Saudi Arabia is spending $4.5 billion to avoid a chicken crisis

Much has been written about the country’s Vision 2030 strategy, which means to diversify the economy away from a dependency on oil by nurturing industries such as tourism, automobiles and semiconductors. More than $1 trillion has been committed so far. Feeding people is a linchpin of that effort, with at least 17 billion riyals ($4.5 billion) earmarked for the poultry sector alone. The kingdom also wants more fruit, vegetable and fish farmers, and is stockpiling strategic food reserves for future crises. Fresh produce at a Riyadh supermarket. Saudi Arabia also wants more fruit, vegetable and fish farms, and is stockpiling strategic food reserves for future crises. Photographer: Tasneem Alsultan/Bloomberg

It’s also looking abroad by investing in poultry producers such as Brazil’s BRF SA and Ukraine’s MHP SE; running farmland in Arizona and California; and working to acquire Singapore-based Olam Group Ltd.’s agribusiness unit. Tanmiah said earlier this month it was partnering with Chinese contractor Chengdu Design & Research Institute to build 100 broiler houses nationwide. Chicken, the world’s most consumed meat, is an affordable protein choice for a nation where the middle class is growing fast, beef is still a luxury and the population of about 37 million is young and getting more Westernized. At a rate of about 6% a year, Saudi Arabia is one of the fastest-growing producers in the world, according to Gira. Restaurant chains such as AlBaik, the local version of KFC, have attained cult status as the nation’s annual consumption surpasses 1.5 million tons.

The country’s coops have come a long way in a relatively short time. Just a decade ago, one in five chickens died before making it to the butcher, Tanmiah Chief Executive Officer Zulfiqar Hamadani said. Today, the mortality rate is less than 4%, the upper limit for the company’s local farmers. Suppliers can earn bonuses for meeting that requirement. “Chicken is not native to the desert, right?,” Hamadani said at his Riyadh office. “To grow it here consistently was always a challenge.” His company is the country’s fourth-largest producer. Shares rose 17% last year. Official data showed Saudi Arabia produced a record 558,000 tons of poultry meat in the first half of 2024, a 9% increase from a year earlier. Tanmiah’s flagship slaughterhouse near Shaqra is about 200 kilometers (124 miles) from Riyadh. The warehouse’s interior is sterile and bleach white, with plucked, headless carcasses whirring overhead on hooks. Photographer: Maya Anwar/Bloomberg

Amid the cacophony, masked workers wearing blue aprons butcher birds on a conveyor belt before they’re packaged for store shelves. In five plants nationwide, Tanmiah’s poultry unit ADC slaughters about 550,000 birds a day — a 12-fold increase since 2013. It’s all about formulating a unique diet and finding the right temperatures, said Marcos Delorenzo, the unit’s CEO. Antibiotics and growth hormones aren’t used, and the birds eat feed that’s high in protein, amino acids and electrolytes. Before they reach the Shaqra plant, mature chickens are kept in broiler houses no warmer than 24C. Baby chicks must be raised in 32C. Saudis prefer a whole chicken as the centerpiece of dishes such as kabsa and madghout, with a weight of no more than 1.3 kilograms (about 3 pounds). Those are about half the size of typical American, British or Brazilian birds. Tanmiah processes about 150,000 birds daily in Shaqra for fast-food outlets and supermarkets. Photographer: Maya Anwar/Bloomberg

But as the society changes — more women are working and driving, thus spending less time at home — chickens are increasingly being sold in pieces. BRF introduced its Easy and Juicy line of pre-marinated strips and cubes that can be cooked in 10 minutes. “Ladies, they want convenience,” said Igor Marti, vice president of halal markets for BRF, which owns the Sadia brand and has been shipping chickens to the kingdom since the 1970s. “They want to get home, they want to have something that’s easy to cook that is nutritious. ”AlBaik, the local version of KFC, is one of the most popular fried chicken restaurants in the kingdom. Photographer: Tasneem Alsultan/Bloomberg

BRF sells about 350,000 tons a year and employs about 1,000 people locally. The company partnered with the state’s sovereign wealth fund to purchase a 26% stake in Addoha Poultry Co., a local producer. The deal is part of BRF’s strategy to create a domestic footprint from hatchery to factory, Marti said. Tipping the trade scales from predominantly imports to predominantly local meat will have global consequences, with Brazil and Ukraine likely seeing a decline in shipments. However, that may be cushioned by more Saudi buying of soy, corn and other grains to feed domestic birds — and not just for homegrown consumption.

Tanmiah is working with Arkansas-based Tyson Foods Inc. to set up a global halal food brand for exports, Hamadani said. BRF’s Saudi operations will further that goal, the company said. “That’s always made Saudi quite special within the Gulf,” said Dalal AlGhawas, a Dubai-based food security expert. “They’ve always been looking at meeting the demand for not only their domestic needs but also for the region.” Some of the biggest meat companies are tapping into the burgeoning business. Brazil’s JBS SA, the world’s largest, is expanding its processing facilities, and Tyson bought a stake in two of Tanmiah’s units. MHP is expanding its local business through a joint venture building hatcheries to supply eggs and 1-day-old chicks to Saudi producers. “Without the eggs, you cannot produce chickens,” said Eugene Levterov, head of the Ukrainian company’s MENA division. “We found that there is an opportunity there.” FILE IMAGE: AP/Mark Lennihan.

Even with all that, it’s not entirely clear the country will hit the 100% local target by 2030. Imports of grains, vaccines and equipment add to production costs and prices, as does the required air conditioning for cages, Claxton said. In addition, the kingdom can’t isolate itself from the global market because of the risk exposure, Levterov said. Exporters may adapt to the reality of losing Saudi business and not be able to supply the country during a time of need. “The reality is that they can’t invest fast enough in farms, hatcheries, feed mills,” Claxton said. “It’s not enough to get rid of imports. Consumption continues to grow and that pushes back how fast they can get to their target.” PHOTO: The production line at Tanmiah Food Co.’s chicken processing plant in Saudi Arabia’s Shaqra town. Source: Bloomberg.

On top of that, the government faces massive budget deficits leading up to 2030. Brent crude is trading below the kingdom’s required level of at least $90 per barrel to balance its finances this year, according to the International Monetary Fund, and that’s made it one of the largest bond issuers in emerging markets. Still, Tanmiah maintains grand ambitions, fueled by a projected 60% jump in revenue from 2023 to 2026, according to estimates compiled by Bloomberg. Besides the new broiler houses, it plans another feed mill, a “mega-hatchery,” more farms and a modern processing factory. It’s also working with Tyson on a fast-food chain targeting both Muslims and non-Muslims. “We are actually a company which is bringing a possibility to the table of 100%,” Hamadani said. “There’s quite a bit of tailwind available to us.”