Poultry of the Middle in the U.S.: ‘Implications for Sustainable Producers & Scaling Up’ pdf

Poultry of the Middle
in the U.S.:
‘Implications for Sustainable
Producers & Scaling Up’

Laurie S. Z. Greenberg
Cultural Landscapes, LLC
for

The Agriculture-of-the Middle Initiative

July 2007

1

A General Map of ‘Poultry of the Middle’


Table of Contents
INTRODUCTION

3

PURPOSE

3

METHODS

4

BACKGROUND

4

Growth of the chicken industry

4

Agriculture of the Middle

6

Poultry production & processing in the U.S.:
Two extremes

7

POULTRY OF THE MIDDLE

9

Who's in the middle?

9

Specialization by production system

11

Specialization by processing technology

14

Some examples of mid-sized companies

16

ISSUES IN POULTRY OF THE MIDDLE

21

Issues to consider

21

Conclusion

26

REFERENCES CITED
APPENDIX A: SMALL-SCALE POULTRY PROCESSING
IN WISCONSIN

27

29

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A General Map of ‘Poultry of the Middle’

A General Map of ‘Poultry of the Middle’
Introduction
Purpose of the study
Poultry meat production in the United States is dominated by a small
group of companies that produce meat at very large scale. In addition
to their industrial scale of production, these companies have two
dominant characteristics. They are 1) Vertically-integrated; and 2)
Consolidated and continuing to undergo further consolidation. In
2006, the top 10 largest corporations controlled 76.6% of the chicken
raised for meat in this country and the top three companies controlled
53.1% of the industry (Thornton 2007).
At the other end of the size continuum, chicken producers tend to be
small and mid-sized farmers or farmer cooperatives that raise a
specialty product---often free-range or organic. Their own the birds
and slaughter either on-farm or in small, locally-owned processing
facilities. These birds are sold directly by the farmers to consumers,
retail stores, restaurants and other outlets that are scales appropriately.
But somewhere between these few corporate giants and the thousands
of small-scale, limited distribution, directly-marketed birds of local
farmers lies a very diverse group of businesses that we refer to in this
report as ‘Poultry of the Middle’.
The purpose of this study is to offer a first attempt at a description and
analysis of the businesses of ‘Poultry of the Middle’ in the U.S. We
believe that the group of businesses that comprises this sub-sector of
the poultry industry has potential to teach us something about what is
needed to support small-scale poultry producers as they scale up in
volume of production to mid-size.
Typically, as small and medium-sized poultry producers grow, there

are two tasks that are essential to their set-up, operations and survival.
These companies must seek out a product/niche that will distinguish
their company. They must also create for themselves the infrastructure
needed to get their product from farm to consumer. The infrastructure
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A General Map of ‘Poultry of the Middle’


needed includes all of the resources that integrated companies own:
access to genetics, hatcheries, feed, processing facilities, distribution,
marketing, sales staff and more. These smaller producers will also
eventually need further development of industry infrastructure to
include research and development, education and training,
publications, etc.
In order to aid producers who are approaching or targeting production
at that mid-sized scale with poultry, we have taken on this study.
This study examines the characteristics that distinguish this group of
poultry producers and processors. It seeks to better understand their
business structures, the infrastructure they use and create, the
technologies employed in production and processing, the role of the
farmer/growers in the business structure and the niche marketing
characteristics of products from poultry businesses of the Middle. The
study seeks to better understand these aspects of this sector of the
industry in order to better assist farmers of Wisconsin and beyond as
they seek to provide alternative poultry products to the marketplace.

Methods
Research for this study involved basic research using the Internet and
interviewing key informants. Multiple key informants were identified

through contacts in the industry and on the Internet. Informants were
interviewed by telephone.

Background
Growth of the chicken industry
Today the U.S produces more poultry than any other country in the
world, valued at more than $20 billion in on-farm revenues (Economic
Research Service 2007) with broiler, egg, turkey and other poultry
production combined. How did this industry evolve into one that is so
huge?
Up into the early 20th Century, most poultry production was
concentrated on small farms. Farm families managed small flocks of
birds that were used for two purposes: a source of both eggs and meat.
By the 1930s, both egg and chicken meat production had become
commercialized to provide for the growing urban population of the
nation.
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A General Map of ‘Poultry of the Middle’


