Chinese chicken gets a boost

China has had its share of food safety issues of late, but one New York-based investment firm is not letting a few hiccups derail its interest in the world's largest food market.

On Tuesday, KKR &Co LP, the global private equity firm formerly known as Kohlberg Kravis Roberts, said it will pay $400 million for an 18 percent stake in Fujian Sunner Development Co Ltd (Sunner), China's largest breeder, processor and supplier of chicken products.

The announcement said the firms will establish a strategic partnership to expand Sunner's operations to "provide safe and high-quality chicken products to Chinese consumers".

David Liu, CEO of KKR Greater China, said KKR is excited to work with its latest Chinese partner to "further strengthen Sunner's market leadership, contribute to China's food safety initiatives and bring high-quality chicken to Chinese consumers".

"Sunner is a market leader in China's chicken farming industry, and it has an experienced management team that meets the highest operating standards," Liu said Tuesday in a company statement. "Partnering with companies that meet China's demand for increased food safety is one of our key focuses for China investments."

Fu Guangming, chairman of Sunner, said KKR's resources and operational expertise would help his company meet the "growing domestic demand for healthy chicken".

"Chicken is the most efficient form of animal protein, and the market demand for high-quality chicken products [in China] is expected to remain strong," Fu said Tuesday in a press release. "We share the same commitment to provide the best quality and safest food products to Chinese consumers."

Chicken is the fastest-growing protein in China, according to the press release, but chicken represents just 17 percent of total meat consumption in China. And per capita chicken consumption in China (10 kilograms per year) lags far behind the trend in the United States (43 kilograms per year).

Jim Sumner, president of the USA Poultry &Egg Export Council (USAPEEC), said pork may still be the meat of choice in China, but chicken "is one of the most economical meat protein sources".

"Pork is still king in China, of course, but having a closer relationship between [the chicken] industries is always positive, and that will benefit both the China-based companies as well as the US companies that export to China," Sumner said in a Tuesday phone interview with China Daily. "To enter the China market now is very fortuitous because I think it's just on the cusp of increasing greatly over the next few years."

In addition to the deal with Sunner, KKR has made a number of previous investments in Chinese food companies, including: a $140 million subsidy to Modern Dairy, a Chinese dairy company, and a $150 million investment in COFCO Meat, the pork production unit of the state-owned COFCO Group.

Sunner also operates as a large supplier for KFC, McDonald's and many other popular fast food chains in China.

Julian Wolhardt, another spokesman for KKR, said Tuesday in the press release: "Vertically integrated chicken farming is a key solution to the food safety threats facing China's animal protein sector. Sunner has thoughtfully constructed its farms and processing facilities at strategic locations to ensure chicken quality and health."