NCC: FOOD SERVICE GAINS ON GROCERY'S POULTRY MARKET SHARE

ERIC THORSEN

WASHINGTON -- Supermarkets are still tops when it comes to purchasing poultry, but they continue to lose market share to the food-service industry, according to the National Chicken Council's latest Broiler Marketing Survey Report.

The biannual survey, of 30 processors and 22 poultry distributors, found that retail grocery was the No. 1 buyer of poultry products in 1997 -- the year profiled in the study -- when it purchased 10.4 billion pounds of poultry, compared with food service's 8.7 billion pounds.

However, when the report examined another benchmark, it clearly indicated that retail grocery's market share of poultry volume is slipping. In 1997, it fell to 38.2%, down from 43.1% in 1995. By comparison, food service experienced a boost in market share, rising from 30.3% to 32.2%.

"It's possible, if we did have the dollar information, we would see food service taking away from retail grocery," said Bill Roenigk, senior vice president of the NCC. "But on a pound basis, [a majority of] people are still going to supermarkets to buy chicken."

According to Roenigk, the retail grocery market doesn't seem to be growing at the same rate as overall production increases. He said that as food service continues to increase its market share, it may soon surpass supermarkets.

"I think the trend is clear that food service will continue to give supermarkets a real challenge for that consumer food dollar," said Roenigk. "Based on our survey, food service is gaining experience at the expense of supermarkets."

There are indications this is, indeed, occurring on a per-dollar basis as well. According to the poll, grocery's purchases actually decreased 0.2% from 10.6 billion pounds in 1995, compared with food service, which enjoyed a 16% increase in dollar purchases from 7.5 billion pounds in 1995.

The study found that a total of 27 billion pounds of chicken was purchased in 1997, a 2.2% increase from the 24.8 billion pounds bought in 1995. Besides retail supermarkets and food service, the poll also included industry segments dedicated to exports and shipments, as well as pet food and rendering.

In computing the retail grocery data, the survey focused not only on fresh-prepared deli items, such as fried chicken, rotisserie chicken and other fresh-case items, but also products like frozen chicken nuggets and individually quick-frozen patties.

For retailers to break even last year, Roenigk said, they would have to have increased their volume by at least 8.9%. Instead, he said, their volume total actually decreased by 1.9%.

"We know food service is gaining on pounds," he said. "We're speculating that they are also gaining even more on dollars spent, because the products going into food service are increasingly more and more value-added, or consumer-ready."

The major factor contributing to the supermarket industry's weakening hold on the chicken market was its inability to meet margins, explained Roenigk.

According to the U.S. Department of Agriculture's 1997 retail composite wholesale prices for poultry, including whole carcass birds, breasts and legs, the price of poultry in 1997 rose to $1.51 per pound, a 4.9% increase in the bird's average value, compared with $1.44 per pound in 1995. Roenigk said that supermarkets, on net, paid 2.6% more for chicken than they did in 1995 -- $15.7 billion in 1997, up from $15.3 billion in 1995.

To offset wholesale costs, Roenigk said, the supermarket industry needed a boost in sales returns, but instead only experienced minimal marginal gains over the past two years.

He said that although the study doesn't include dollar amounts, the NCC estimated sales using an average markup of 50%. By using these figures, the supermarket industry as a whole managed a $6 million sales increase over two years, he said.

"If supermarkets used a 50% markup, consumers then paid $23.6 billion for chicken in 1997," said Roenigk. "They would have spent $23 billion in 1995."

Who's Buying The Chicken?

1995 1997

Pounds Pounds

(billions) Share (billions) Share

Retail Grocery 10.6 43.1% 10.4 38.2%

Food Service 7.5 30.3% 8.7 32.2%

Export/Shipments 3.9 15.7% 4.7 17.6%

Pet Food/Rendering 2.7 10.9% 3.2 12%

Total: 24.8 100% 27.0 100%