Freezing Out Competitors : New Chicken Labeling Bill Is About Buck-Buck-Bucks
Just as California consumers warm up to inexpensive chicken from the South, the state’s poultry industry is taking steps to freeze it out.
A trade association dominated by leading California growers Zacky Farms and Foster Farms is pushing legislation that would make it hard for out-of-state companies to sell fresh chicken in California. If the state’s lawmakers go along, as expected, Californians could end up paying higher prices for fresh chicken.
The legislation is expected to go before an Assembly committee soon, as chicken growers on either side of the California border trade charges of “protectionism” and “chicken dumping.” The bill has already cleared the state Senate.
The plea for government help comes amid rising turmoil in California’s poultry business. With the state’s economy on the ropes, consumers are snapping up inexpensive chicken from Texas, Louisiana and Arkansas--abandoning old loyalties to premium-priced, California-grown chicken. Today, home-grown chicken accounts for slightly more than a third of the $2.5-billion California market, down from nearly half nine years ago.
The declines have taken their toll on the state’s chicken giants, which have evolved from small, family-run enterprises into California institutions. Although the companies are not publicly traded and do not report their financial results, there are clear signs of distress.
In recent months, Livingston-based Foster Farms has swept out its top management, bringing in a team from outside the industry to revive the company. El Monte-based Zacky Farms is operating at two-thirds capacity; even so, the company has had to cut the price of its chicken more frequently than ever simply to get rid of it.
The companies complain that higher wages, taxes and feed costs in California prevent them from lowering prices to match non-California-based competitors. Wholesale prices for Southern-grown chicken average 10 to 15 cents a pound less than for California birds.
Zacky President Robert Zacky blames an invasion of cheap Southern chicken for his company’s woes. “They don’t care about California,” Zacky says of his competitors. “They are dumping chicken.”
Opponents say that charge is preposterous and note that California growers have been slow to adapt to consumer tastes.
The legislation doesn’t directly close California’s borders. Instead, it takes an indirect approach.
The bill modifies for California the legal definition of a fresh chicken, raising the temperature threshold for fresh chicken from the federal standard, 0 degrees, to 25 degrees. Chicken chilled below 25 degrees could not be sold as fresh within the state.
The legislation poses a potential dilemma to firms selling Southern-grown chicken in California, because the refrigerated trucks that bring the chicken here keep their cargo at between 26 and 27 degrees. Uneven cooling over long distances--which companies say is likely--could inadvertently chill the chicken below 25 degrees.
“They want to build a wall around California,” said Stan Bloom, a Vernon meat distributor who has prospered selling Texas-grown chicken under the Randall Foods label in Southern California.
The National Broiler Council, a trade group representing some of the biggest chicken processors in the country, is expected to challenge the legislation if it becomes law.
Legislators supporting the bill contend its chief purpose is to protect consumers from purchasing what they consider mislabeled chicken. Peter Cooey, chief aide to the Assembly Agriculture Committee, said: “We view this as a truth-in-labeling issue. . . . This chicken is brought into the state frozen as hard as a rock.”
The California Poultry Federation, the lobbying arm of the state’s poultry industry, is working the freshness angle, strutting out prominent California chefs--Spago’s Wolfgang Puck among them--extolling the virtues of fresh chicken.
But food scientists say the legislation falls short of ensuring that chicken is fresh. George K. York, a food science professor at UC Davis, said chicken meat begins to freeze at 28 degrees. York, who provided this information to legislators, said the bill permits frozen, or partially frozen, chicken to be labeled as fresh.
The legislation doesn’t reflect reality for good reason: California processors also ship chicken below its actual freezing point, somewhere between 26 and 28 degrees, according to the federation. (Since California chicken is shipped shorter distances, its temperature isn’t likely to dip to 25 degrees.)
In the arcane world of agricultural regulation, tinkering with chicken temperature to control markets is nothing new. Last year, similar legislation failed in Oregon, where Foster Farms operates a subsidiary.
“They wanted to stop the so-called Arkansas traveler,” said an official with the Oregon Department of Agriculture, referring to chicken from the country’s leading poultry-producing state.
The Arkansas traveler got its walking papers in 1989, when the U.S. Department of Agriculture lowered the temperature of a legally fresh chicken to 0 from 26 degrees. An apparent accommodation to poultry producers in the South, the change made it easier for them to ship chicken to California and elsewhere and label it fresh.
Now, as California moves to adjust the temperature dial, there are indications that the federal government may also do so. Steve Kinsella, USDA press secretary, said in an interview that the department is reviewing the definition of freshness. While Kinsella declined to predict any changes, he said the USDA is concerned with truthful labeling.
Though they blame competition from Southern rivals, California’s chicken processors share blame for their own misfortune.
The California firms have failed to match competitors’ moves, allowing processors of Southern chicken to get a leg up. For example, Randall Foods last year started grading its meat to give its chicken a wholesome Grade A image with consumers. Neither Zacky nor Foster had ever arranged for the USDA to conduct grading inspections, which deal with appearance, not healthfulness.
“In truth, everyone’s chicken is probably Grade A quality,” said Randall’s Bloom. “But right now, we’re the only ones who can say so.”
At the same time, the California companies failed to spread their wings into profitable prepared chicken products, such as the vacuum-packed roast chicken offered by industry leader, Arkansas-based Tyson. Their dependence on fresh chicken, a commodity, has left Zacky and Foster vulnerable to low-cost competition.
Foster Farms, more than three times the size of Zacky, is beginning to respond. The company’s new president, former RJR Nabisco executive Rob Fox, plans a plateful of new products, such as ready-to-cook marinated chicken breasts. And under Fox’s direction, Foster is in the process of arranging for the USDA to conduct grading inspections at its slaughterhouses.
How much of a boost passage of the fresh-chicken bill would give California’s poultry kingpins isn’t clear. Representatives of Tyson, Pilgrim’s Pride and Conagra said they are not sure how they will adjust. The companies might eventually be forced to drop “fresh” from their labels, especially if the USDA acts. It is a reluctant choice, since processors believe freshness sells.
With so much money at stake in California, no one is yet chickening out. “In the ‘80s, Foster and Zacky took money to the bank in wheelbarrows,” said Bloom, Randall’s chicken buyer. “Now it’s our turn.”
More Than Chicken Feed
Here are the nation’s leading broiler companies, ranked according to average weekly production so far this year. Zacky Farms, California’s second-largest chicken producer, is ranked 28th nationwide.
Company name, state Production in millions of pounds 1. Tyson Foods, Ark. 80 2. ConAgra, Ark. 38 3. Gold Kist, Ga. 35 4. Perdue Farms, Md. 26 5. Pilgrim’s Pride, Tex. 22 6. Hudson Foods, Ark. 16 7. Wayne Poultry, Ga. 15 8. Seaboard Farms, Ga. 13 9. Foster Farms, Calif. 13 10. Townsends, Del. 11
Source: National Broiler Council
