India: Effects of Tariffs and Nontariff Measures on U.S. ... - USITC

BOX 8.1 FDI in <strong>India</strong>’s Poultry Market
Godrej Tyson Foods is a joint venture between Tyson Foods, Inc., a major U.S. poultry processor, <strong>and</strong> Godrej
Agrovet. The venture, established in 2008, was aimed at convincing <strong>India</strong>n consumers to purchase chicken as
most Americans do—in chilled bags <strong>of</strong> whole chickens or tray packs <strong>of</strong> chicken parts readily available in a retail
shop. This is a significant change for <strong>India</strong>n consumers, who typically purchase live chickens that are
slaughtered to order. The company emphasizes the convenience <strong>and</strong> food safety advantages <strong>of</strong> refrigerated
chicken for <strong>India</strong>’s growing population <strong>of</strong> consumers with disposable income. Nonetheless, Godrej Tyson’s
market is limited because many rural areas do not have sufficient access to the electric power required for
refrigeration <strong>and</strong> because retailers are required to store vegetarian <strong>and</strong> nonvegetarian food separately,
creating competition for retailers’ limited refrigerated storage space.
For retail customers, Godrej Tyson sells processed chicken under the Real Good br<strong>and</strong> <strong>and</strong> ready-to-eat
frozen foods, such as chicken sausages <strong>and</strong> vegetarian patties, under the Yummiez br<strong>and</strong>. The joint venture
also sells frozen food to the restaurant <strong>and</strong> hotel trade. These large customers generally require a health
certification from their meat suppliers, which gives large companies such as Godrej Tyson an advantage.
Godrej Tyson maintains complete control <strong>of</strong> its cold chain distribution system from slaughterhouse to retail,
including generating much <strong>of</strong> its own electricity, an essential investment for refrigeration capacity. Chickens are
raised through a contract farming arrangement with local farmers, <strong>and</strong> Godrej Tyson supplies the feed <strong>and</strong> all
other inputs.
The company sells chicken through a controlled distribution system to 600–700 retail outlets. Godrej Real
Good Chicken is sold with a three-day shelf life from the date <strong>of</strong> processing. One roadblock has been that most
<strong>India</strong>n food retailers are not accustomed to the hygiene requirements necessary for selling fresh meats, <strong>and</strong>
there have been problems with retailers turning <strong>of</strong>f the electric power to the refrigerators at night to save
electricity costs, not underst<strong>and</strong>ing the bacterial risks. To combat this problem, Godrej Tyson has engaged in
marketing efforts aimed at both consumers <strong>and</strong> retailers, <strong>and</strong> the company now refuses to credit retailers for
any chicken that shows signs <strong>of</strong> nonrefrigerated storage.
Godrej Agrovet introduced chilled tray-pack chicken under the Real Good Chicken br<strong>and</strong> before partnering with
Tyson, but Tyson brings several highly useful attributes to the joint venture, including new technology <strong>and</strong>
operating procedures that can exp<strong>and</strong> the retail shelf life <strong>of</strong> chilled chicken to 12 days by keeping bacteria
counts low. Together, Godrej Agrovet <strong>and</strong> Tyson will invest millions <strong>of</strong> dollars to upgrade equipment in the
venture’s chicken processing plants in Mumbai <strong>and</strong> Bangalore, establish additional cold chain distribution
facilities, <strong>and</strong> increase marketing efforts aimed at consumers <strong>and</strong> retailers. Godrej Tyson has also invested in
self-controlled electric power <strong>and</strong> water <strong>and</strong> wastewater treatment facilities.
Godrej Tyson’s inputs come from local <strong>India</strong>n production rather than from imports. The company has imported
equipment for its chicken processing line <strong>and</strong> some chicken vaccines, but chickens <strong>and</strong> chicken feed (primarily
corn) are all sourced locally. Godrej Tyson exports small amounts <strong>of</strong> chicken from <strong>India</strong> to neighboring
countries. Exports to larger markets in the Persian Gulf region, however, are currently prohibited because <strong>of</strong>
the presence <strong>of</strong> avian influenza in <strong>India</strong>.
Sources: Industry representatives, interviews by Commission staff, Mumbai, <strong>India</strong>, May 13 <strong>and</strong> 28, 2009;
industry representative, telephone interview with Commission staff, April 7, 2009; fDi Markets database; <strong>and</strong>
press reports.
8-7