Integration of the Broiler Industry in China

The Integration Strategies of Broiler Processing Companies in Shandong Province

Abstract

We clarify the procurement strategies from broiler breeding farmers and the sales strategies to wholesale/- retail, which are mainly conducted through broiler processing companies. We have taken up case examples of broiler processing companies Z, XD and XC in Shandong Province, which has the highest production volume. Broiler processing company Z is an integrator, which has been attempting to become more integrated upstream via marketing contracts with poultry farmers or cooperatives. When looking into XD, X, which is a major feed sales company, is observed to have become an integrator. Noticeably X has established the subsidiary company XD, while subsequently, XD established a broiler cooperative which make marketing contracts and production contracts with poultry farmers to integrate materials, breeding and processing. In the case of the XC company, the fact that C broiler cooperative engaged in broiler breeding is an integrator has led to the establishment of a processing company XC through capital collaboration with the major feed sales company X. In sales strategies, all the three companies secure sales volume by means of utilizing major wholesale sales channels and, intertwining partnership with wholesale companies. In procurement strategies, Company Z procures broilers selected a relatively cost saving channel of marketing contracts. X, the parent company of XD, is mainly deployed in production contracts. This is in part due to X integrating materials, breeding and processing and emphasis on the stable supply of broilers is valued more in X than Z. On the other hand, XC's procurement is depended on the C cooperative, whereas the C cooperative predominately encompasses covers procurement by a directly managed farm. The president of C cooperative began as a large-scale poultry farmer, and then expanded its business to processing. Broiler processing companies can be observed to adopt various methods on procurement strategies, while sales strategies are seldom taken into consideration.