In the 1940s, most business along the value chain from farm to
consumer remained independent. Hatcheries, farms, feed mills and
processing facilities were located primarily in the east, south and
Midwestern regions of the country where water, corn and soybeans and
land made poultry production possible and profitable. Feed mills
extended credit to farmers for feed which was typically paid back once
the bird was processed and sold.
After World War II, like many agricultural sectors in the U.S., poultry
production and processing took a new direction. First was that the

scale of production has increased to industrialization of production and
processing. A second important change in the poultry industry in the
past 50 years has been the specialization in genetics that divided the
industry into meat and egg sectors. Standardization of poultry meat
was achieved by breeding birds specifically for meat production.
Poultry businesses found that they achieved better control of all stages
of production and processing by buying up businesses that formed the
infrastructure in the value chain (hatcheries, farms, feed mills,
processing plants and trucking operations). Thus began the vertical
integration of the broiler industry.
The National Broiler Council was formed in 1954 (National Chicken
Council 2007b). Based in Washington, D.C., its role was to represent
the growing industry businesses to the federal government and to
increase the demand for chicken in the marketplace and among
consumers. Print and television advertising were used to stimulate
demand for chicken. By the 1970s, most chicken was sold under brand
names, either of a corporate producer or of the grocery chain where
sold.
Changes in dietary preferences have had a major influence in creating
increased demand for poultry in the U.S. in the past 40 years. In 1960,
poultry was 16% of people’s overall meat, poultry and fish
consumption, but by 2003, poultry was 35% of meat and fish
consumption in the U.S. (National Chicken Council 2007a).
In recent years, broiler production has increased dramatically to meet
market demand. For example, the value of broiler production
increased 34% from 2003 to 2004 (U.S. Poultry and Egg Association
2006).

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A General Map of ‘Poultry of the Middle’


Per capita poultry consumption in US, 1960-2000,
in pounds
90.0
80.0
70.0
60.0
50.0
40.0
30.0
20.0
10.0
0.0
1960

1970

1980

1990

2000

Year

Data sources: National Chicken Council 2007

These numbers imply tremendous growth in the importance of chicken

in the diet and also growth in the poultry industry to supply, process,
package, market and transport that volume of chicken.
Agriculture of the Middle
This study’s emphasis on mid-sized poultry processors emerged from a
larger, national study examining the plight of similar sized agricultural
operations in the U.S., past, present and future.
Since 2003, a task force of academics, agricultural extension workers
and others has focused on studying a sector of agriculture in the U.S.
referred to as ‘Agriculture of the Middle’. This sector comprises a
group of businesses owned by farmers, ranchers, processors and other
entrepreneurs. These businesses produce agricultural products of
many types on a scale that is neither industrial or small farm in scale
and can be referred to as ‘Agriculture of the Middle’ (Kirschenmann et
al. 2004).
While difficult to define with exact production numbers, this sector is
characterized by a set of businesses that are between the large-scale,
vertically-integrated industrial sector and the small-scale direct market
producers. The businesses that fit this criterion have been
disappearing over time (Fred Kirschenmann et al. 2004) and have been
the subject of considerable research attention.
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A General Map of ‘Poultry of the Middle’


Why is there concern about the disappearance of Agriculture of the
Middle?
For the purposes of this report, the most important reason for concern
about mid-sized poultry production operations and mid-sized
processing facilities has to do with the lack of and increasing loss of

infrastructure that impedes the growth of small scale producers who
wish to scale up in production and processing.
Another reason has to do with the role that these companies have
played in the marketplace. Many innovations and much
entrepreneurial activity originates from this sector of producers. In
order to be a smaller company and be profitable, businesses must
produce and market specialty goods or services (ie. non-commodity
products) that can be differentiated from generic products by
distinction in production, processing, packaging or other
characteristics. Specialty goods can earn adequate margin that offers a
smaller-scale producer (non-industrial-sized) the potential to be
profitable.
Chicken production & processing in the U.S.: Two extremes
Typical of many agricultural sectors in the U.S. today, the poultry
industry is characterized by two types of systems that result in poultry
for consumption: large-scale industrial, conventional production and
small-scale, alternative production.
Large-scale, conventional, industrial poultry production.
At the high-volume end of the continuum is the conventional,
industrial poultry industry. Today, the conventional, verticallyintegrated poultry industry controls and manages the production and
processing of 96% of the chickens raised for meat in the U.S. (Pretanik
2007).
There are 10 companies that produce more than ¾ of the chicken
produced for market in the U.S. (Thornton 2007). All are
characterized by extreme vertical integration and efficiency: individual
corporations own multiple businesses or profit centers that control and
manage every aspect of the production, processing, distribution and
sale of chickens.
Breeder operations enable these companies to maintain genetic stock
of birds that enables them to select and breed for characteristics that

