27 February 2014, Centurion– AFGRI Limited (“AFGRI”), a leading listed South African agricultural services and foods group, announced today that it is in support of the proposed brining legislation.
“After careful consideration of the proposal relating to the regulation of brining published on 15 December 2013, AFGRI Limited and its subsidiary AFGRI Poultry are in favour of the regulation,” said CEO of AFGRI, Chris Venter.
The Department of Agriculture, Forestry and Fisheries (“DAFF”) announced that it intends to cap the brining of chicken portions (IQF) at a level of 15% and to cap the brining of whole birds at 10%. The intended implementation date is 1 September 2014.
“AFGRI is in support of DAFF’s proposed regulation based on its opinion that the maximum brining levels suggested are ethical, fair, reasonable and scientifically justifiable said Izaak Breitenbach, MD of AFGRI Poultry. “It is an opportunity to provide clear guidance to the industry and it will level the playing field for all suppliers of poultry products in South Africa. A cap will eliminate the competitive pressure to up the brining levels that has been of concern.”
The reduction in brining levels will not only provide transparency to consumers but will furthermore create a better legal framework for compliance with the regulation. The reduced brining level will unfortunately financially impact the consumer and producers alike AFGRI is therefore keen to engage, interact and support Government departments in this regard. “We strongly believe that brining is only one aspect of the poultry value chain and it is also important for all parties to engage around issues of controlling and administering imports, administering packaging as well as other parts of the value chain,” Venter noted
It is important to understand the background to brining. The terminology “brining” is misleading as it insinuates that the product is injected with a water and salt mixture, which is not the case. Poultry producers, AFGRI included, use flavourants which are injected into the carcass or product to make it more succulent and tender. This is also the process required by quick service restaurants to obtain a distinct taste and tenderness profile to their respective
products. Treating the carcass or portion with a flavour enhancer (which costs less than meat) also reduces the cost per kilogram of meat, making individually quick frozen (IQF) portions the lowest cost animal protein source money can buy.
It is with the above in mind that DAFF initiated a consultative process to put a cap on the legally allowable percentage of injectable flavour enhancer, namely 15% for chicken portions and 10% for frozen whole birds.
“It is the consequence of the brining cap however that needs to be dealt with so as not to have a material negative effect on the consumer and the producer,” reiterated Breitenbach. “The nett effect will be that the cost of IQF will increase by approximately 15%,” he said.
Most poultry companies have endured losses for more than 30 months and will not be in a position to subsidise the additional cost and on the flip-side consumers (particularly those in the lower income groups) will find it difficult to pay 15% more for an IQF product when increases are felt by the consumer in fuel, other food products and the cost of services, putting them under further strain. Food inflation, as an example over the past year, was 37%, whereas poultry inflation has been 0% since 2007.
AFGRI currently has BEE ownership of 26%, employs a total of 2,500 staff within the poultry business and produces quality poultry products into the South African market place. Given this, it is open to discussions with the role 2 players to ensure that a smooth transition into the new brining regulation is in place by the suggested implementation date.
“AFGRI declares its willingness to engage in discussions with the relevant Government departments to determine how impacts can be mitigated against both for the consumer and poultry companies,” concluded Mr Venter.
Issued for: AFGRI Limited
Contact: Chris Venter, Chief Executive Officer (CEO)
Contact: Izaak Breitenbach, MD AFGRI Poultry
Account: Keyter Rech Investor Solutions
Contact: Vanessa Rech
Tel: (011) 447-8656 or 083-307-5600
Date: 27 February 2014
JSE Code: AFR