VALUE CHAIN ANALYSIS (VCA) & VALUE ADDITION OF CHICKEN IN INDIA
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SURINDER KHANNA, POULTRY CONSULTANT ,JALANDHAR
Value chains play an important role in transforming agricultural commodities from raw material to end products demanded by the consumers. Value chains are particularly well suited to understanding how poor people can engage, or engage more beneficially, with domestic, regional or international trade. Value chain analysis has economic viability and sustainability at its core because of its focus on markets and commercial viability (as well as development concerns). This provides a framework for engagement with both business and beneficiary groups. Successful value chain development projects, therefore, aim for win-win outcomes for all participants. Value chain analysis focuses on segmenting the different activities that add value in the production and sale of a product or service. The value chain consists of the primary producer, trader, processor, wholesaler, distributor, retailer, and consumer. Value chain analysis(VCA) is a strategy tool used to analyze internal firm activities. Its goal is to recognize, which activities are the most valuable (i.e. are the source of cost or differentiation advantage) to the firm and which ones could be improved to provide competitive advantage. Small ruminants and poultry bird’s value chain are concerned with the flows of commodity to and within a value chain to meet the needs of chain actors for commodity, to secure sales, to buy inputs or produce, or to improve efficiency. A “value chain‟ describes the full range of activities required to bring a product or service from conception, through the different phases of production (involving a combination of physical transformation and the input of various producer services), delivery to final consumers and final disposal after use.
Various actors are involved in small ruminants and poultry birds’ value chain right from rearing to marketing. The value chain displays a number of points that are important in value chain analysis. First, value chains are a market-oriented approach, in the sense that all activities in the chain are directed towards the market. Second, all stakeholders along a particular value chain have to cooperate to achieve systematic competitiveness for supplying different inputs into the final product. Third, the starting point for any value chain analysis is the internal working systems (e.g. labour costs, productivity, and quality control).
Value Chain Analysis—
Value chain analysis normally shows the build-up of costs along a specific commodity chain. This can be complemented with an identification of the business service providers and what are considered to be the main determining factors in the external policy environment. Such analysis is well suited to understanding how poor people in rural areas can engage, or improve their terms of engagement with trade. Value chain analysis focuses on segmenting the different activities that add value in the production and sale of a product or service. It differs from traditional industry sector analyses in many ways, including the following: Identifying dynamic linkages between productive activities, value chain analysis transcends traditional economic and industry sectors by showing where value is added in a rearing of small ruminants Value chain analysis focuses on net value added instead of overall size and gross output Traditional industry sector analyses often do not sufficiently determine the distribution of value added between activities, both within and between countries, or a country’s current insertion in local markets Value chain analysis thoroughly examines information flows among actors in the value chain unlike typical industry analysis Segmenting the value chain allows for better understanding of the constraints and opportunities within each segment, as well as the context in which the chain operates.
With India‟s economy rapidly expanding, growth in the broiler sub-sector is marked by a rising demand for animal protein. Poultry industry has been growing at the rate of 12% annually over the last decade. At present, the annual national consumption is 2.2 million tonnes. A CII-McKinsey report on the sector predicts that demand for broilers would increase by 2021 to 20 billion broilers. The per capita annual chicken consumption in India is 850 grams and in rural areas it is 350 grams against the world average of 9.5 kg. This shows that there is considerable scope for future growth. Chicken is the first-choice meat for the non-vegetarian population because of its wide culinary adaptability to various Indian cuisines. Chicken is also preferred over goat and lamb on health grounds as it is considered white meat while the latter is red meat, which is harmful to health. Further, chicken is acceptable to both, the Hindus and the Muslims. Whereas the Hindus do not eat beef for religious reasons (barring a very small segment of the community), the Muslim community, which is predominantly non-vegetarian does not eat pork, again, for religious reasons. The opportunity to achieve a double-digit annual growth rate in poultry industry has essentially been cornered by the large growers and the lot of the small farms has been worsening; their share in the total marketed production has dwindled from 55% in 1970 to less than 10% today. This process of concentration of production in the hands of big producers has also been aided by the failure of small growers to negotiate with organised poultry industry, which is increasingly becoming market-oriented and vertically integrated.