are desirable for industrial production. Some of these same companies
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A General Map of ‘Poultry of the Middle’


control large volumes of corn and soybeans for chicken feed that are
managed and mixed into individualized bird diets in corporate-owned
feed mills. Hatcheries are also a part of the corporate structure and
serve to provide the day-old chicks to the growers who raise the birds.
Birds may be raised on corporate-owned farms or may be raised by
contract farmers on their own farms. Farmer involvement in the
conventional industry is by contract for production only. Farmers
typically have a contract with large, corporate poultry companies. The
company typically provides the chicks, the feed, any necessary
medication needed for the birds and oversight of the production
operation. Farmers supply housing, electricity, water, labor and invest
the capital to provide these services.
Birds raised for meat (broilers) are raised indoors, in confinement. It
is not uncommon for operations to have up to 20,000 birds (Fanatico
2002) in one facility. When the birds have grown to the desired size,
they are picked up by corporate trucks, delivered to the processing
plant (a government-inspected plant), are slaughtered, packaged and
distributed.
This industry aims to produce a meat product that is both standardized
and inexpensive. A standardized product is essential in the
mainstream marketplace. The corporation assures this standardization
of product by providing chicks with the same genetics, feed with the
same nutrition, by requiring standardized production techniques and
processing procedures.

Control of operations along the value chain in chicken production
assures not only standardization of product but allows for corporate
control of expenses, labor and equipment. The system assures a costefficient operation at all levels of the value chain.
Small-scale, alternative poultry production. Small-scale poultry
production tends to be managed by farmers that raise the birds on
their own small-to-medium-sized farms. These birds are typically
raised to be direct marketed by the farmer to consumers, restaurants or
small retail stores. In this model, the farmer typically buys chicks from
a hatchery or feed mill and provides all the feed, lighting, housing,
expertise and other requirements for raising the birds. Farmers
maintain control over the bird and its production. For processing,
farmers can either conduct their own slaughter or work with a facility
that is willing to provide processing (Fanatico et al. 2006.) Several
regions of the U.S. have developed directories of the processing
facilities that are willing to do custom slaughter.) States vary in the
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A General Map of ‘Poultry of the Middle’


type of facilities they permit and oversee. There are also restrictions on
inter-state sales unless animals are slaughtered at a USDA facility.
Small-scale producers seek to meet the financial needs of their
households and businesses while simultaneously addressing the
demands from the marketplace. Many small-scale poultry producers
have been successful at direct marketing. Many have sought to grow
their businesses to fill a larger market niche by offering their chickens
to restaurants or retail stores. Most find that they are excluded from
mainstream poultry processing facilities, distributors and marketing
operations because they tend to be controlled by large-scale, industrial

corporations. The highly integrated nature of the poultry industry in
the U.S. means that growth for small, independent producers is very
challenging.
In part, this small-scale sub-sector of poultry production has grown in
response to a market demand for poultry that is raised using
production systems outside of the conventional, confinement,
industrial model.
Free-range poultry, heritage poultry varieties, organic certification and
other characteristics are used by farmers to distinguish their products
and to help earn a margin that enables them to be profitable despite
their small volume of production.
In this small-scale, alternative model, farmers typically raise poultry in
an effort to diversify and complement other income sources. This
model is termed ‘alternative’ because these producers do not fit into
any vertically integrated scheme and therefore must seek out and often
create the infrastructure they need---along the value chain---in order to
raise their birds, and get them processed and to market.

‘Poultry of the Middle’:

A diverse group of businesses

Who’s in the middle?
Between these two extreme---large, industrial poultry processing and
the small scale farmer-owned and managed production and processing
---exists another sub-sector that is comprised of companies that are
highly variable in size, products and functioning, but relative to the two
extremes, are intermediary in scale. For the most part, this mid-sized
poultry production and processing industry has remained difficult to
define or identify and is poorly described. This study aims to start

filling that void.
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A General Map of ‘Poultry of the Middle’


In an attempt to define the businesses that comprise ‘Poultry of the
Middle’, we’ll look at a table showing the names and average weekly
production of select companies ranked in the top 38 businesses in
volume of chicken meat production in the U.S. (Watt Poultry USA
2007).

