Recent Outbreak Fears Refocus Attention on Meat Processors

FinancialBuzz.com News Commentary

NEW YORK, Feb. 14, 2020 /PRNewswire/ -- The prevalence of processed foods in today's markets has its fair share of critics. Processed foods are generally considered to be inferior to unprocessed foods. However, because food begins to deteriorate and lose nutrients as soon as it is harvested, virtually all foods sold in the supermarket would be classified as "processed" to some degree. Therefore, in practice, it's important to differentiate between the various degrees of food processing. According to Harvard T.H. Chan School of Public Health, minimally processed foods have been slightly altered for the main purpose of preservation but this does not substantially change the nutritional content of the food. Examples include cleaning and removing inedible or unwanted parts, grinding, refrigeration, pasteurization, fermentation, freezing, and vacuum-packaging. This allows the food to be stored for a greater amount of time and remain safe to eat. Many fresh fruits, vegetables, whole grains, nuts, meats, and milk fall into this category. Meat products in particular have been in the center of attention, as demand for meat has been increasing around the world. And according to a research by Technavio, the processed red meat market is driven by the increase in demand for convenience foods as these foods are categorized under the easy-to-cook and ready-to-eat products. Overall, a rise in e-commerce culture and the easy availability of food products at the click of a button will further drive the demand for convenience foods. And the global processed red meat market size is projected to reach USD 668 Billion by 2023 while at a CAGR of 9%, according to the research. China Xiangtai Food Co., Ltd. (NASDAQ: PLIN), Tyson Foods, Inc. (NYSE: TSN), Yum China Holdings, Inc. (NYSE: YUMC), Restaurant Brands International Inc. (NYSE: QSR), General Mills, Inc. (NYSE: GIS)

It is unclear how the outbreak of the Novel Coronavirus (named "2019-nCoV") in China will impact the global red meat market. The APAC region holds a major share of the processed red meat sector and accounted for 34% of the overall market share in 2018. This was attributed to a rising number of organized retail outlets in the region. Now, as the efforts to contain the 2019-nCoV are underway, China's meat industry is disrupted. The virus, which has killed 1,370 as of this Thursday, is keeping consumers and workers at home in China, delaying purchases at stores and restaurants and slowing the unloading of products at ports. The disruptions also complicate Beijing's efforts to ensure adequate meat supplies. In addition, Chinese authorities recently temporarily banned the trade of wild animals, following a viral outbreak in Wuhan, saying the government will "severely investigate and punish" violators. According to the Associated Press, no wildlife can be transported or sold in any markets or online, as was reported by the local state media. A group of 19 researchers from the Chinese Academy of Sciences, the Wuhan Institute of Virology, had also called for the government in China to crack down on wildlife markets such as the one at the center of the Wuhan outbreak. The researchers explained that illegal trade flourishes in "loopholes" of the legal wildlife trade in China and increases the probability of an outbreak. Passing new modern regulations on such markets, and improving standards of the meat processing industry mat help prevent similar future outbreaks.

China Xiangtai Food Co., Ltd. (NASDAQ: PLIN) announced earlier last week that, its supermarket sales growth of 300% during Chinese New Year 2020 compared to the same period of last year despite of the ongoing 2019 Novel Coronavirus.

To meet the public demand for food and to stabilize the pork price in the market, the Company has increased its efforts to ease the negative impact of the 2019 Novel Coronavirus on food supplies by continuing operating its business with transparency and integrity, keeping its pork price fair and stable, and timely delivering quality fresh pork and other freshly processed meat products to supermarkets in Chongqing every day.

Zeshu Dai, Chairwoman of the Board and Chief Executive Officer of the Company, commented, "The outbreak of the 2019 Novel Coronavirus has shadowed China and general population in many aspects. In order to ensure that consumers' basic living needs are met, supermarkets in various places still operate as usual. However, during the Chinese New Year and the coronavirus outbreak, many food suppliers have raised product prices due to temporary shortage in the supply chain, which has caused some distress to local residents."

Ms. Dai continued, "As a socially-responsible public company, we made our own efforts in maintaining sufficient meat supply, stabilizing market price, and striving to minimize the impact of this unfortunate event however we can. Consumption demand will likely rise once businesses resume their operations. We will continue to supply local supermarkets with sufficient fresh and quality meat at a reasonable price in order to meet consumers' demand."

2019 Novel Coronavirus (2019-nCoV) is a virus (more specifically, a coronavirus) identified as the cause of an outbreak of respiratory illness first detected in Wuhan, China. Early on, many of the patients in the outbreak in Wuhan, China reportedly had some link to a large seafood and animal market, suggesting animal-to-person spread. However, a growing number of patients reportedly have not had exposure to animal markets, indicating person-to-person spread is occurring. At this time, it's unclear how easily or sustainably this virus is spreading between people. The latest situation summary updates are available on The Centers for Disease Control and Prevention's web page 2019 Novel Coronavirus, Wuhan, China.

