SQUEEZE PLAY 2004-07-12 (2)

ROSEANNE HARPER

Buy-one, get-one free boneless chicken breasts have flown the coop -- for now, anyway.

Fueled by the low-carb, high-protein diet trend and food service's increasingly chicken-based menus, demand for chicken is big in all channels. As a result, supermarkets find their benefits have become a bit slim.

"Let me put it this way: We're selling a heck of a lot of chicken, but we're not making much money on it. In fact, less than we ever have," one retailer told SN.

He said he's paying 30% more for chicken breasts than he was a year ago, but has raised his retail price by only 4%. That's about par for the course, SN discovered, as more retailers were polled.

Some meat department veterans expressed surprise that tonnage sales are as strong as they are since retails are up over last summer, if only slightly.

"Demand is still up, actually in all the protein sectors, and I believe a lot of that is the high-protein diets. And then food service locks up millions of pounds based on their programs, so they're taking a lot out of the market, tightening up availability on the retail side," said Mark Greenberg, vice president, meat division, Wakefern, an Elizabeth, N.J.-based cooperative that supplies ShopRite banner stores in the Northeast.

There are no front-page ads for boneless chicken breast in ShopRite circulars of recent weeks. In fact, as SN fanned out circulars from various supermarket chains, it was apparent chicken is not being featured. Beef is taking the top ad spots these days.

"Sales [of chicken breasts] are strong in volume and that has helped a lot, but margins are depressed," said Mike Miller, meat/seafood director, at 21-unit Clemens Markets, Kulpsville, Pa. "We have raised our prices, but minimally. I was just out at other stores looking at [retail] prices. It looks like retailers are nice-guying it. We're trying to stay competitive."

Miller's competition includes ShopRite stores, Acme, Giant of Carlisle, Pa., and Giant of Landover, Md., units, as well as small independents.

Even dark meat prices are up at wholesale, industry sources told SN, but it's boneless breasts and wings that are skyrocketing, up a dollar at one point this spring.

"The Georgia dock price [the commodity-based price that sets the wholesale] was at 80 last week. A year ago, it was in the 60s. That gives you some idea. We definitely are not making as much money on poultry as we did a year ago. As an [everyday-low-price] operator, we try to stay under other's prices so it's particularly difficult for us. We operate in several states and we've been checking other chain's prices and I see nobody advertising breasts or wings. But in poundage sales, there's been no significant drop-off for us," said a meat director for a Midwestern wholesaler-retailer.

"Last year we could buy dark meat cheap because of the market surplus, but exports are opening up again. I think some is going to China. So there's also been a rise in dark meat prices. There's pressure on the whole bird. I don't know if the wholesale prices are at a record high, but I've been around for a long time, and I've never seen anything like this."

Another retailer agreed, saying, "We've never seen Georgia dock prices this high."

David Harvey, an agriculture economist at the U.S. Department of Agriculture, said wholesale prices for broiler parts quoted for the Northeast were up 35% across the board for the first five months of this year compared to the same period a year earlier, and wings were up almost double that percentage. He added that prices have been rising steadily since the second half of last year, a reflection of there being almost no growth in supply in the first half of 2003 -- following two years of low prices.

Supplies, however, will be bolstered as we go into fall, according to Richard Lobb, spokesman for the National Chicken Council, Washington.

"Manufacturers are ramping up production. There will be a significantly bigger supply by the end of the year," Lobb said, pointing out that demand will continue to grow.

"We think demand is up largely because of the low-carb trend, and then the casual dining segment has added more variety, using chicken in more recipes. They're showing what a versatile product it is. And there have been high beef prices. People are not loading up on beef."

Indeed, a recent survey conducted by the Chicken Council underscores that the chicken industry has benefited immensely from prevailing diet trends. It shows that among those respondents following a high-protein, low-carbohydrate approach to dieting, twice as many report eating more chicken than eating more beef. Pork comes in third among major meats.

The survey also revealed that people overwhelmingly choose chicken as the most appropriate meat if low-fat is added to low-carb as a diet criterion. In fact, 67% of respondents chose chicken in that context, while 14% chose beef and 9% chose pork.

