Shift to cage-free eggs, part of larger consumer movement

Consumers want to know more about where their food is coming from and major food companies are reacting to stay relevant in a changing marketplace. Cage-free eggs are part of a host of issues, including artificial ingredients and genetically modified foods that are challenging major food brands.

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How do major food brands decide on how they should change to satisfy consumer demand? | Austin Alonzo
How do major food brands decide on how they should change to satisfy consumer demand? | Austin Alonzo

As the saying goes, the customer is always right.

Over the past year, the U.S. food industry – grocers, restaurants, foodservice and hospitality – rapidly pledged to serve only cage-free eggs in the next 20 years. Led by McDonald's Corp.’s landmark announcement in 2015, retailers are saying they are switching because that’s what their consumers want and it makes business sense in the long run.

Egg producers have good reasons to grumble about the change:

  • Cage-free housing is going to cost the industry billions of dollars and will force changes in husbandry and production expectations.
  • The egg and food industries partnered to study the issue scientifically and cage-free wasn’t the best option available.
  • Cage-free egg production on the scale necessary to complete pledges might not be possible before the key year of 2025.

The biggest gripe, raised by the industry at United Egg Producers (UEP) meetings in summer and fall 2016, is that cage-free eggs just aren’t selling nearly as well as conventionally raised eggs. This fact can be used to undermine the food companies’ claims about consumer preferences forcing their hand.

Bob Langert, a former executive at McDonald's, spoke at the UEP’s Annual Meeting in Miami Beach, Florida, and explained that, while consumers are not clamoring for cage free right now, the move is about getting out ahead of the issue – instead of opening another defensive front – and ensuring food companies can continue to stay relevant, and in business, in the future.

Consumers want to know more about where their food is coming from, and major food companies are reacting to stay relevant in a changing marketplace. Cage-free eggs are part of a host of issues, including artificial ingredients and genetically modified foods that are challenging major food brands.

“All of these things are not done in some sort of individual, one-off manner. They are all done with this broader strategy of people caring about where their food comes from,” Langert said. “They are not just doing it to do the right thing, they are not just doing it because of science … those reasons are part of the decision-making process … but leading the pack is being relevant with consumers. The consumer is king.”

A deeper look at consumer preferences

U.S. consumers are not a homogenous, monolithic group, but there are some notable trends concerning public perception of agriculture in general and cage-free eggs. In an interview with Egg Industry, Charlie Arnot, CEO of The Center for Food Integrity (CFI), said the general perception is that big – production-scale agriculture, international restaurant companies and retailers – is bad and that smaller operations are more trustworthy

Arnot, who leads the nonprofit organization dedicated to growing consumer trust in the food system, said today’s farming practices are contributing to a vicious cycle. Average consumers have less confidence in farming as the global industry becomes more intensive to feed the world. Large food companies have poor credibility with consumers, and are thought to be more likely to put profits ahead of principles than smaller companies. On the other hand, non-governmental organizations – including animal rights activists – are well trusted due to their perceived independence and commitment to serving the public as a watchdog.

Essentially, Arnot said, consumers want a product that’s safe to eat and affordable. The most important thing in their mind is their family and the people they know. Therefore, issues that are less likely to affect them like environmental impact and animal welfare are secondary in buying decisions. Just because someone says they care, Arnot said, doesn’t mean they will buy based on that belief.

Consumers are telling the market, “I want you to do what’s right – for the animals, for the environment, – and I want you to provide me with a really good value. I am not willing to pay more for you to do what I believe is the right thing to do,” Arnot said.

How companies make their decisions

Arnot said companies consider six factors when weighing decisions about ingredients:

  1. The impact on the supply chain
  2. The impact on the brand if the company acts or does not act on the issue
  3. Impact on the cost structure
  4. Impact on consumer purchasing behavior
  5. Impact on public perception of the brand and how it operates
  6. How the decision fits with corporate values

In April, McDonald’s executives Jill Scandridge Manata, vice president of global public affairs and management, and Dr. Justin Ransom, senior director of supply chain management and quality systems, spelled out the company’s reasoning behind the cage-free pledge during the Egg Inudstry Center's Issues Forum in Chicago.

The executives said the decision was ultimately about selling a product its customers will support and purchase well into the future. McDonald's co-sponsored the Coalition for a Sustainable Egg Supply research and considered the science, but the company determined consumers still value cage-free eggs above conventional eggs.

Consumers want to know more about where their food comes from and food retailers want to stay in business and sell more food, Langert said in an interview with Egg Industry. In order for companies to make relevant products, they need to address consumer concerns about what is in their food, where it comes from and how it’s processed. More consumers are rejecting battery cages, so retailers don’t want to associate themselves with caged birds.

“I think retailers don’t want to be on the wrong side of that issue and wreck all the work they’re doing to make their food more relevant,” Langert said. “Retailers look at the pluses and minuses and say, ‘I can be more relevant with a product that’s very important to consumers by going cage free.’”

Langert retired from McDonald’s in March 2015, and served as vice president of corporate social responsibility and sustainability. He spent 32 years with the company and is now president of Mainstream Sustainability L.L.C., a consultancy firm.

It is true that activists are playing a role in pressuring companies to act on animal welfare-related decisions, but the truth is cage free is an issue that resonates with consumers. McDonald’s and other food brands are striving to be progressive and relevant in their food-sourcing practices, because that’s what consumers want now and will want in the future.

Pressure across the food industry

Cage free is just part of growing consumer scrutiny of food ingredients and processing practices that are perceived to be unnatural. A Fortune report from May 2015 said major packaged food companies lost $4 billion in market share in 2014 as consumers switched to alternatives perceived to be fresher and more natural.

The drop in performance is spurring food companies, from The Hershey Co. to The Campbell Soup Co. to General Mills Inc., to reassess their ingredients and product lineups. Some are looking to acquire smaller and start-up food companies to build their cache with consumers. Others are looking to simplify their ingredients by reducing or removing artificial colors, flavors and preservatives, high-fructose corn syrup, growth hormones, antibiotics, gluten and genetically modified organisms from their products and supply chain. More than ever before, consumers are eschewing products labeled “diet,” “fat free” and “low calorie” for “natural,” “organic” and gluten free.

Regulators as well as consumers are also increasing pressure on brands to disclose the use of genetically modified ingredients. In July, a Vermont law requiring the disclosure of the presence of genetically modified organisms on food labels went into effect. According to a USA Today report, Mars Inc., General Mills, The Kellogg Co. and ConAgra Foods Inc. announced they would voluntarily begin labeling their products as well.  

Consumer views on cage free

Consumers say they care about animal welfare – 47 percent, according to CFI research – but as egg producers note, the majority are not buying cage-free eggs. Arnot said he believes companies, and the cage-free trend in general, are getting ahead of consumers, but research shows demand for the product will grow in the future. He cited research from global consulting firm A.T. Kearney which said food with “free” label claims, trumpeting the absence of items consumers don’t want in their food, are projected to be the highest growth area in the future.

For food companies already on their heels with consumer trust, making a decision on cage free or another ingredient choice means carefully considering how the decision will go over with consumers’ ideological concerns and financial demand.

“Brands have to pay attention to both; it’s not either or. While it may be true, from an egg producer’s perspective that consumers aren’t knocking down the door saying, ‘I want a cage-free egg in my McMuffin,’ it may be very true, the restaurants – McDonalds and others – are hearing about the desire to make sure their supply chain comes from animals that are well cared for,” Arnot said. “Those two aren’t mutually exclusive.”

 

McDonald's execs explain cage-free egg reasoning
www.WATTAgNet.com/articles/27096

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