Industry Watchdog Asks DOJ Regulators to Examine Organic Poultry Acquisition

June 13th, 2018

Tyson Foods Announces Plans to Acquire Smart Chicken Brand

[Read Cornucopia’s letter to the DOJ and FTC.]

Last week, U.S. meat industry titan Tyson Foods, Inc. announced its plans to acquire Tecumseh Poultry, LCC for an undisclosed amount. The deal would take one of the leading organic poultry brands, Smart Chicken, and pair them with other organic brands the industrial giant already owns. Organic industry watchdog The Cornucopia Institute just released a formal request to antitrust regulators asking them to scrutinize the acquisition, claiming it will irreparably harm competition in the already highly concentrated industry sector.

Some of 41 Smart Chicken barns in Tecumseh, NE:
Gates open, grass mowed, all doors closed.
No signs of birds ever being out.

Tyson Foods is one of the world’s largest food companies. The corporation has approximately $38.3 billion in annual sales, producing over 68 million pounds of meat per week. Tyson representatives state that this acquisition will make them one of the nation’s leading producers of organic branded chicken. Tyson also produces organic chicken products under its NatureRaised Farms and Aidells brands. Smart Chicken will add significant market share to the organic poultry brands Tyson already holds.

In 2017 Cornucopia made a similar claim that France’s Groupe Danone’s acquisition of WhiteWave Foods would create an unhealthy market in the organic dairy industry. That deal would have combined the Horizon label (the country’s largest organic milk brand) with Stonyfield yogurt (the country’s largest organic yogurt brand). Regulators at the U.S. Department of Justice concurred, allowing the deal to go through only after Danone jettisoned Stonyfield.

The market for organic poultry grew in sales volume by 8.6 percent from 2016 to 2017 (more than four times the rate of conventional poultry growth). According to USDA’s Economic Research Service (ERS), the number of certified organic broilers produced in 2016 totaled more than 19 million and the number of certified organic turkeys was 410 thousand. The impressive growth of the organic poultry market in recent years made this move attractive to Tyson, with its representatives noting that the Smart Chicken brand is a leader in the organic poultry market and would give them a greater slice of that market.

The biggest players in the poultry industry, Pilgrim’s Pride, Perdue, and Tyson are heavily invested. Together they already dominate the growing organic market.

However, Cornucopia contends there are potential problems with the acquisition: it could substantially lessen competition in the organic poultry market. “Greater consolidation by large companies including Tyson allows them to push out smaller companies or farmstead producers who would have difficulty competing with Tyson’s superior economy of scale,” said Marie Burcham, a food and farm policy analyst with The Cornucopia Institute.

This is especially true with organic chicken and turkey, as small brands are more heavily impacted by the high costs of organic grain and limited consumer recognition. In comparison to a large corporation and well-known brands including Smart Chicken, small ethical farmers struggle to stay afloat, even though their products are often of higher quality.

“We are concerned that Tyson and other large industrial livestock producers will easily be able to beat out any competition by controlling prices and squeezing more moderate-sized processors and marketers,” said Marie Burcham, who specializes in looking at livestock issues for the Wisconsin-based Cornucopia Institute. “We already see this happening in the organic poultry market.  Livestock raised with true outdoor access and local feed carry the same label as birds that are confined without outdoor access, raised using industrialized methods and fed imported grain and other feed of dubious origin.”

The growth of organic poultry signals the increased demand for organic meat and dairy products over conventionally produced alternatives. In an increasing percentage of households purchasing organic food, chicken is a staple. “As a key, and aggressively growing, part of the organic market, it is vital that competition remains open,” Burcham added.

The Cornucopia Institute makes this argument in a letter calling on the Department of Justice and the Federal Trade Commission to treat this acquisition as problematic for the future of free competition in the organic poultry market.

The market for organic poultry already has less competition than other agricultural sectors and is more susceptible to monopolization. Limited availability of organic grain and issues with fraudulent grain imports further the squeeze on the industry. “Large corporations have the ability to import feed, on the cheap, and lock out more moderately scaled competitors sourcing limited domestic supplies,” said Mark A. Kastel, Cornucopia’s codirector.

Burcham, who is trained as an attorney in environmental law in addition to her expertise in livestock agriculture, added, “It’s vital to determine whether the acquisition of companies and brands chills the market to the point that a few players are able to control the entire field. We hope that a swift determination will be made as to whether this acquisition violates the Sherman and Clayton Acts for anti-competitive and antitrust reasons.”

“When large companies like Tyson gobble up smaller competitors like Tecumseh Poultry, it could eventually reduce options and raise prices for consumers without any positive impact on the quality of the products they are buying,” said Kastel, who helped found The Cornucopia Institute, now in its fifteenth year acting as a governmental and corporate watchdog in the organic arena. “With less competition, big companies also commonly underpay independent farmers for their products, undermining the economic viability of small, family-scale farms and rural communities. We should be very wary of this move.”

Tyson’s major competitors have also increased market share through acquisitions. In 2016 Pilgrim’s Pride Corporation purchased the parent company of the “Just Bare” organic chicken brand, and Perdue Farms entered the organic poultry market when it acquired Coleman Natural Foods in 2011.

Recent antitrust enforcement decisions have been a mixed bag. After preventing Staples and Office Depot from combining, and modifying the deal that would have combined Horizon, Stonyfield, and other organic brands, the DOJ recently approved Bayer’s acquisition of Monsanto. While the DOJ did require Bayer to divest some of its assets before combining, the companies forming a single entity will have broad marketplace implications in the global agricultural sector.

“Congress charged the USDA with protecting the integrity of the organic label as a true marketplace alternative,” added Kastel. “Dominance by corporate livestock agriculture has the potential to strip away environmental, animal welfare, and economic justice elements that have been the key to attracting consumers to the rapidly growing food movement. We need antitrust oversight to make sure that the promise of organics is not stolen.”

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