The NCC-sponsored survey found that the high-protein, low-carb diet craze has had at least some influence on 19% of respondents. Sixty-two percent of that group said they're eating more chicken, 31% said they're eating more beef, and 28% said they're eating more pork.

Retailers told SN they see that trend reflected at the meat counter in tonnage sales of chicken and it's also reflected in the supermarket's deli sales.

"I have tremendously strong sales for whole roasted chickens and eight-piece fried chicken. And sales of our rotisserie chicken breasts are up 15% to 20% over the same period last year. There's not just one factor driving it, but certainly among the top ones would be convenience and low-carb eating," said Ed Meyer, vice president, deli/seafood/carryout foods, Schnuck Markets, a St. Louis-based independent with more than 100 stores.

The National Chicken Council is jumping on the opportunity to take advantage of low-carb, high-protein eating. So is the National Turkey Federation, also in Washington.

The NCC will base its whole September is Chicken Month on the diet theme with shelf-talkers and other point-of-purchase items "reminding people that chicken is the perfect choice for any of today's popular weight-loss diets." A wide range of graphics, including static cling posters, will be made available to retailers, officials said.

Meanwhile, the National Turkey Federation launched its first national ad campaign with the slogan, "Turkey, the Perfect Protein."

Taking Wing

Sales of chicken wings have taken flight.

Every year, during the football playoffs through Super Bowl Sunday, demand for wings zooms up sharply, but this year it was different. Demand kept going strong after the big game day.

Such a phenomenon must tie into the diet trend, some sources said. Others said it's driven by food service because it's such a omnipresent menu item. It's probably some of both. Like bacon and sausage, chicken wings are perfectly acceptable to many of today's dieters. Some who might have eaten a half dozen in the past may have upped their consumption to a dozen and a half without guilt.

National Chicken Council spokesman Richard Lobb said the demand is related to strong growth in the casual dining segment.

Whatever the reason, demand is huge right now. That has sent wholesale prices up as much as 70% since this time last year. Lobb pointed out that from January to now, the increase was 100%.

Sometimes there just aren't enough to go around.

"We've already been pro-rated for wings and may be again. That means we get only a certain percentage of our order. We're pretty much back to 100% right now," said a Midwest wholesaler-retailer.

Supplies are tight everywhere.

"There's just such huge demand and [poultry growers] can't produce enough of them. We don't even get quotes on promotions for wings anymore," said Mike Miller, meat and seafood director at 21-unit Clemens Markets, Kulpsville, Pa.

NEW BIRD ON THE BLOCK

Duck has been making a splash recently as a poultry alternative.

It's been hitting the food pages of newspapers like the Los Angeles Times and the New York Times. Indeed, just two weeks ago, television viewers were introduced to a Maple Leaf Farms-brand rotisseried half duck on Good Morning America. Such attention undoubtedly is spurred by the fact that well-known chefs are championing the bird as an interesting entree.

"Consumers are looking for alternatives and I think we've been ahead of the curve [as it relates to the low-carb, high-protein diet trend]," said Jim Hawkins, eastern business manager for retail sales, at Milford, Ind.-based Maple Leaf Farms.

The company has been supplying the food-service arena since the 1950s, but more recently began offering its duck parts, raw and fully cooked, to retail operators.

One of its customers is Wakefern, an Elizabeth, N.J.-based cooperative that supplies ShopRite banner stores in the Northeast.

"For years, we've offered whole ducks, but we're seeing the momentum in duck pieces rather than in the whole bird. Quarter legs are doing a great job. They're very good for barbecuing," said Mark Greenberg, vice president of Wakefern's meat division.

The co-op took the duck parts on last fall, and began featuring them early this spring, alternately in cents-off ads and at a special price to holders of customer loyalty cards.

"That gets people to try it and then they see the value [in buying parts]. If you go to a restaurant, you might order duck, but you're not apt to cook a whole duck very often at home," Greenberg said.

Among chains carrying the branded duck parts are Raley's, Larry's Markets, Kroger-owned QFC, Wegmans Food Markets and Publix Super Markets.