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business newsWhy the Threat of Bird Flu Hasn't Flown Away
Companies see Avian influenza as a public-relations war.
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Photo by Andrew Ross/AFP/Getty Images
The World Health Organization pinpoints a farmed goose in Guangdong Province, China, in 1996, as the first H5N1 case. The following year the first outbreak arrived in a Hong Kong live poultry market. Outbreaks have been relatively confined to Southeast Asia, and Vietnam has been the hardest hit: Between December 2003 and August 2005, Vietnam had 45 million birds culled, leading to a 0.5% reduction in GDP in 2004, according to the World Bank. In 2005, however, infected poultry started to be detected in parts of Europe and the Middle East, and the following year H5N1 cut a wider path through Europe, Asia, and Africa. The virus shows no signs of disappearing: The most recent outbreak was in Egypt in July.
Since 1997, hundreds of millions of birds have died as a result of H5N1 or been culled in the effort to contain or eliminate it. As a result, H5N1 has already cost tens of billions of dollars in lost production, control, and surveillance measures in Southeast Asia. Projections of the impact of an H5N1 outbreak in the US range between $71.3 and $166.5 billion dollars due to lost production, control, and surveillance of poultry, according to Wildlife Trust, a New York conservancy organization.
Still, the United States has so far avoided avian flu. This was not expected: In 2006, as the virus spread through Europe, people feared it would arrive here. A spokesman for Chick-fil-A, the restaurant chain, then told the New York Times, “The question is not if, but when. You can’t put big nets in the sky to prevent birds from flying here.”
American companies were cautious -- justifiably concerned that people would eat less chicken simply out of fear -- and they prepared responses for an outcome that didn't arrive, at least then. For instance, Yum Brands (YUM), which owns KFC, told investors in October 2006 that based on its experiences with avian flu in China, chicken sales would drop 10% to 20% here. At the time, poultry consumption declined 70% in Italy, 30% in France, and 40% in India following outbreaks, the Times reported.
Preaching caution can still pay a large price. That same year, Tyson Foods (TSN), the world’s biggest meat processor, reported a loss of $196 million -- its first yearly loss since 1994 -- because of gluts in both chicken and beef. Avian flu concerns and mad-cow bans hurt their exports of both.
And, last year, Tyson shares dropped nearly 10% in one day after the company said it would destroy about 15,000 chickens exposed to a mild strain of bird flu. Though it was not even H5N1 but a different strain -- basically a nonevent for the company -- Tyson and its competitors all watched their shares decline initially.
Fear, itself, is a powerful contagion. Thus, American poultry companies have kept their response plans in case avian flu does ultimately arrive.
“Companies need to be prepared on day one for potential outbreaks,” says Peter Daszak. “They need a public image plan ready if they are affected by this outbreak. It’s a PR war.”
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