Poultry sector headed for duopoly

The Philippine poultry industry is headed for a duopoly — with San Miguel Foods and newly acquired Purefoods Corp. on one side, and the proposed merger between Swift Foods Inc. poultry division and Vitarich Corp. on the other.

RFM Corp. executive vice president Felicisimo Nacino told The STAR that a merger between RFM’s poultry unit and Vitarich will give San Miguel-Purefoods a good competition since each will have a 40-percent share of the poultry business.

Swift Foods has the biggest share of the poultry business in the country, followed by Vitarich, San Miguel Foods, and Purefoods Corp. Other companies like Tyson Foods, and Universal Robina Corp., as well as backyard poultry growers, compete for the remaining 20 percent.

Nacino said that a duopoly will be beneficial for the industry since they will have more economies of scale and can better manage the business.

The RFM official revealed that they have yet to begin negotiations on the proposed merger, even as he stressed that there may be some urgency now to the plan considering that San Miguel has already acquired Purefoods.

Aside from the possible merger between Swift Foods and Vitarich, RFM is also planning to sell some of its retail food businesses, including Orange Julius, Little Caesars, and Dairy Queen.

Vitarich has yet to rise from its financial debacle which started in 1997 due to a chicken supply glut and unfavorable economic conditions. It, however, got a reprieve when it reached a restructuring agreement with its creditors for debts worth over P1 billion.

On the one hand, the poultry business is one of the more profitable ventures of Swift.

RFM also recently signed an agreement to sell Cosmos to a joint venture of San Miguel and The Coca Cola Co. for an enterprise value of P15 billion, but the proposed sale got a court restraining order due to a complaint filed by former Jaz Cola owner and now Iloilo Rep. Augusto Syjuco and which RFM has dismissed as plain harassment on the part of Syjuco.

RFM hopes to raise P4 to P6 billion in cash if ever the sale of Cosmos pushes through to fund future acquisitions and meet payments on convertible bonds which have matured.