About China Xiangtai Food Co., Ltd.:Headquartered in Chongqing, China, China Xiangtai Food Co., Ltd, is a food company primarily engaged in pork processing. The Company's operations span key sections of the pork processing value chain, including slaughtering, packing, distribution, and wholesale of a variety of fresh pork meat and parts. Primarily focused on pork products, the Company also offers other fresh and processed products, including beef, lamb and poultries. Through its core values, the Company is committed to maintaining the highest standards of food safety, product quality, and sustainability to provide high-quality, nutritious, and tasty food in a responsible manner through its portfolio of trusted brands. For more information, please visit http://ir.plinfood.com/.

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Tyson Foods, Inc. (NYSE: TSN) announced in a recent blog post that it employs more than 2,700 food safety and quality assurance team members who are focused not only on making sure we produce safe food every day, but also on continuously improving the systems, processes and technologies we use to do it. They work alongside on-site federal inspectors who also verify the safety of our products. In addition, the Company has a cross-functional team of scientists and operations experts who are always looking for new ways to improve processes. They've made significant progress toward eliminating bacteria from our fresh chicken and preventing the inclusion of foreign objects in the food we produce. Tyson also announced that it continues to do more to evaluate and test new technologies, educate their team, audit their processes and look to innovate in areas of food safety. For example, earlier this year, the Company's capital venture fund, Tyson Ventures, invested in Clear Labs, a start-up tech company focused on food safety.

Yum China Holdings, Inc. (NYSE: YUMC) has exclusive rights in mainland China to KFC, China's leading quick-service restaurant brand, Pizza Hut, the leading casual dining restaurant brand in China, and Taco Bell, a California-based restaurant chain serving innovative Mexican-inspired food. Yum China also owns the Little Sheep, East Dawning and COFFii & JOY concepts outright. Recently, the Company announced that it signed a strategic cooperation framework agreement with the Shaanxi provincial government in Xi'an on September 25, 2019. This agreement consolidates the joint commitment of both parties to leverage their respective advantages to comprehensively deepen their cooperation. As part of the agreement, Yum China will bolster its fast-growing digital business by upgrading its Xi'an Customer Service Center to a Digital Service Center that will contribute to building Shaanxi's digital economy. In addition, Yum China will open more stores at prominent locations across Shaanxi, including new builds at historic and cultural sites, and introduce new and innovative business models, store concepts and services to the province. Yum China plans to leverage its expertise in supply chain management and cold-chain logistics to support the development of local businesses in Shaanxi and promote the sustainable growth of the local economy.

Restaurant Brands International Inc. (NYSE: QSR) Popeyes, announced earlier last year a new agreement to develop and open more than 1,500 Popeyes restaurants in the People's Republic of China over the next 10 years. "We're very excited to grow the Popeyes brand in the Chinese market," said Josh Kobza, Chief Operating Officer of Restaurant Brands International (RBI), parent company of Popeyes. "We look forward to bringing our great tasting chicken, biscuits, sides and beautiful new restaurants to our guests in China with our partner, TFI TAB Food Investments (TFI)." TFI TAB Food Investments (TFI) is a leading quick service restaurant operator in Turkey and China, with more than 2,000 restaurants and 50,000 employees. TFI operates a broad range of quick service restaurants across the hamburger, chicken, sandwich, Italian/pizza and Turkish food categories, including the BURGER KING® and POPEYES® brands in Turkey, and the BURGER KING® brand in China. During its 25-year history, TFI has also established a suite of businesses which are complementary to QSR, and which provide food supply chain and distribution management, bread production, advertising, potato production and meat processing, with nearly all raw materials sourced in Turkey.

General Mills, Inc. (NYSE: GIS) subsidiary EPIC Provisions, announced back in 2019 several new offerings including the new Rise & Grind morning-inspired bar line and new flavors across EPIC's pork skin, snack strip, and performance bar lines. "Everything we do at EPIC is centered around positively impacting how animals are raised. Our Rise & Grind bars incorporate nutrient-dense egg yolks, enabling us to further support the egg-laying hen supply chain," says Taylor Collins, co-founder of EPIC Provisions. "Expo West is the best place to share these new bars with the world. We're also introducing some awesome new flavors to some of our most popular product lines!" Among the newly unveiled offerings is the EPIC Rise & Grind Bar, a 1.5 ounce morning-inspired bar made with organic egg yolks from Pete and Gerry's Organic Eggs, humanely raised pork, and chicken raised without antibiotics, providing the nutrients your body needs to prepare for the busy day ahead. They are available in two varieties – bacon & egg yolks, which offers 9 grams of protein; and chicken, egg yolks, & apple, which offers 13 grams of protein.

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