Poultry industry in India is a well established industry, ranked third in egg production (75 billion) and fifth (4.20 million tons) in broiler meat production in the world. The industry contributes 5% and 2.5 % of meat and egg of total global output, respectively. In India, the per capita consumption of egg and poultry meat is 61 eggs and 3.9 Kg of meat, respectively. The consumption pattern is not uniform between urban and rural areas with higher consumption in urban areas. The reasons attributed for more consumption could be more urbanization, improved income, better knowledge on health and nutritional benefits of poultry meat. Although the poultry production is constantly showing an increasing trend, but the processing industry has not maintained the same pace leading to overall moderate profitability. In India, only 20% of the chicken and 6% of the eggs are processed. Among the dressed chickens, 70% are sold as dressed or chilled or frozen whole carcass, while remaining 30% as cut up parts and further processed products (Singh 2012). Major constraints in our country for lack of processing is less preference for frozen chicken by the consumer, insufficient cold chain infrastructure facilities, lack of well organized marketing system, less domestic demand for value-added products, non-availability of adequate technology, fluctuating export trade, high import duty and strict sanitary and phytosanitory norms by importing countries (Desikan and Megarajan, 2014).
Processing and marketing of poultry ranges from live bird markets or a very primitive on-site slaughter and sale to a highly sophisticated, fully automated and International Standards Organization (ISO) certified facilities and ready-to-eat convenience products in many parts of the world. Lack of or inadequate refrigeration is probably the single largest obstacle to the marketing of many perishable foods, including meat and poultry. In many developing countries, even the subtle improvements in the cold storage capabilities have significantly increased the trade, storage, distribution, and consumption of poultry products (Babji, 2001). The adoption of modern freezing, packaging, and transportation technologies has provided large poultry companies the flexibility to export their high quality, mostly value-added premium cuts to all corners of the world, especially at times of domestic surpluses and low market demands (Bilgili, 2001).
The poultry processing is broadly divided into pre-processing, primary processing, secondary processing and further processing.
Pre-processing
Prior to processing, several steps are taken to prepare the live birds for processing. First the feed is removed from broilers approximately 8-12 hr before slaughter. Feed withdrawal is important to reduce gastrointestinal contents within the bird, which reduces the chance of ingesta or fecal contamination during processing. The poultry house is cleared of equipment prior to arrival of the catching crew. The birds are loaded into multilevel coops. These coops are loaded onto trucks and transported to the processing plant. Upon arrival, the birds are weighed as a group and held in a holding shed to provide some minimal protection from the environment prior to unloading. The loading, unloading as well as transportation of poultry birds should preferably be done during colder hours of the day. Upon arrival, the ante-mortem examination of poultry birds is done to pass judgment about the suitability of slaughtering them for further processing.