Table 1. Selection of top 38 chicken meat producing companies in the U.S.
Source: Watt Poultry USA, />
From the Watt Poultry list (above), those ranked 1-10 (in volume of
production) produce 76.6% of the chicken meat produced in the U.S.
Even within this group of the top 10, there is wide variation in the
volume produced by each company—with Pilgrim’s Pride producing
more than 180 million pounds of chicken from 38 different plants and
Tyson producing over 150 million pounds per week at 39 plants. At the
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A General Map of ‘Poultry of the Middle’


lower end of the top 10 is Foster Farms, #10, with five plants producing
considerably less at 17 million pounds a week. At the lower end of this
group of top 38 chicken producers, by volume, is Hain Pure Protein
Corp. that processes 800,000 pounds of chicken in a week.
Using the table, it becomes obvious that defining large versus mediumsized poultry producers is far from easy. The table also illustrates the

great variation within categories based on volume of production.
Specialization by production system
As in any industry, the survival of mid-sized companies producing
meat chickens depends largely on the company’s ability to identify a
niche market, define that niche in the marketplace and keep their
prices competitive. A niche or specialty product enables producers to
earn a higher margin that with conventional (commodity) products.
This higher margin per unit is essential to the survival of smaller-scale
producers since they can not compete effectively on price. (Higher
volume manufacturers can always undercut them on price and thus
close them out of the market.) But a specialty product is perceived as a
premium product and thus demands a higher price.
This need for a well-defined niche is made even more critical in the
poultry industry because of the increasing concentration and vertical
integration within the conventional broiler industry in the U.S. These
changes have resulted in extremely low-cost meat chickens in the
conventional market and have forced alternative producers (small and
medium-sized) to identify a clear niche in order to maintain a place in
the market.
Several different types of marketing niches characterize the group of
companies that are mid-sized in the U.S. Most of these distinctions
deal with methods of production or processing, though other issues are
also used to convey unique and higher value products.
Organic, free-range and natural
The most common production distinctions in meat chicken production
deal with methods that diminish or eliminate antibiotic use in finished
birds.

The largest and most successful set of niches that has opened in poultry
markets is for organic chicken and natural chicken. While these two

niches are very different in production method, they (and free-range)
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A General Map of ‘Poultry of the Middle’


tend to be poorly understood by many consumers and may be assumed
to be interchangeable terms.
Free-range refers to birds that are given outdoor access where they are
allowed to forage and feed on grass and insects. The amount of time
outside or specific conditions of the outdoor area are not regulated or
defined for the purposes of marketing or labeling birds as ‘free-range’
in the U.S.
Organic poultry production systems must adhere to the set of
requirements defined by the USDA’s National Organic Program
( Organic production
systems operate without chemical pesticides or fertilizers and animals
are not fed antibiotics or growth promotants. The farm where
production occurs must adhere to these and other practices as defined
by the USDA, cannot have been treated with synthetic pesticides in the
previous three years and must undergo organic certification by a third
party certifying agent.
Organic poultry production has increased dramatically in the past
decade in the U.S. with expanding and growing markets. From 2000
to 2005, production of certified organic poultry quadrupled in the U.S.
(Greene and Oberholtzer 2007).
Premiums paid for organic poultry have remained high in recent years.
The high cost and shortages of organic feed, limited processing
capacity and distribution networks account for the gap between
demand and production, and are likely to keep premiums high for

organically-raised broilers.
Demand for organic broilers continues to be higher than the supply.
Concerns about human health, the natural environment and about
animal welfare appear to be influencing consumers in their pursuit of
organic chicken.
The term ‘natural’ on a chicken label is confusing and can be
misleading. ‘Natural’ on the label refers to the manner in which the
birds were processed, thus implying that no chemicals were used in
processing the bird. (This is likely misleading to consumers.) ‘Natural’
on the label does not refer to or provide any information on how the
bird was raised. That is to say that a bird can be raised on antibiotics
and hormones and still be labeled ‘Natural’ since no chemicals were
added during processing.) The level of consumer awareness of this
practice and the meaning of such labels is unclear.
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A General Map of ‘Poultry of the Middle’


In June 2007, Tyson took a major step in the direction of specialty
production practices for one brand of chicken that they produce.
Tyson announced that they have created a premium brand under their
own label of birds will be raised with no antibiotics. These ‘natural’
chickens will be sold fresh in stores. The Tyson chicken label for this
natural brand will read: “100% All Natural Chicken Raised Without
Antibiotics–No Hormones Administered and No Artificial
Ingredients.”
Tyson also announced that they are simultaneously launch a $70
million campaign to publicize this change in their production practices
(for the new brand). Tyson acknowledges that this change in practice

resulted from consumer preference. The company indicates they will
charge more for fresh chicken produced without antibiotics than for
birds raised with antibiotic.
High Animal Welfare

