SIC 5144
POULTRY AND POULTRY PRODUCTS

This category encompasses establishments primarily engaged in the wholesale distribution of poultry and poultry products, except canned and packaged frozen foods. Not included are establishments primarily engaged in the killing and dressing of poultry, which are classified in SIC 2015: Poultry Slaughtering and Processing. Establishments primarily engaged in the wholesale distribution of packaged frozen poultry are classified in SIC 5142: Packaged Frozen Goods, and those distributing canned poultry are classified in SIC 5149: Groceries and Related Products, Not Elsewhere Classified.

NAICS Code(s)

422440 (Poultry and Poultry Product Wholesalers)

Industry Snapshot

Between 1989 and 2001, U.S. consumer demand for chicken jumped 60 percent, which Supermarket Business attributed in large part to the industry's aggressive development and marketing of value-added, case-ready products, such as boneless breast strips, shredded chicken in a tub, grilled fillets, and diced and shredded breast meat, often pre-seasoned and packaged with flavor-enhancing sauces. U.S. Department of Agriculture statistics revealed that U.S. consumers ate 70 percent more chicken in 2001 than 20 years earlier, amounting to about 57 pounds of chicken per capita.

By 2003, the industry employed 23,550 workers in its 1,133 establishments, according to analysts at Dun & Bradstreet. Nearly half of these businesses employed fewer than five people; however, like much of the U.S. wholesale industry, poultry distribution was rapidly consolidating in the early and mid-2000s, shifting focus to value-added services such as inventory and display management. Poultry wholesalers raked in revenues estimated at about $6.45 billion in 2003.

Different kinds of poultry meat command vastly different prices. The wholesale price of chicken breasts, for example, was generally twice that of dark leg meat. While purchasing whole chickens was generally the cheapest option per pound, consumer trends were driving

The Most Popular Types of Chicken
SOURCE : Supermarket Business
1. IQF Boneless Skinless Breasts
2. Leg Quarters
3. Whole Fryers
4. Boneless Skinless Breasts
5. Wings
6. Bone-in Split Breasts
7. Drumsticks
8. Thighs
9. Roasters
10. Cut-up Fryers

away from this option, as demand skyrocketed for more easily prepared and more controlled meat types, such as ready-to-eat boneless breast fillets.

Background and Development

The U.S. poultry industry started on small farms, where chickens and eggs provided family income. Hatcheries, feed stores, and poultry processing facilities sprang up in grain-producing regions of the Midwest, connected to markets by collection and distribution centers. Integration developed as feed dealers and manufacturers merged with hatcheries and processors. Large wholesalers began to dominate the market in the mid-1940s in response to consumer demand and the ability to preserve and ship fresh products.

Current Conditions

In the late 1990s and early 2000s, the industry was beset by a series of disease-related health concerns, including salmonella and bird flu. In 2003, Asia was hit with a widespread case of bird flu—originating, according to experts, among ducks and other waterfowl—and migratory birds were in danger of spreading the virus to the United States' poultry farms, beginning in Alaska. After a series of salmonella cases in the late 1990s, the industry was panicky about potential for the problem to intensify, and so it focused on ways in which such outbreaks could be quickly contained before they had a chance to spread through an increasingly centralized food industry.

The U.S. government challenged food industries, including poultry wholesalers, to develop methods of detecting salmonella and other food-borne pathogens, some of which had developed resistance to antibiotics. Industries were asked to design controls for all production phases—including transportation, shipping, tracking, and shelving—focusing on temperature, prior cargoes, and sanitation. Methods either in use or under study included sturdier machine-assembled reusable shipping containers doubling as retail shelves, computerized order placement, and tracking and bar coding. Pathogen eradication and tracking technology included food irradiation and genetic "fingerprinting." Control points could monitor temperatures and times with package sensors both en route and during loading and storage. Pathogen source control might involve such ideas as coating chicken feed with red pepper to repel rodents.

The poultry industry also came under fire from medical and regulatory authorities who argued that the industry's alleged overuse of antibiotics to maintain healthy stocks had given rise to evolving food-borne germs that could resist high-strength medicines, thus running the risk that major diseases could rip through the food chain. In response to such concerns, the largest U.S. poultry product producer, Tyson Foods Inc., announced in 2002 its intentions to wean its chicken populations of antibiotics.

Industry Leaders

Industry leader Zacky Farms, LLC of El Monte, California, shuttered its chicken operations, leaving its rival Foster Farms as a leading player in the industry. Foster Farms, the largest poultry country in the western United States, operated its own hatcheries, grow-out ranches, feed mills, and processing plants in addition to its distribution operations. Other industry players included Norbest Incorporated of Midvale, Utah; Troyer Foods of Goshen, Indiana; and Crystal Farms Refrigerated Distribution of Minneapolis, Minnesota.

America and the World

The United States was a major exporter of poultry and poultry products. Russia was the industry's biggest foreign customer, purchasing $586 million in chickens in 2001. That relationship soured briefly when Russia, ostensibly to force U.S. poultry producers to erect a barrier between the slaughter and processing segments of the industry, slapped an embargo on U.S. poultry imports in 2002. Russia later backed off, but the embargo caused a decline of U.S. exports to Russia to $494 million.

Another key trading partner was Mexico, to which U.S. poultry producers exported chicken legs and thighs in exchange for the breast meat favored by U.S. consumers. In the early 2000s, the two countries scored a series of deals to regulate tariffs through the middle of the decade under the rules of the North American Free Trade Agreement (NAFTA). These deals allowed both countries to protect their domestic industries with 99 percent tariffs in 2003, which would then decline about 20 percent per year for five years until the tariffs were phased out entirely.

Further Reading

Dun & Bradstreet. "Industry Reports." Waltham, MA: Dun & Bradstreet, 2004. Available from http://www.zapdata.com .

Kilman, Scott. "Tyson Foods to Curb Its Use in Chickens of Antibiotic Targeted for Ban by FDA." Wall Street Journal, 20 February 2002.

Leach, Peter T. "A Thorn in the Side." Journal of Commerce, 16 June 2003.

Luhnow, David. "U.S., Mexico Close to Tariff Deal on Chicken Trade." Wall Street Journal, 30 December 2002.

Major, Meg. "More Cluck for the Buck." Supermarket Business, 15 October 2001.

Prystay, Cris, and Matt Pottinger. "Migration Raises Bird-Flu Worries." Wall Street Journal, 2 February 2004.

Spaeth, Anthony. "The Revenge Of the Birds." Time, 9 February 2004.