Egg producer looking for big growth in enhanced welfare category

When asked about the impact of implementation of Proposition 2 in California on the growth of cage-free and free-range eggs sales, Matt Materazo, president, U.S. operations, the happy egg co., says that he sees this as a potential turning point for the U.S. egg industry. "It is still unclear what the rules will be. But what is clear is that the industry supplying California is going to have to change," he said.

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'Our number-one objective is to make free-range eggs available to everyone, not just to a select group of people who shop in a particular type of store,' said Matt Materazo, president, U.S. operations, the happy egg co.
"Our number-one objective is to make free-range eggs available to everyone, not just to a select group of people who shop in a particular type of store," said Matt Materazo, president, U.S. operations, the happy egg co.

The shell egg market in the UK has transitioned from what was predominantly a cage-produced market to a majority free-range market. Noble Foods is the largest producer of free-range eggs in the UK, and a little over a year ago, the company brought its successful the happy egg co. brand to the U.S.

Currently, approximately 150,000 free-range, on-pasture, vegetarian-fed hens produce eggs for the happy egg co. on farms in Arkansas and Missouri. Matt Materazo, president and general manager, U.S. operations, the happy egg co., said, "Our production is located where it is because our 'girls' can spend the greatest period of time outside. It never gets too hot, and it doesn't get really too cold."

Developing a new category

Materazo said that free-range now makes up approximately 60 percent of shell egg production in the UK, while he estimates that over 90 percent of U.S. eggs are still produced in cages. He said that consumer demand and California's Proposition 2 will trigger a major shift in how eggs are produced in the U.S. "I think that absolutely there will be an aggressive shift [in the U.S.] over the next several years to cage-free and ultimately free-range simply because consumers will demand it. As they become more educated and informed, they are becoming more concerned about how their food is produced and the welfare of the animals that produce it," Materazo said. "The big question will be how quickly is this going to happen? How quickly can farmers convert to cage-free or free-range? We think that there is going to be a similar shift in the U.S. to cage-free and free-range as we saw in the UK."

Materazo's belief in the coming change in the U.S. egg market is based upon market research. He said that their research shows that a category for eggs, which he called "enhanced welfare," that groups together cage-free, free-range and pasture raised eggs will grow at a rate of 15 percent per year.

"Our number-one objective is to make free-range eggs available to everyone, not just to a select group of people who shop in a particular type of store," Materazo said. "We think that there is a significant part of the population that cares about the food that they put in their bodies and are concerned about the welfare of the animals that produce the food they consume. That is our mission statement and guides everything that we do."

Proposition 2

When asked about the impact of implementation of Proposition 2 in California on the growth of cage-free and free-range eggs sales, Materazo sees this as a potential turning point for the U.S. egg industry. "It is still unclear what the rules will be. But what is clear is that the industry supplying California is going to have to change," he said. "Our view is that whatever the rules becomes, it will favor some form of enhanced welfare production. This clearly will not happen quickly."

Materazo sees the changes required by Proposition 2 as an opportunity for U.S. egg producers to get out of the commodity business, add value to their eggs and improve the welfare of their hens. He said, "The [changes brought about by Proposition 2] have the potential to move the U.S. egg industry forward into added value production and thinking, and out of the age-old commodity trading world that it seems to be stuck in."  Also, like many other industry insiders, Materazo sees the potential for short-term egg shortages in California in 2015.

Building a brand

In October of 2013, right around the time of the happy egg co.'s first anniversary in the U.S., the company began supplying some Walmart stores in western states with eggs. When asked to characterize the company's first year in the U.S. market, Materazo said, "Reception by the retailers and by the consumer has been very positive, and we are optimistic about the future." He said that the happy egg co. works very closely with customers to make sure that egg production can keep up with increasing demand and increased distribution.

Materazo said that the happy egg co. is using some of the same promotional and advertising techniques that it used to build the brand in the UK here in the U.S. "We are a large successful brand in the UK, the largest free-range egg brand, and we are transferring these same activities to the U.S.," he said. Everything from public relations efforts to garner attention in the media to in-store promotions and social media efforts are being employed to build brand awareness among consumers. "We are not taking a one size fits all approach. We are a consumer branding company. We don't just produce an egg and put an attractive price on it. We are about building a brand that consumers value and trust. That is what we did in the UK and that is what we are doing in the U.S.," Materazo said.

Educating consumers

Materazo said that there is a wide range of knowledge and understanding among consumers regarding how eggs are produced. He explained that some consumers see "cage-free" on the egg carton and think that this means that the birds are outside, particularly if there is a an outdoor scene or picture on the carton. In the UK, "cage-free" eggs are labeled as "barn" eggs, and Materazo said that this helps to distinguish these eggs from "free-range" hens that are kept outdoors. He said another area of confusion stems from producers who label eggs as "cage-free/free to roam" because some consumers may not realize that "free to roam" refers to roaming inside the layer house, not roaming outdoors. "The consumer is becoming better educated, but right now there is a lot of confusion," he said

Retailers driving change?

In some EU countries, grocery chains played a major role in the shift of egg production out of cages by stating that they would only stock eggs produced by cage-free hens. Materazo was asked if he could see retailers in the U.S. forcing change in the manner in which eggs are produced, like they did in Europe.

"I think it is possible that some major retailers might come out and make statements that they would only sell products that meet certain standards," he said. "You are seeing this at some retailers today in other segments. It is very possible that we could see retailers get behind this movement. When this happens, I'm really not sure."

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