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Kroger is the second largest seller of groceries in the U.S., trailing only Walmart, and when they announced that they were launching Kroger brand cage-free eggs it makes news. At least one popular press article about this announcement really misses the target when trying to explain what is driving Kroger’s move.
When describing the announcement of Kroger’s new cage-free egg brand, the article states: “The move is part of a strong shift in consumer preferences that federal officials say was triggered by 2015’s avian flu outbreak, which wiped out 32 million hens.”
The article later moves to comments from Michael Sheats, director of the USDA’s agricultural analytics division for livestock, poultry and seeds, who reportedly said that shortages of cage-produced eggs caused by the avian flu losses forced some consumers to purchase cage-free eggs.
The article then states that: “That's when the grocers discovered that consumers were willing to pay the premium for cage-free eggs.”
This last statement is false, because consumers purchasing cage-free eggs during the shortage of cage-produced eggs weren’t paying the real cage-free premium. Prices for cage-produced eggs had already soared and were at or nearly at the price for cage-free eggs in many stores. This meant that any “premium” being paid for cage-free eggs was non-existent or minimal.
Now as 2016 is winding down, the U.S. egg industry has completely recovered its avian flu related hen losses and it has added a few million more cage-free layers. The result of all this is that cage-produced egg prices at wholesale dropped to their lowest levels in a decade over this past summer and many cage-free eggs were diverted to breakers because of slack demand. There has not been a rush of consumers willing to pay the premium for cage-free eggs so far in 2016.
Avian flu isn’t the cause of cage-free purchase pledges and neither is consumer demand. Activists groups are the reason for cage-free purchase pledges. The activists don’t want to take the credit they so richly deserve because they need to maintain the charade that consumer preference is behind this. Activists know the next step is to get cage-produced eggs out of the store entirely, and that needs to look like it is “voluntary,” just like the purchase pledges were.
Kroger says that cage-free egg sales now make up 15 percent of the company’s total, compared to 9 percent for the country as a whole. So right now, 85 percent of Kroger’s egg sales are going to consumers who aren’t willing to pay the current cage-free premium. The big question for egg producers is how long consumers will be allowed to make this choice.