Moving into meat
Cargill is partnering with Asia’s largest food service company to launch a poultry business in the Philippines
June 03, 2016
When Cargill opens its new poultry processing plant in Santo Tomas, Batangas, in the Philippines next year, it will be the first multinational meat company to enter the country, which has a population of 104 million and is on a growth curve for protein consumption.
Cargill will own 70 percent of the joint venture, called Cargill Joy Poultry Meats Production, Inc., with the remaining share held by Jollibee Foods Corporation, a growing powerhouse in the quick-serve restaurant industry.
“Once the plant opens in mid-2017, it will be biggest, most modern facility in the whole of the Philippines,” said Philip Soliven, president of Cargill Philippines. “We expect this plant will be a game changer for quality and food safety standards in this country.”
The business will be asset-light. A network of contract growers already in a customer relationship with Cargill’s feed business will provide the birds. The new business should have a major impact on poultry farming in the Philippines, where most growers still sell birds to the outdoor “wet markets” where the birds are sold live or unprocessed.
“The key point is not the fact that we’re getting into the chicken industry,” says Paul Fullbright, managing director of the new joint venture, “it’s that we’re partnering with by far the biggest buyer of restaurant chicken in the country. In market capitalization, Jollibee is one of the top-10 restaurant chains in the world — more than 3,500 stores. They just bought Smashburger in the United States.”
Indeed, Jollibee has grown at a rate of about 19 percent a year for the past quarter century, according to Fullbright, who has worked in Cargill’s meat business in the U.S. and China prior to coming to the Philippines.
In the Philippines, the cartoon face of a bee in a chef’s hat signals one of Jollibee’s thousands of stores — and counting. Jollibee founding owner Tony Tan is determined to grow as a global restaurant power.
One reason Cargill was attracted to Jollibee as a partner was the good cultural fit, Fullbright says. “Their other JV partners have nothing but good things to say. They have a long-term view.”
Vision for growth
One of the selling points for Jollibee was seeing the quality and food safety at Cargill’s poultry processing businesses in China and Thailand. The visiting team included Tan himself.
“Tony is the owner and founder, still active in the business,” says Fullbright. “He has a vision — a big vision. It’s hard not to be excited about a joint-venture relationship with such a dynamic partner.”
“Jollibee aspires to be one of the top five quick-serve restaurants in the world — not just the Philippines,” says Atoy Huelgas, agricultural project leader for the joint venture. “This is a good step to earn the confidence of Jollibee, so that we can be part of their growing vision for 2020.”
The joint venture has the potential to change the food system of the entire country. New standards and methods introduced by Cargill poultry processing could become common practice.
“This partnership will meaningfully benefit our customers, our operations as well as the overall Philippine food industry,” said Ernesto Tanmantiong, chief executive officer of Jollibee Foods Corporation.
Cromwell Tajon, a veterinarian, is business development manager for Cargill Feed & Nutrition. “We have more than 100 million people to feed, and our population is still growing,” he says. “As the economy improves and the middle class grows, so will broiler consumption. We really need to find ways to produce chicken more efficiently and safely. I think the entry of the meat business will change the poultry industry.”
Food safety standards could be a particular contribution of Cargill. As Soliven says, “I think Jollibee and other food companies here are beginning to appreciate that the Filipino consumer will have a great interest in understanding how food is prepared.”
The right partners
Among the most excited about the growth prospects of the joint venture are people in Cargill’s feed business and some of their large poultry-farming customers.
“This is our opportunity to work with preferred suppliers to process poultry for a specific end customer,” says Stephanie Quah, general manager of Cargill Feed & Nutrition. “Our approach is very simple. If this joint venture is a success, we are a success. As their supplier, we will earn their business every day. We’ll operate transparently with an open book to make sure both of us win.”
Quah is confident the system can work. “You just need to find the right partners. There will be challenges, but I’m excited for our new poultry business.”
The only people more excited may be commercial poultry growers. “These producers —ranging in size from 100,000 birds to more than 3 million birds — would like to expand,” explains Tajon. “The wet market they serve is already saturated. They see this project as a great opportunity for them.”
Dindo Katigback is one of these commercial producers. A poultry producer for 30 years, he has 30 farms with a total of 1.2 million birds. He aims to double his capacity within a year.
“When big players like Cargill move, everybody notices,” says Katigback, who buys 60 percent of his feed from Cargill. “There is a big chance to grow now, partly because of this development in the Philippines.”