenbach says that producers lose “six hours of slaughter” during stage 6 loadshedding – which cannot be caught up because they already slaughter 24 hours a day.

The delays mean that chickens have to be fed for longer before they can be slaughtered, which results in larger chickens, and larger individual portions (which may also not be suitable for fast-food outlets). While these larger portions can still be sold in supermarkets, retail packs containing larger – but fewer – individual chicken portions could negatively impact producers.

CEO of Astral Foods, Chris Schutte, told eNCA that the poultry industry runs on a schedule that is planned two and a half years ahead, and the power cuts make it difficult to meet the demand for chicken at fast food establishments, and that eventually the problem could spill over into the retail sector.

“You can sell a bigger bird via retail but obviously you’ll have fewer pieces in a two kilogram bag. Although you’re still selling two kilos of chicken there might only be nine pieces in instead of eleven [in the bag]. Consumers are not used to that. They might put it down, thinking they’re getting less chicken. So eventually it could spill over to the general retail sector, and of course that will lead to a change in consumer behaviour, which may negatively impact us as a producer.”

The loss in sales, cost of additional feed, and costs to generate its own electricity is reportedly costing Astral R250 million, over the past quarter and into the next quarter. 

“It’s a massive impact on Astral… it’s not sustainable. So we’re going to have to up prices just to recover our input costs. We are in a vice grip here of note and it’s really a struggle to keep the business afloat at this point in time,” Schutte concluded.

Multiple farming industry representatives have approached the government to push back against loadshedding as it limits food security across the country. Last week, stakeholders from the agricultural sector held a meeting with Minister of Agriculture, Land Reform and Rural Development, Thoko Didiza. The members said that irrigation systems, livestock maintenance, and temperature regulation in chicken coops are all affected by power outages. 

“Poultry consumption is at its highest during the festive season. This, combined with stage 6 loadshedding certainly didn’t make it easy for consumers, producers, or processors to stay ahead of demand,” says Breitenbach. 

“Larger producers are reporting losses in the millions, while smaller producers are letting go of their employees and closing their businesses as they are simply not able to sustain their operation without a reliable energy source. The high cost of feed was a bane for many farmers during the course of 2022, and while feed costs are still high, it’s loadshedding that is steadily becoming the greater threat to the value chain.”