An increasing concern among some consumers and producers
regarding the conditions under which animals are raised and
slaughtered has opened up opportunity for producers to distinguish
their operations by their treatment of animals.
The poultry industry has established welfare guidelines that assure a
minimum standard of animal welfare for birds raised in the U.S.
(National Chicken Council 2007). However, the companies falling into
this niche of specialization have developed a more involved set of
production characteristics in support of animal welfare and humane
treatment of animals.
As with organic, third party certification organizations have emerged to
lend credibility and an objective assessment of production operations
with regard to treatment of animals.
MBA Poultry, producing the Smart Chicken brand, announced in
January 2007 that they had been awarded the ‘Certified Humane
Raised and Handled’ label for use on their organic chickens. This
designation is awarded by a non-profit organization, Humane Farm
Animal Care (HFAC), based in Herndon, Virginia. HFAC has a set of
standards for producers of meat, dairy products and eggs that offers
inspection of production establishments and certification if businesses
comply with their standards. If awarded certification, business may
use the ‘Certified Humane Raised and Handled’ label on products and
may advertise using this designation.
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A General Map of ‘Poultry of the Middle’


Specialization by processing technology
Stunning, killing and plucking

Birds are stunned to render them unconscious before killing in most
processing plants. While required by law in Europe and used in
slaughterhouses for other livestock in the U.S. stunning is not a
requirement in poultry processing in the U.S.
Stunning renders the birds insensible to pain. It is also helpful to
immobilize the bird to make the kill more efficient and makes animals
insensitive to pain. Stunning may also have an effect on the birds’
feather follicles making removal of feathers easier (Fanatico 2002).
The predominant method of stunning used in the U.S. is low voltage
electrical stunning. In electrical stunning, birds are shackled live to
immobilize them. The heads are then immersed into a water bath with
an electrical current. Once unconscious from the stun, birds are killed
with a cut to the neck. Placing the bird’s neck at a particular angle and
being cut from the side diminishes damage and optimizes bleeding.
Specifications of equipment that facilitate this optimal angle and type
of cut vary by manufacturer and equipment.
A newer technology, used in Europe and elsewhere (though minimally
in the U.S.) is controlled atmosphere stunning. Controlled
atmospheric stunning (CAS) involves the use of gases that stun the
birds into unconsciousness.
Multiple companies sell equipment and necessary supplies for
electrical bird stunning. There is some reported controversy related to
different stunning methods and humane treatment of birds. There is
also discussion in the literature regarding the efficiency, cost and other

characteristics of different gas combinations in CAS systems.

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A General Map of ‘Poultry of the Middle’


As with other specialized practices, consumer demand is beginning to
have some influence on industry practices in stunning methods used in
the U.S. One example comes from a major fast food chain in the U.S.
In March 2007, Burger King announced that it would give preference
for chicken meat purchases to companies that use controlled
atmosphere stunning for slaughtering chickens (Martin 2007). In the
same article, Burger King, the second largest fast food hamburger
chain in the U.S., cited a desire to move ahead of consumer food trends
as their reasoning in making this shift.
Chilling systems

Once birds are slaughtered in a processing facility, the carcass
temperatures must be brought down to a temperature low enough to
inhibit growth of microorganisms. There are two general types of
chilling systems used after slaughter to accomplish this task: 1)
immersion (water) chilling and 2) air chilling.
Immersion cooling. Immersion chilling is by far the more commonly

used chilling technology in the U.S. It is used to lower the temperature
of slaughtered birds. Carcasses are soaked in cold water tanks. This
system also incorporates a treated bath of either chlorine or other
chemicals for elimination of microorganisms.
Air Chilling. Air chilling in poultry processing has been used since the
1970s in Europe. In this system, bird carcasses hang individually from
a track that advances through two separate rooms where chilled air
circulates. Tracks are arranged water cleaning of carcasses occurs
down low where the wastewater cannot contaminate other birds. In the
Smart Chicken system, 75% of the bird’s body heat is eliminated in the
first chill room. In the second room, the carcass temperature is
lowered to the intended 32-34oF.
A major advantage of air chilling is that there is less possibility of
cross-contamination of birds because the birds have less contact with
one another. If water chilling is used, that contaminated matter can be
spread to any carcass that shares the bath. While water is continuously
circulated, this does not eliminate cross-contamination. Crosscontamination is far less likely with air chilled systems than with water
cooling. With air chilling, contaminated material (feces and other
sources of bacteria) remain segregated with the bird or birds that are
contaminated.

