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Supermarket/foodservice panelists, from left: Moderator David Nelson, Rabobank; Harry Balzer, NPD Group; Jim Beauvais, Roundy’s Supermarkets; Mike Ledford, Unified Foodservice Purchasing Co-Op; Michael Pennella, Schwan’s Food Service; Ed Wahlenmaier, Jason’s Deli; and Robert Orton, Sav-A-Lot Food Stores.
on December 5, 2011

Chicken suppliers and sellers confront new technology, social issues

Supermarket and foodservice buyers of chicken are concerned with technology, pricing, social issues and the meaning of “natural” chicken.

Anyone who thinks that Twitter is just the noise a bird makes is a little behind the times, judging from a wide-ranging discussion among marketing experts who threw into high relief some of the issues and challenges that confront chicken suppliers and retailers today.

Technology, pricing, the ability of processors to meet demand from retailers, the meaning of “natural” chicken and the role of social issues were on the agenda as chicken sellers faced chicken processors at the Chicken Marketing Seminar in the Lake Tahoe area of California, sponsored by the National Chicken Council and the National Poultry and Food Distributors Association.

On the panel were the chicken buyers from two major supermarket chains; the co-op that supplies KFC and its fellow YUM Brands operation; a quick-service chain; and a manufacturer and distributor of frozen foods, including many chicken items. Also on the panel was Harry Balzer, the food industry analyst with NPD Group. Listening – and asking questions – were the marketing specialists from chicken companies. Both sides were deeply concerned with the direction of the industry.

Social media and new technology  

Social media – Facebook, Twitter, YouTube, and new services like Google Circles – are playing an increasing role in allowing brands to keep in touch with the public, and technology is opening new channels for marketing solutions to the question, “what’s for dinner?”

“We’re trying to make it easier for the consumer,” said Jim Beauvais, vice president of meat & seafood at Roundy’s Supermarkets, a chain based in Milwaukee with 156 stores under five banners.

In cooperation with partners such as McCormick & Company and its Lawry’s brand of seasonings, Roundy’s puts QR (quick response) codes on chicken packages that instantly link the consumer to a website featuring recipes. The site is optimized for smart phones and illustrated with photos of tempting-looking dishes so the consumer can easily pick a recipe and buy the ingredients while he or she is in the store.

Yum Brands use social media  

Each of the five major Yum brands – KFC, Taco Bell, Pizza Hut, Long John Silver and A&W – have a Facebook page and a Twitter feed, said Mike Ledford, senior director of purchasing for poultry for the Unified Foodservice Purchasing Co-Op based in Louisville, Ky. The co-op serves the company’s 21,000 locations across all brands.

Customers seem to be enthusiastic about the new media. KFC’s Facebook page, for example, has 3.5 million friends and its Twitter account has over 69,000 followers. The company’s Twitter staff engages in banter with individual followers, takes complaints about service issues and keep followers posted on promotional activities at the stores.
Social media serves the company’s goal of “attracting younger consumers while keeping our core,” which skews somewhat older, Ledford said.

Jason’s Deli builds ‘digital district’  

Jason’s Deli is a quick-service concept based in Beaumont, Texas, with 225 units in 28 states. The company allows its fans to post to its Facebook page, which yields overwhelmingly positive comments (“Organic turkey wrap was great today!” wrote one fan) sprinkled with some complaints about service at particular locations, which allows the management to zoom in on problem areas.

“We are building a digital district for promoting the brand cost-effectively via Google, Facebook and other similar means,” said Ed Wahlenmaier, director of purchasing. “Social media is a very big player for us.”

Hitting the price point  

The fact that chicken sells for less money per pound than beef or pork is a longstanding source of competitive advantage. But that isn’t the only reason chicken is attractive to food manufacturers, according to Michael Pennella, senior vice president & general manager, national accounts, Schwan’s Food Service. The unit is part of Schwan Food Company of Marshall, Minnesota, which manufactures and distributes a wide variety of frozen products. The company is famous for its fleet of buff-colored home delivery trucks, but it also sells into supermarkets and foodservice outlets, including schools.

“Chicken right now, as we all know, is the less expensive protein, but it also flavors the best,” he said. “There is a lot you can do to flavor chicken that you can’t do with pork and beef.”

Schwan’s is currently at work on variations of the empanada, the meat or fruit-filled pastry ubiquitous in Latin cuisines, he said. New products will include variations with beef, pork, chicken and sometimes seafood, he said.

“Chicken more often than not makes it to the finals with both consumers and with the trade, because we can reach food cost percentages at the chains, which would retail it between a full-size sandwich and an appetizer or snack,” he said.

