Industry News,

Assessing the Demand for Poultry as Production Costs Rise

As one of our most widely consumed meats poultry has long been positioned as an affordable and versatile source of protein for consumers.

But in these inflationary times pricing is coming under pressure, says Mark Field, a veteran of the Australian and European supermarket industry.

With a background across the European red meat and poultry industry working with the likes of Tesco, Marks & Spencer and Sainsbury’s, Mr Field moved to Coles in Melbourne following the acquisition of Coles by Wesfarmers to support its retail transformation as Head of Coles Brand.

Mr Field, who is now CEO of Prof. Consulting Group, notes that pricing pressure in poultry has already increased in recent years with brand owners and retailers working to create points of difference through the introduction of premium value-add offerings, free-range products and increasingly antibiotic-free and chlorine-free poultry.

The question now is how much more consumers will be expected to pay over the next year as poultry prices rise due to higher costs of production and how this will influence consumer trends.

“The inflationary pressures that are coming across food in general are being reflected very strongly within poultry more than say beef or lamb – with the influence of feed costs on overall profitability and the short life cycle of poultry, the impact will come through to the consumer far quicker,” he says.

“We’re already seeing higher prices in the Australian market across the roast barbecue bird and the fresh product range.”

An additional risk for brand owners and retailers is that consumers will turn to other sources of proteins. The pork industry has an aggressive 2025 strategy to position itself as one of Australia’s most versatile meats and is looking to actively grow the value-add market.

“We’re used to buying chicken to cook two or three times a week not just as the centre of plate but also as a main ingredient,” Mr Field says.

“The danger is that as it continues to increase in price, if it reflects the increases we’re seeing in international markets, then instead of buying chicken breasts to make a curry we might buy something different to make a curry because it’s more cost effective.”

As a result, he believes buyers and retailers will now be working hard with suppliers to reduce some of that pricing pressure before it’s passed on to consumers. During a recent trip to the UK, Mr Field noticed that leading retailers had reintroduced a small whole bird into the market that has a lower unit price point helping make a whole bird more affordable to families that are focused on meal occasions rather than a main meal with cooked chicken for other meal uses afterwards.

“When you have challenges like this you’ve got to work together and identify what can be done to reduce unnecessary costs and minimise increasing costs before asking the consumer to pay more.”

He notes that the Australian market has matured and settled with relationships between retailers and producers now more strategic than transactional driven by longer-term investments in the supply chain and agriculture.

“With a transactional relationship a producer would go to the market and say this is the price of a whole chicken for the next month or six weeks and win a short-term contract on the back of that whereas longer-term strategic contracts give confidence to both parties, enabling a producer to trade significant volumes and giving the retailer access to the big volumes they need to meet customer needs.”

Mr Field was recently interviewed by British business publication The European.

Figure 1: Per capita protein consumption

Source: ING

Source: ING