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A General Map of ‘Poultry of the Middle’


A University of Nebraska study comparing water- and air-chilled
chicken concluded that air-chilled chicken had 80% lower bacteria
counts than water-cooled birds; the air-chilled meat had a firmer
texture, with less shrinkage (Sanchez et al. 2002).

A second advantage to air chilling that is cited in the literature and
among processors that use it is that there is no water uptake by the
meat or leaching of natural meat juices. Water weight gained in the
immersion bath is retained and so a portion of what consumers are
paying for poultry is the water absorbed during immersion cooling.
Additionally, users of air chilling claim that retention of natural juices
offers both flavor and textural advantages.
Among other reasons plants opt for air chilling, concerns about
excessive use of water have emerged in the poultry processing industry.
When HACCP was introduced in the late 1990s, the assumption was
that water is a limitless resource to eliminate fecal contamination in
processing facilities. By 2004, a serious search for ways to conserve
water was underway among most broiler and turkey processors
(Northcutt and Jones 2004).
Who does air chilling of poultry in the U.S.?
MBA Poultry (Smart Chicken brand) pioneered the use of air chilling in
the U.S. and for many years was the only U.S. company using an air
chill system for poultry. Their website claims that they are the only
company in the U.S to use air chilling though they mention that about
half the poultry processors in Canada and all but export poultry in
Europe is air chilled ( />Today Bell & Evans also air chills some of their birds. Other poultry
companies are also looking at and beginning to incorporate air chilling
into their operations as they build new plants. Retrofitting of air chill
systems into plants that use immersion is difficult because the space
needs of air chilling are far greater than with water immersion.
Some examples of mid-sized companies
In order to illustrate the character of some of the businesses that make
up Poultry of the Middle, information on eight different companies is
summarized in two tables below. Table 2 summarizes basic
characteristics of each of the eight companies that form part of Poultry

of the Middle. Page one of the first table describes the basic
characteristics of specialty poultry companies that are on the list of top
38 chicken meat producers in the U.S. The second page of Table 2
summarizes characteristics of farmer-owned companies of the Middle.
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A General Map of ‘Poultry of the Middle’


Table 3 provides additional information on the eight case study
companies by summarizing how they carry out each task in the chain
from acquiring genetics for production to marketing their product.

Table 2a. General characteristics of eight companies comprising Poultry of the Middle.
Specialty companies ranking in the top 38 chicken meat producers in the U.S.
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A General Map of ‘Poultry of the Middle’


Table 2b. General characteristics of eight companies comprising Poultry of the Middle.
Farmer-owned and operated businesses.

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A General Map of ‘Poultry of the Middle’


Table 3a. Infrastructure (value chain) of eight companies comprising Poultry of the Middle.
Specialty companies ranking in the top 38 chicken meat producers in the U.S.

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A General Map of ‘Poultry of the Middle’


Table 3b. Infrastructure (value chain) of eight companies comprising Poultry of the Middle.
Farmer-owned and operated businesses.

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A General Map of ‘Poultry of the Middle’


Issues in Poultry of the Middle
Issues to consider
This report was intended to provide a baseline description and analysis of
Poultry of the Middle. This is a group of businesses that we have attempted to
define as a distinct sub-sector of the poultry meat industry that fall in scale of
production between the largest, industrial manufacturers and those businesses
that market product directly to consumers and other buyers. We believe that
the group of businesses that comprises this sub-sector of the poultry industry
has potential to teach us something about what is needed to support small-scale
poultry producers as they scale up in volume of production to mid-size.
The following are a series of conclusions drawn from data and information
collected for this report:
Poultry of the Middle is hard to define.
For the purposes of this study, we have combined a very diverse group of
businesses in poultry of the Middle. There is a huge range in size among those
of the Middle. Among the largest in the Middle are the smaller companies from

