US egg market will eventually go cage free

Cage-produced eggs still make up more than 90 percent of the U.S. egg market, but cage-free egg sales have been growing rapidly.

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Richard Kottmeyer, principal, Strategic, said that the better way of tracking consumers’ attitudes is to analyze “every kind of digital signal a consumer can possibly have.”
Richard Kottmeyer, principal, Strategic,
said that the better way of tracking consumers’ attitudes is to analyze “every kind of digital signal a consumer can possibly have.”

Cage-produced eggs still make up more than 90 percent of the U.S. egg market, but cage-free egg sales have been growing rapidly. Futurist and “consumerologist,” Richard Kottmeyer, principal, Strategic, thinks the growth in cage-free egg sales in the U.S. will continue and that, eventually, cage-free egg producers will dominate the U.S. egg market. Kottmeyer, who analyzes “Big Data” (see sidebar), said that even though the American public is split over how animals should be treated, he thinks a vocal minority of consumers will drive the move to cage-free egg production in the U.S.

Consumer attitudes and the U.S. egg market

“The U.S. public is very split over whether they care about animal rights or not,” Kottmeyer said. “On a survey, consumers will always say that they care far more about the treatment of animals than they actually do, because they think that they should or they think that they will be judged for not caring.”

He said that old companion animal surveys used to give the results where consumers all said they treated their dog like a member of the family, but many didn’t really.

In reality, he said, “Around half the public who have a companion animal treat this pet like a member of the family, the other half of pet owners treat their pets like a piece of furniture that moves and jumps around.”

Kottmeyer said approximately half of American consumers seem to care about animals at all. Then, only a portion of this group will let their feelings about animals actually affect their purchase decisions. He said the estimate is that less than 20 percent of American consumers really care about how chickens are raised. “The problem is that they are kind of vocal, and that 15 to 20 percent can shift their loyalties between grocery stores and restaurant chains very, very quickly,” he said. “That is why they matter.”

Cage-free hens versus cattle feedlots

Among consumers who will let their purchasing decisions be affected by how they would like animals to be treated, there is a variance in how much these consumers care about different animals, according to Kottmeyer. “Unquestionably, the American consumer finds the big-eyed cow to be far more relatable and express far more concern for them. Second would be the pig, and way down the list would be the chicken, which doesn’t look like their pets. They don’t have a lot of birds in the house,” he said.

The 15 to 20 percent of consumers who care about animal welfare can play a big role in the profit margin for grocers and restaurants. These consumers tend to be more wealthy and educated. Kottmeyer said these consumers are often the “make-it-or-break-it” market segment for the earnings calls that publicly traded retailers and foodservice companies make.

“That is why you could see some of these changes happen very quickly,” he said. But, he said the fact that there is still more the industry could do to improve living conditions for cows and pigs -- which consumers tend to care about more -- takes emphasis away from change in how poultry are housed and raised, at least temporarily.

Driving cage-free egg sales

Kottmeyer said that how rapidly cage-free egg producers expand in the U.S. will depend somewhat on where animal welfare advocates choose to focus their efforts first. He said feedlot and dairy issues for cows and crates for sows are things that resonate more with consumers than cages for chickens. He also said health claims, antibiotic-free, hormone-free and clean labels are bigger issues for consumers.

High protein costs also are slowing the movement to force the industry to move toward more "welfare-friendly" housing for poultry. Kottmeyer predicted that we are at least three or four years down the road from hen welfare becoming a major issue for grocers and foodservice. The time will come but, for now, there won’t be a mass rush for change.

In 2015, Americans can go into just about any grocery store in the country and buy either cage-produced or cage-free eggs. The key, according to Kottmeyer, is whether the 15 percent that cares about animal welfare decides not to shop at stores that offer a choice or if they will only choose to shop at a store that has only the eggs they are comfortable with. Will they demand that their grocer stock only cage-free eggs? If most of the 15 percent say it is sufficient that they have an option to buy cage-free eggs, then stores will continue to stock cage-produced eggs.

Market for cage-free egg products

Kottmeyer said the deciding battle for the U.S. egg market will be in egg products where large food companies and foodservice outlets will go totally cage-free and not offer choice for consumers.

“They will jump right to cage-free. It adds a little cost, but they don’t want to run afoul of 10 to 15 percent of the marketplace that care,” he said. “The more the finished product is value-added, the more likely you are to go cage-free.”

The question that egg products purchasers will have to ask themselves is, according to Kottmeyer, "What is the additional cost of cage-free egg products versus what does a percentage point in lost sales cost us?"

Some major international food companies like Nestle and Unilever have already announced intentions to source only cage-free egg products in the future. Kottmeyer said announcements like this will continue and that the egg products market in the U.S., which accounts for more than one-third of all U.S. egg production, will move quickly to all cage-free.

Will consumers accept the enriched cage alternative?

Regarding possible consumer acceptance of enriched cages as an alternative to cage-free egg production, Kottmeyer said, “Consumers don’t care about the science of it. They aren’t going to spend 10 minutes thinking through the science of it. It won’t work in the U.S. The American consumer is into all or nothing. They either want to solve the problem or they don’t see it as a problem. It is far too much to ask the American consumer to consider if enriched is good enough.”

“Enriched cages could be useful as a step which delays the movement to cage free by putting the issue lower on the list of concerns that could be dealt with in animal agriculture,” he said. But, “It won’t stop it, it won’t turn it around, but it can delay the move to cage-free.”

Overall, Kottmeyer said we will either continue to have a bifurcated market for retail shell eggs between cage-produced and cage-free eggs or we will move to all cage free. He said enriched cages may be what allow the market to stay at 80 percent cage-produced eggs and 20 percent cage free, so they may play a role here, but they won’t prevent 20 percent from becoming cage free.

Kottmeyer has laid out two possible scenarios for cage-free egg sales in the U.S. Either the U.S. egg market shifts 100 percent to cage free or all egg products shift to cage free along with 20 percent of shell egg sales. Either scenario means big changes would be in store for U.S egg producers.

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