Primary Processing
Primary processing includes slaughter, evisceration and chilling. In the modern and automated poultry processing plants, the coops are unloaded from the truck and a machine tilts and dumps the entire coop onto a conveyor that transports the birds to the hanging area. The birds are hung upside down on the overhead shackles where they remain for the duration of steps in the slaughter area, (approximately 6-7 min total). The birds are stunned using electrical stunning device (water troughs), passing a current of 10-20 mA through the head and body. Immediately after stunning, the birds are slaughtered either manually or mechanically using automated kill machine. After the neck is cut, exsanguination (i.e. bleeding) takes approximately 2 min. It is followed by scalding where the birds are submerged in hot water which assists in feather removal. In a small plant, scalding can be performed manually in a large bucket. i.e., placing the carcasses in and removing them from a tank. In large plants, it is done in a continuous manner employing a single stage or multistage scalding bath while the birds are suspended from a moving shackle line. Feathers are being plucked either manually or using a defeathering equipment. The defeathering equipment is equipped with rubber fingers that rub the feathers off the carcass. After feather removal, the heads, oil glands, crop and feet are removed. On-farm and small processors usually cut the head off while large plants have machines that pull heads off so that the esophagus is also removed. The feet are removed at the knee joint. In small plants, birds are put on evisceration shackles after scalding and picking. In large plants, after the feet are removed, the birds are rehung on the shackles. When birds are first hung, it is easiest to hang them by the feet, but during rehanging, they are hung by the knee joint. This is followed by evisceration stage which involves removal of the contents of the body cavity. The body cavity can be opened by making a small cut near the vent, extending the cut around the vent. After the abdomen is open, the viscera can be removed through the opening. It is very important to remove all the viscera, including the lungs that are attached to the back. After all the contents of the cavity are removed, the bird is thoroughly washed inside and out. The edible byproducts including heart, liver, and gizzard (collectively called giblets) should be separated and cleaned. After dressing, the carcass is cooled as soon as possible. The most common methods of chilling include water-immersion chilling, air chilling and spray chilling.
Secondary Processing
Secondary processing usually refers to further processing of the raw carcass into value-added product forms. Cut-ups, deboning and portioning are included in secondary processing. There are different ways to cut up a poultry carcass. Depending on market demand, poultry can be sold as a whole, ready-to-cook bird, split into two halves, separated into different parts (wings, legs, breasts) and sold with/without skin and bones (e.g., boneless breast). In high volume markets, a large percentage of carcasses are cut into portions for retail sale, for use in restaurants and catering outlets and as a raw material for an increasingly wide range of fast-food products. In low throughput plants, carcasses can still be cut manually. In most medium and high throughput plants, birds are cut automatically by modular systems able to operate at hourly throughputs of 5000 carcasses or more. The cut-up-parts of poultry (usually 8 in number) include breast, back, legs (2 thighs and 2 drumsticks) and 2 wings. Deboning means separating meat from bones. Mostly, deboned meat is from breasts (fillets and tenders), with some thigh meat also available to the retail market. Portioning is conducted on deboned meat, usually breast fillets. Portioning is important to supply meat at a certain weight, length, width, and thickness. Although it does not seem important other than for marketing, fast food retail operators rely on portion-controlled meats as a food safety method. For example, a breaded fillet of a certain size is placed in a fryer with a set temperature and a timer set for 3.5 min; an overweight or overly thick portion may not reach a safe internal temperature with the programmed settings.
Further Processing
Further processing is the addition of ingredients, and/or heat treatment to poultry meat to create a variety of value added products. Poultry industries involved with the processing have developed hundreds of processed products. Some processed forms include marinated, chopped and formed, breaded, glazed, oven roasted, fried and char-grilled varieties. Major product forms include patties (breaded or roasted), nuggets, tenders, fillets, wings, drums, and thighs, prepared and either par-fried (partially cooked in oil for less than a minute) or cooked in many different possible forms.
The Chicken Industry scenario———-
While the production of agricultural crops has been rising at a rate of 1.5 to 2 percent per annum, that of eggs and broilers has been rising at a rate of 8 to 10 percent per annum. With 10 lakh poultry farmers producing around 851.8 million birds annually, poultry contributes Rs 1.3 lakh crore to the national GDP. The poultry market is predominantly fresh meat and processed meat accounts for just 5 to 10 percent depending on the geography. This share varies from 30 to 40 percent in countries such as Russia and France and 15-25 percent in South East Asian countries and Brazil. Hence there is a clear opportunity to double or even triple the size of processed poultry meat in India.