the national list of the top 38 poultry producing companies in the U.S. At the
other end of the continuum are farmers and groups of farmers who are
cooperatively marketing meat.
There is wide variation in specialties: conventional, organic, free-range and
others. There is diversity in production, processing, distribution and marketing
practices among those companies within the Middle’.
A question that has arisen in the process of this study is whether or not there is
justification for further dividing ‘Poultry of the Middle’ into sub-categories. For
the purposes of this study, the Middle has been divided into ‘specialty
companies’ and farmer-owned specialty companies. Other means of
categorizing the companies of the Middle could be by: type of specialty
product(s); production systems, processing technology used, geographical
distribution or other characteristics.
Poultry industry characterized by consolidation and integration
The poultry industry appears to be constantly in the process of consolidation.
The list of top 38 companies from Watt Poultry USA changes frequently as
companies buy out a competing company, increase their production and thus
rise higher on the list. Buy-outs also occur in order for one company to acquire
another piece of infrastructure—a hatchery or breeding operation or access to a
certain geographical market and thus many continue toward further integration
21

A General Map of ‘Poultry of the Middle’


over time also. Consolidation and integration offer higher efficiency for
businesses, lowering their costs of production.
Specialization is essential in Poultry of the Middle.
When large companies dominate the market with a standardized, conventional
product, as is the case with poultry, those producing meat on smaller scale (the

Middle in this case) typically need to move into niche markets. Without the
higher margin earned from these niche or specialty products, smaller scale
producers cannot survive; they must make up in margin what they cannot earn
in scale of production.
Exceptions to this specialty product focus may occur in the case of a small
number of regionally-isolated, small-scale conventional producers. In these
cases, the companies have served a particular market for a long time and the
limited geographical area is their niche. Customer loyalty probably contributes
to their survival. Lack of penetration by larger-scale, industrial meat
manufacturers could also explain the survival of these small-scale regional
conventional (non-specialized) producers.
Seek ways to assure integrity in Poultry of the Middle claims.
Specialization or producing a niche product can only be successful if buyers and
consumers recognize the distinctions of the specialty product and value those
distinctions adequately to be willing to pay a premium (a higher price compared
to conventional product) for them.
Specialty labels can offer producers an opportunity to make certain claims
about characteristics of their products. Product labels usually convey claims
regarding the product, its production, processing or packaging. These claims
can explain the distinctions in products that justify a higher, niche price. But
several issues emerge with labels and claims.
Establishing credibility for those who make a claim can be a concern. The most
common way that producers manage the issue of credibility is to work with a
certifying agent. Typically producers work with third party certifiers who offer
some level of authority and verification that can convince consumers (or other
buyers) that the claims are justified. For example, organic producers (such as
Petaluma Poultry) use certifying agents. The job of a certifying agent is to set
standards or adhere to existing standards and to oversee production practices
to ensure that producers meet organic certification standards. The same is true
for other types of labeling and certification agencies—including those that

certify humane treatment of animals (Smart Chicken’s certification) or fair
labor or whatever the distinction is that can be verified by a third party agent.
Relying on a third party to verify specialty distinctions can be effective since
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many consumers look for some sort of authority to assure them of authenticity
of product characteristics in their purchases.
A related problem is that product labels can be so laden with information that
consumers can actually undergo information overload. There are many terms
used in claims, on product labels and in point of sale information. Consumers
can become so overwhelmed with details, characteristics and claims that they
are confused and uncertain in making a purchasing decision. This practice of
over-labeling a product or providing consumers with too much information is a
common one. Again—a certifying agent or seal from a third party can go a long
way in conveying a large amount of information in a simple manner.
Another method to convey information about distinctions in products is
campaigns. The very largest corporations can afford to devote resources to
launch a campaign to educate the public about the distinctions of their
products. Tyson put out $70 million to launch a campaign to educate the public
about their new, antibiotic-free line of chicken meat. This is an effort aimed at
education so that the public can recognize why these specialty products demand
a higher price.
Realistically, very few companies have adequate resources to launch a campaign
to educate the public about their specialty product so that consumers and
buyers understand how their product is differentiated from the rest. In these
cases, simple messages and outside (third party) certification or seals are more
realistic strategies.

