Feathers ruffled in SA chicken industry

US IQF and Agoa agreements effectively holding country to ransom, says Rainbow. Keith Ross reports

US had a large surplus of brown meat it wanted to “dump” in South Africa.

He said South Africa had come under huge pressure on the poultry issue because the Americans had linked it to the African Growth and Opportunity Act (Agoa) agreement, which allowed South Africa duty-free entry into the US for a wide range of its goods, mainly in the auto, wine and citrus sectors.

“We believe the US is effectively holding South Africa to ransom by threatening not to renew Agoa unless we allow them to behave inappropriately.

“We are not seeking special treatment but merely asking that the playing fields be levelled, that we do not allow our country to be bullied into giving dispensations which will harm our economy and represent a real threat to our long- term food and job security.”

Heath said Rainbow was fortunate in that much of its present-day poultry production went on contract to the foodservice sector and was not greatly affected by such variations in the market.

“We now supply 90 percent of KFC’s poultry, 100 percent of Nando’s and 100 percent of Chicken Licken’s, as well as other food service chains.

“That accounts for about 50 percent of our total production. We are also increasing our production of added value products – the freezer to fridge boxed meals sold mainly through supermarkets.”

He traced much of Rainbow’s rapid growth back to 2003, when a new chief executive, Miles Dally, was appointed. “Miles is a marketing man,” said Heath, “and he changed the focus of our company. We had always seen poultry as a commodity, something that could not really be branded. He introduced a customer-focused strategy – moving away from our commodity attitude, building a brand people wanted to buy.”

Heath said Rainbow was part of RCL Foods, a massive corporation with an annual turnover of R24 billion.

“We are now the second-biggest food producer in South Africa, after Tiger Brands.”

RCL produced a wide range of foods and feeds under more than 20 brand names – from animal feeds and grains, such as wheat and maize, to poultry products, from speciality foods and pies to groceries, baking products and beverages.

“We have many products and a lot of important synergies, but chicken still remains very important to us. It makes up 37 percent of our turnover and affects our whole business. It has a big impact on our group. So those US imports will be felt.”

But, he said, the company remained extremely positive and aimed to once again double its size in the next five years.

“We are expanding further into Southern and Central Africa and beyond. We are in Zambia and want to expand further north, with a focus on East Africa.”

He said the company would seek partnerships with existing businesses in those countries.

“We go in with 49 percent or less of the business, and bring with us useful knowledge and skills, and sometimes finance. We hope to grow these businesses and possibly increase our stake over time.”

Heath said Rainbow traced its origins back to a small chicken farm started in Hammarsdale by a British immigrant, Charles Methven.

“In the late 1950s and early 1960s his son, Stanley Methven, started to take live chickens on the back of a bakkie to the Durban market. He had a vision that chicken need not be a luxury – as it was seen by many people at one time – but could be on everybody’s table on Sundays.”

Methven then started to “process” poultry. “In 1963 he built a processing plant – to handle 1 000 birds a day - near the family farm at Hammarsdale.”

“A few years later he entered into an exclusive distribution deal with Irvin and Johnson to help market his poultry. He had a vision of distributing throughout South Africa.”

This arrangement with I & J continued until Rainbow bought out the distribution arm, Vector Logistics, in 2005.

Meanwhile, Rainbow had grown rapidly. In 1976 a processing plant was completed in Worcester and in 1985 another was opened in Rustenburg, giving Rainbow a national capacity of 1.5 million birds a week

At that time Methven remained the sole shareholder, a situation that continued until 1989, when the Rembrandt Group bought a 25 percent stake in the company, initially through Hunt, Leuchars and Hepburn . The stake was later increased to 82.3 percent.

Methven went to live in Monaco, although he frequently visited South Africa to keep in touch with Rainbow. He died in a motor scooter accident in Monaco in 1986.

Rainbow continued to expand and in 1991 the company bought 100 percent of Bonny Bird and 50 percent of Epol Animal Feeds. It completed the Epol takeover four years later.