CHICKEN CATEGORY SUCCESS NEEDS BOOST TO SURVIVE

ROBERT VOSBURGH

WASHINGTON -- Convenience presents the best opportunity for keeping the chicken category at the top of the protein pecking order, according to a survey of retailers and suppliers conducted for the National Chicken Council.

Convenience is especially important for traditional supermarket operators, who face growing competition from alternative selling venues such as wholesale clubs and supercenters.

The responses of the 50 suppliers polled tell the story: When asked where they anticipated selling chicken products in 2003, some 31% of vendors said supermarkets, a decrease of 5% from 2000, the year they were asked to use as a measure. Against this decrease, sales to supercenter formats increased from 3% to 8%, and wholesale clubs from 7% to 9%.

"This is a real cautionary sign because historically, supermarkets have held onto the lion's share of perishables sales," said Bill Bishop, president of Willard Bishop Consulting, Barrington, Ill., author of the study, which also included the opinions of 30 retailers.

Suppliers said food-service sales also increased, from 46% to 48% between 2000 and 2003. And the future looks bright, especially to quick-service restaurants. Wendy Cook, menu development manager for McDonald's, Oak Brook, Ill., said poultry will play an important role in the chain's New Tastes menu, which consists of more than 50 product options.

"Our vendors will need to be innovative to support our changing needs," she said during a subsequent roundtable discussion at the annual seminar, noting chicken works well in the program's need for variety.

"Suppliers do now have additional distribution channels, so they need to be better channel managers, rather than just sellers, to supermarkets," Bishop added. "They've got different outlets with different growth and profitability."

The change in numbers seems to confirm the belief that consumers are continuing to unbundle purchases of perishables by doing less one-stop shopping. For example, Bishop noted convenience stores are capturing more milk sales than in the past.

There are other factors respondents feel are threatening chicken's dominance of the marketplace, the survey found. For example, 60% of retailers and 63% of processors said the shift to case-ready beef and pork products will have an impact on chicken sales. Bishop said the increased variety and better in-stock position enjoyed with case-ready programs will now cover beef and pork items, and improve the shopping experience for consumers.

"Chicken marketing is going to have to change to neutralize this threat from competing proteins," he said.

Some of the tools retailers can use to combat this incursion remain product promotion and shelf price. Forty percent of supermarket operators said promotion and price will drive the category in the next year.

Vic Orn, corporate meat manager for Supervalu, Eden Prairie, Minn., said the wholesaler/retailer is focusing on promotion this year, during the NCC's annual National Chicken Month promotion held every September. Stores and regions have been invited to participate in a first-ever corporate display contest centered on the promotion, with Supervalu's own program, called "More Cluck for the Buck."

Some 63% of suppliers agreed promotion will lead sales, though only 25% voted for price.

"This response shows retailers' appreciation for the price component of their customers' value equation," said Bishop. "My observation has been that retailers are generally more sensitive than manufacturers in many instances to the price factor."

The survey also looked at what is going to protect chicken's dominance in the coming year. An overwhelming majority of retailers and suppliers agreed that sales will be affected by the advances competing proteins have made in introducing ready-to-heat products, with 80% of retailers and 100% of suppliers responding "yes" to the question.

"The convenience factor goes up substantially here," said Bishop, though he noted the threat is not so much a comment about chicken, "as it is that [these new beef and pork items] are just another easy, attractive option for time-pressed shoppers."

Ken Parnell, vice president of meat, poultry, seafood and deli for Wal-Mart Supercenters, Fayetteville, Ark., said in the roundtable discussion that vendors who offer value-added items such as combination packs, kabobs, spice packets and sauces will have an advantage in doing business with the retailer.

The company also prefers to see more consistent finished product, time and temperature discipline, and packaging improvements that prevent leaks, he said.

Indeed, 80% of retailers and 75% of processors polled said new ready-to-eat/take-home items will drive future category growth. Further-processed poultry also got a strong nod of support, with 60% of retailers and 63% of suppliers saying products like premarinated chicken will help build sales.

"There's a definite move toward ready-to-eat and take-home, including fried or rotisserie chicken," observed Bishop. "Product innovations drift into the ready-to-eat or ready-to-cook categories, and convenience is the headline."