Fresh chicken growth at Roundy’s  

In more traditional retail products, assortment seems to be the key. Roundy’s carries a wide variety of brands in its different stores, including the Roundy’s brand, Perdue, Harvestland, Full Circle Organic, Bell & Evans and Gold’n Plump, plus marinated, rotisserie foodservice chicken, Beauvais said. The organic product is offered in about half the stores.

The Roundy’s brand accounts for 40% of volume, with Perdue leading the processor brands with 14%, he added.

“The fresh chicken category is growing steadily,” Beauvais said. “Consumers want something quick and easy to prepare. Chicken continues to sell and to sell well.”

Roundy’s operates traditional and upscale supermarkets. Covering a different demographic is Save-a-Lot Food Stores, which its Director of Meat and Seafood, Robert Orton, describes as a “hard discount retailer” with an “edited assortment” of offerings. The company is based in St. Louis, and is a subsidiary of SuperValu, Inc. Its 1,285 stores are usually smaller than typical supermarkets, have a bare-bones décor that makes club stores look fancy, and stock only about 1,250 items, far fewer than a typical store. The company says the limited assortment and lean operation allow it to offer prices as much as 40% lower than typical supermarkets.

“Our consumer is under stress,” with 39% of them using food stamps or other government assistance programs, he said. “We serve the underserved and are proud to do so.”

Save-a-Lot sells meat and poultry under store brands and urges consumers to “switch and save” from national brands. Its selection of both fresh and frozen chicken items leans toward dark meat, with 56% of its fresh poultry units consisting of legs, thighs or drumsticks. Frozen chicken is also popular, both in the individually quick frozen format or in prepared dinners from brands such as Banquet.

Product availability  

The marketing meeting was held against the backdrop of dramatic change in the chicken industry, with nearly all companies losing money, some companies going bankrupt and analysts calling for production restraint; i.e., less chicken in the market. How did this affect the thinking of the marketers?

From the customer’s point of view, Ledford said, the key is “ensured supply.” After all, he said, “If you don’t have chicken, you don’t need to have the KFC store open.”

A more specific concern for KFC is the continued shrinkage of the supply of small birds for bone-in chicken products such as the company’s signature fried chicken. The company’s new grilled chicken product uses a larger bird, he added.

Save-a-Lot’s Orton is keeping an eye on his suppliers.

“Availability is a concern, but we need strong suppliers and there’s not very many left that can handle our volume,” he said. “We can work with a number of suppliers. We can scour the market and take advantage of protein that is out there, and we’ll just have to do with what we can get our hands on and promote that with our edited assortment.”

“Natural” chicken  

“Natural” is one of the biggest buzzwords in the food industry. While the government has a definition of “all-natural” poultry, marketers tend to offer their own.
“For us, it’s less fooled-around-with food,” Wahlenmaier said. “It’s a journey for us about eliminating things that are not necessary in our food and letting the natural flavor of that product speak for itself.”

“We were the first national concept to eliminate artificial trans fats (in 2005) and to get rid of high-fructose corn syrup from food (in 2008),” he added. “Last year, we eliminated artificial dyes and colors from food.”

Jason’s Deli also specifies that its chicken has to be produced without antibiotics and promotes the chicken as “antibiotic free (ABF).”

“We feel strongly about being ABF in chicken,” he said. The company buys two chicken items, a 4.5 ounce filet and diced chicken. The products are used in salads, wraps, potato dishes and sandwiches – a total of 15 items representing 30% of the menu.

Sustainability and other social issues  

Some chicken companies are going to great lengths today to demonstrate that they are in the middle of the corporate social responsibility movement, emphasizing their commitment to environmental responsibility, sustainability, animal welfare and other issues. But the nagging question remains: Do consumers care? Judging from the marketers’ discussion, it depends on who and where the consumers are.

“It’s a small issue today but it’s a growing concern with our customers,” Beauvais said. “Sustainability is much more of a concern in seafood” than in poultry, he added. The concern tends to be concentrated in demographic pockets in certain markets, including Madison, Wis.; Chicago; and Minneapolis-St. Paul, he said.
Mariano’s Fresh Markets, the company’s upscale chain in Chicago, is testing compostable expanded polystyrene packaging, but “people haven’t noticed. There’s been very little consumer comment on it.”

Balzer, who has been conducting consumer research for many years, warns the industry against thinking that consumers are concerned enough with social issues to participate in paying for them.

“These are all good questions, and the consumer would want you to address them,” he said. “But don’t buy into the idea that they will pay 10% more for it. That’s not true.”

“Consumers say, do I want an environmentally friendly product? Absolutely,” Balzer added. “Do I want organically produced products? Absolutely. Do I want animal welfare concerns (to be addressed)? Absolutely. What I don’t want is for you to charge me for it. In fact, that’s the opportunity. If you can do that and not charge me for it, I’ll be at your front door."

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