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Bird flu scare threatens sales growth of QSR chains

A KFC spokesperson said that the chain has 'seen a drop in the sales momentum over the past few days'. 

Published: 20th January 2021 10:24 AM  |   Last Updated: 20th January 2021 10:24 AM   |  A+A-

Bird Flu

For representational purposes. (Photo | EPS)

Express News Service

NEW DELHI:  The spread of avian influenza, or bird flu, across ten Indian states is set to take a toll on the quick service restaurant (QSR) sector—at least during the month of January. Analysts say that the impact of the flu will be significant for chicken-focused players such as KFC (as was the case in China in 2013) while Pizza chains may fare relatively better.

“Even burger outlets, where core patty offerings are chicken-based (McDonalds or Burger King have 6-7 (chicken) burgers out of 17 each) will be impacted as sales of non-veg items will dip and the sourcing of chicken will become a challenge. We envisage same store sales growth—a measure of turnover in established outlets—of QSR chains in January to be impacted and continue to remain subdued till the outbreak is controlled,” said analysts at Edelweiss Securities.

A KFC spokesperson said that the chain has “seen a drop in the sales momentum over the past few days”. “However, it is difficult to attribute this impact on any particular development. Several factors as the ongoing protests, harsh winters in the north, among others are in play at present,” the spokesperson noted. 
While there is limited data on the impact of bird flu on QSRs in India, an analysis of poultry prices and consumption indicates that both decline immediately after an outbreak.

Since the first recent case of bird flu was reported in Kerala in early December 2020, the consumption of chicken in many states has plunged 40-60 per cent, with prices falling 50 per cent over the previous year. Brokerage firm Crisil Ratings estimates that the flu has chopped off around 30 per cent of broiler chicken volumes, bringing down daily chicken demand in the country from 100 lakh kg in December 2020 to an estimated 70 lakh kg in January 2021.

Additionally, wholesale prices of broiler chicken have crashed 20-30 per cent from Rs 105-110 per kg in December to Rs 80 per kg. “Given this backdrop, overall revenue could decline 30-40 per cent in January 2021 due to a fall in realisations and volume,” says CRISIL. The agency added that the impact of the current bird flu outbreak on associated industries will depend largely on its intensity and duration.



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