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Last Updated: Monday, 5 February 2007, 11:53 GMT
Bird flu could spook fickle consumers
By Jorn Madslien
Business reporter, BBC News

Customer looking at Bernard Matthews products
Poultry sales are set to fall despite assurances that it is safe to eat

The threat from bird flu to the world of commerce has been building for some time.

Not in the form of a much-feared pandemic - which experts say is an unlikely development - but rather as an irrational response by unduly concerned consumers.

"The biggest threat to the poultry industry is not avian influenza. It is a backlash from consumers," says free range poultry farmer John Widdowson.

Many shoppers are now expected to stop buying eggs and poultry after an outbreak of bird flu at a Suffolk farm.

"There is the likelihood that there could be an effect on sales and that is really what is going to hit," says Charles Bourne, chairman of the National Farmers' Union's poultry board.

One turkey fan, whose daily choice of supper since 1993 has earned him the nickname Mr Christmas, has already made the move.

"I had intended to continue eating turkey every day but this bird flu outbreak has put a stop to that," says Andy Park.

"It's frightening. Although they say you can eat infected birds as cooking kills the bug, I still don't fancy it."

The poultry industry is concerned that others may follow suit.

"If chicken sales drop by 5%, that means we produce 16 million chickens a week in this country and some 500,000 are not wanted," says Mr Bourne.

"That will affect the market and prices will go down."

Falling sales

Poultry breeding farms by English region

And the effect could be much greater.

In France, poultry sales fell 30% following a bird flu outbreak on a turkey farm in February last year.

In Germany sales fell 20% during an outbreak there the following month.

Elsewhere, reactions have been starker, with Romanian poultry sales falling 80% in May last year following a string of outbreaks.

Similarly, in Italy sales fell 70% after wild swans were found to be infected with the H5N1 virus.

Fickle investors

Such responses from consumers in the shops would quickly spread to financial markets where investors would respond in an entirely rational way by ditching shares in companies selling eggs and birds.

The most obvious commercial victim of bird flu - imagined or real - would be the multi-million pound poultry industry, which includes egg producers and broiler breeders.

Across the UK, retail sales of poultry total more than 3.4bn per year through shops and supermarkets, according to the British Poultry Council.

The industry employs 55,000 people and rears almost a billion birds every year - some 850 million chickens, 20 million turkeys, 19 million ducks, and 100,000 geese.

Some ten per cent of it is exported, adding 400m to the UK economy.

On top of this, there is the egg production industry, and then there are those who bring the eggs and the poultry to market; ranging from supermarkets and restaurants to food processing firms.

Bird flu infected site sign at Bernard Matthews premises in Suffolk
Experts predict the latest bird-flu scare will spook consumers again

As yet, there are few signs of any widespread commercial impact from the Suffolk-outbreak.

"It is too early to say what the impact will be, but initial reports from retailers is that it will remain steady," observes Richard Griffiths, senior executive officer, British Poultry Council.

Yet everyone in business accepts that although it may be possible to contain the virus itself, it will be much harder to prevent rumours from spreading.

Victims of earlier bird flu scares have included Northern Foods.

Last week, the firm's chief executive Pat O'Driscoll quit after bird flu concerns - along with other problems - led to two profit warnings last year.

Northern Food's shares almost halved during the first half of 2006, sliding from about 140 pence per share to a low of 77p per share, although the stock has since bounced back to about 124p a share it is a clear indication of how fickle investors can be during times of difficulty.

If the bird flu outbreak is contained and does not spread to humans - which experts say is the most likely scenario - consumer concerns will most probably ease off fairly quickly.

In other European countries this took months, but eventually sales of egg and poultry bounced back.

If a similar pattern was to materialise in the UK, then any investors whose knee-jerk reactions had led them to dump poultry-related shares in the first place would also eventually dive back in as the situation returned to normal.

At least, that is, till the next bird flu scare - which could be just months, weeks or even days away.

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