Keep innovating in Poultry of the Middle.
As mentioned above, the companies in the Middle tend to be those that
innovate. The nature of their place in the Middle demands that they seek out
innovative products, methods and channels to produce, process, manufacture
and deliver their products to consumers. In any production or business sector,
this process is the same. These innovators identify niches. For a while they are
able to rely on higher margins for their innovative products or services.
However with time, in most cases, their success draws other businesses into
that niche. Eventually someone else moves into the marketplace with a similar
product at a lower price. That’s when innovators move on.
Good innovators are good entrepreneurs, so they will have been anticipating the
challenge of competitors, and already have a new plan up their sleeves (or in
implementation) to overcome this challenge. This can be a new product or
diversification into a new market. Or they may be open to buy-out and ready to
move on to something else.
One way to look at this process is to see that the success of a niche market is
measured by attempts of the big guys to move into that market. For a long
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time, production of chicken without the use of antibiotics was strictly in the
realm of a smaller-scale, specialty producer who could afford the higher costs of
production because of the margin they earned for the specialty product. Tyson
began to change all that in June 2007 with the announcement that they will
have a new line of chicken meat raised with no antibiotics. Companies of the
Middle that specialize in that niche will need to respond adequately to assure
their places in the market.
Burger King did something similar to smaller specialty producers when

consumer demand resulted in a change in their policies. Burger King
announced preference given to chicken producers that use more humane
processing methods. A company the size of Burger King making this change
creates a huge demand for specialty meat. To what extent will companies of the
Middle be capable of addressing that demand? These companies are surely
more limber than the bigger companies and may be able to transition to the
new technology. But how many (and which) companies of the Middle have the
available capital to alter their processing technology so dramatically?
In short, specialization is not enough. Innovation must continue among
producers of all sizes.
Many additional niche opportunities exist in Poultry of the Middle.
While this paper has discussed multiple specialty niches, there are many more
opportunities for specialty poultry production and sales. As Fanatico points out
(personal communication), the nature of the industrial, large-scale chicken
meat industry is so narrow in its structure and its products that it allows the
opportunity for many niche products and companies.
Among those with future potential could be:
• Functional meats—those products with specific nutritional
characteristics that may have health advantages for those who consume
the meat.
• Terroire meats—in many European countries, products raised in
certain regions are recognized as having certain characteristics that
result from being raised in a very specific geographical region. Terroire
implies a connection to the soil and water of a region that impart certain
characteristics and flavors that cannot be duplicated elsewhere.
• Distinctive feed formulas—animal feeds can offer certain nutritional
advantages or distinctive flavor profiles when compared to conventional
birds and thus claim specialization.
• Small family farm-raised—many smaller companies of the Middle
fall into this category. Organic Valley is perhaps the premier example of

how farmers can use their position to capture a national market.
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A General Map of ‘Poultry of the Middle’


These production and product specialties and many others are likely to be used
by entrepreneurs of Poultry of the Middle in the future.
Interstate shipment of meat.
For many companies in the Middle and those that direct market meat in small
volume, access to USDA processing facilities is limited. Many of these
companies in 38 states in the U.S. take their animals to state-inspected facilities
for processing. A major disadvantage is that meat processed in state-inspected
facilities cannot cross state lines for commercial purposes. This means that a
producer may have meat that meets (or exceeds) the USDA standards for
processing, but that meat cannot be sold in another state. This is especially
limiting for companies near state lines (especially those with nearby out-ofstate, cities), those producing adequate volume that they want to market out of
state or those working with out-of-state distributors. Over the years, there have
been multiple attempts, in several states, to overthrow this restriction, but no
one has been able to eliminate it to date. A challenge to this restriction appears
in the proposed Farm Bill (July 2007) that appears to be promising. If
overturned, this could create multiple opportunities for producers who use
state-inspected processing facilities and who want to market their meat beyond
state borders.
Avian flu and scale of care.
Every producer of poultry and organization who works with poultry producers
is paying close attention to avian flu outbreaks across the world. Most
organizational websites have relevant policy statements, guidelines and
recommendations in anticipation of this coming challenge.
While the scenario could be very bleak, businesses of the Middle and smaller

producers may offer some hopeful opportunities. Companies that keep and
breed non-conventional, more genetically diverse poultry varieties may have
better survivorship in the face of an epidemic when compared to genetically
identical, large-scale poultry manufacturers. A possible analogy could be the
example of honeybees and the crisis of disappearance of hives experienced and
reported in the media throughout the winter and spring of 2006-07.
Remarkably, organic bee keepers apparently did not experience this crisis.
Some attribute this to the genetic variety of bees that is used by large,
conventional beekeepers (Organic Consumers Association 2007). Other
interpretations of this crisis point to the number of hives managed by smaller
scale beekeepers compared to the huge, industrial honey operations. The
smaller scale of production may enable producers to maintain certain standards
and more closely oversee colonies so that at the first sign of problems, they can
react before the problem creates a crisis (Eugene Woller, personal
communication).
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A General Map of ‘Poultry of the Middle’