A live poultry market puts pressure on producers as fresh meat prices are impacted by supply-demand economics and unexpected market shocks which Industry has witnessed in the past 3 months even before the Covid lockdown due to fake news resulting to market collapse. A business model that necessitates continuous rearing and natural gestation period makes it difficult to vary supply with demand. Another complexity in India is that the meat consumption cycle is not constant as in other countries. Producers often bear reduced margins or even losses to sustain the farming volumes. To give a perspective, the loss suffered by the poultry industry on account of the current price crash is estimated at around Rs 22,500 crore.
Advantages of the processed meat market
A well-developed processed meat market will benefit both producers and consumers. Processing will increase the shelf life of meat products and will enable producers to absorb demand shocks through improved inventory control. Processed meat has other advantages such as better taste, low possibility of meat-borne diseases, better life span and a high amount of portability. The ability to store the product will shield the producers from price crashes.
With social distancing becoming a norm, the need for hygienically packed meat untouched by hand will increase. Indian customers will start asking for traceability, no antibiotics/chemicals, fresh-but-hygienic meat. Also, consumers demand a food supply that is nutritious, safe, convenient and varied. Meat processing methods and advances in technology help to make this possible. Processed meat is a logical answer as producers will be able to confirm adherence to these quality requirements. Existing players who can forward-integrate into a processed brand-led play could gain from this consumer trend.
Challenges for the transition—
The first challenge in the Indian context is the preference to buy fresh food. Indians are for long used to buying fresh fruits, vegetables and poultry. Changing this consumer behaviour will need sustained investment in customer education through awareness campaigns. Industry stakeholders with the help of government agencies should play an instrumental role through a structured marketing plan. Even a bigger challenge will be to convince that the taste of the meat and its nutrient value is largely undisturbed during processing.
The flip side of chicken processing industry will be feared loss of employment among a section of wholesale traders and butchers, who could become redundant if the processed segment grows. As the processed meat industry gains share, such intermediaries often find different roles in the new supply chain network. In addition, we could see an increase in employment in processing plants which can offset the fear of losing jobs for the wholesale traders and butchers.
The third challenge is upgrading the processing and supply chain infrastructure. Capacity utilisation in India’s processing plants is around 50 percent, and is hence not an issue. However, it is the supply chain infrastructure that needs to be invested in. A robust cold chain from the processing plants to storages and extending to retail refrigeration will be needed. Favourable government policies will also be needed to attract foreign investments in this area.
The way ahead
Growth of processed meat consumption benefits both producers and consumers in the long run. India, just as many other countries, will continue to have both wet and dry markets. The key will be to create consumer awareness and change the perception towards processed meat. There are many factors accelerating this change in the Indian market-changing lifestyles and demographic profiles of families; exposure to international cuisines; growth of modern retail and restaurants.
Once end-consumer acceptance increases, capacities could be created and utilised well. Some of the Indian players could seize this opportunity to forge international tie-ups. Government regulations will continue to play a key role both in attracting investments and in promoting processed meat as safe and hygienic food. To conclude, this transition won’t be an overnight journey — it could take five to ten years for India to have a well-developed processed poultry meat market.
Conclusion
Indian Poultry Industry is one of the fast growing markets in meat production. Although poultry production industry shows enormous growth, but the processing sector has not maintained same pace. Marketing of poultry products has many hurdles such as unstable market, increased taxes on processed foods, high transportation charges, and lack of cold chain facilities and non-compliance of food safety norms. However, continuous research has lead to the development of low cost and efficient poultry processing technologies. Rapid urbanization, industrialization, improved income and changing food habits can be seen as positive factors for development of processed food sector including poultry processing sector. Value added poultry meat products are in vogue because of them providing increasing convenience to consumers through decreasing preparation time, minimizing preparation steps, allowing use of specific parts, taking risks out of kitchen and increasing value of product. With the advent of further processing and availability of new products, meat consumption, particularly poultry consumption has potential to upgrade the poultry industry all over the world and particularly in developing countries like India. However, need of the time is to maintain the strict quality assurance norms as per the standard guidelines to further the marketing and consumption pattern of value added poultry meat products.
