Race to use only cage-free eggs could create supply challenge, predicts exec from the happy egg co.

By Elizabeth Crawford contact

- Last updated on GMT

As the race for manufacturers and restaurants to switch to 100% cage-free eggs in the US gains momentum, the speed of the transition could create short-term supply challenges for manufacturers and long-term opportunities for existing specialty egg providers, predicts a top executive at the happy egg co., which sells “true free range” eggs. 

Most major manufacturers that have committed in the past few years to switch from caged to cage-free eggs have given themselves lead times of at least 10 years, but some companies that have jumped on board more recently have substantially shortened their lead time.

For example, Nestlé announced Dec. 22 that it will make the change in five years and Taco Bell said Nov. 16 it will crack only cage-free eggs by the end of 2016.

Nestlé’s and Taco Bell’s commitments are part of a larger “avalanche of similar announcements concerning cage-free production this year”​ from companies including, McDonald’s, Compass Group, Aramark, Sodexo, Starbucks, Panera Bread and Dunkin’ Donuts, Wayne Pacelle, president and CEO of the Humane Society of the US, said in a Dec. 22 blog post.

In addition, in the past month Flower Foods, Grupo Bimbo, Post Holdings’ Michael Foods, and General Mills also made commitments to shift to cage-free eggs. Kellogg also has vowed to make the change.

The one-upmanship on how quickly companies can make the change is good for animal welfare and could provide some companies a competitive edge, but it also eats into the time producers have to change their practices and raise more cage-free hens, which could lead to supply shortages temporarily, cautioned David Wagstaff, chief operating officer at the happy egg co.

On the bright side for specialty egg farmers and producers that already practice more humane egg production, like happy egg co., the misaligned supply and demand is accelerating their growth and ability to seize market share from big ag commodity producers as first-movers, Wagstaff added.  

Supply shortage threats

In the past two years, some big ag egg commodity suppliers have started to move away from confining chickens in 8.5 square inch cages indoors and toward “medium scale sustainable type production,”​ such as cage-free, which allows chickens to roam in barns that allot at least 1.2 square feet of space per bird, Wagstaff said.

“But,”​ he added, “they are not changing as quick as their customers, and if that happens you always are going to end up with an industry that is trying to play catch up. “

The result likely will be a temporary struggle to provide sufficient cage-free eggs in five to 10 years, he said.

“The US egg industry remains very stuck in a commodity, cheap food mindset with practices that can and often do lead to food scares and poor quality production and poor quality product,”​ Wagstaff said.

But he adds, in the next few years big ag commodity egg producers will “wake up and start to invest far more heavily in big scale cage-free production to maximize the benefit.”​ However, he noted, it will take time to change how farms are structured and raise sufficient cage-free eggs.

Specialty egg sales on the rise

In the meantime, existing specialty egg producers, such as happy egg co., are stealing “first mover status from these guys,”​ and experiencing rapid growth in the US as a result, Wagstaff said.

He explained that the happy egg co.’s animal welfare standards are “head and shoulders above everything else in the market”​ with outdoor access to 21.8 square feet of space per hen and at least eight acers of land per farm.

This vastly exceeds the two square feet of space mandated under the free range and organic standard, and is about the same as the 21.65 square feet of accessible space per bird required by pastured raised hens. The pasture raised standard also requires rotation of pastures.

Wagstaff tipped his hat to “some of the progressive companies,”​ like Handsome Brook Farm​ and Vital Farms, that he said “are doing a great job as well,”​ but he added for the most part “nobody else wants to play in our space.”​ 

Competitors likely shied away from happy egg co.’s farming model when it first came to the US about three years ago because they doubted consumers would pay the higher price necessary to provide the hens so much space, Wagstaff said.

“I remember four years ago, people said we were crazy to try and sell eggs for $5 a dozen, but I guess the rise [in sales] speaks for itself,”​ he said.

According to the company, year over year sales of happy egg co. eggs has increased 166% to more than $17.8 million in the 52 weeks ending Oct. 3. This outpaces the 15% growth to $6.1 billion of the total egg market in the year ending Sept. 6, according Nielsen data sited by the firm.

Consumers are willing to pay the higher price for cage-free and pasture-raised eggs because they perceive the products as having a higher nutritional quality and taste profile, as more environmentally-friendly and safer or less likely to carry salmonella, Wagstaff said.

The rising price of commodity eggs in the past year also has made the price difference less noticeable to consumers, according to the company. It notes that the average price of commodity eggs increased 43% in the year ending Sept. 5, compared to a lower 15% price increase of cage free eggs and a 7% price increase for free range eggs. The price hike is due in part to shortages caused by avian flu.

The happy egg co. also has expanded its distribution to more than 7,000 grocery stores nationwide with partnerships with Kroger, Walmart, Safeway and Costco.

In addition, he said, the company now has 400,000 birds on the ground at 20 Mennonite farms and plans to double production in the next six to eight months to nearly a million birds.

Looking forward for the next two to three years, he said: “We want to expand across the US. We want to get to be a $100 million brand is our financial target. That means being in the mass market nationally … across all major retailers.” ​ The firm also will consider acquisitions and partnerships as part of its growth strategy. 

Ultimately, Wagstaff said, the happy egg co. and other direct competitors in the specialty egg market have caught most players in the category "napping."​ He added they need to "wake up"​ an see how the segment and consumer demands are changing quickly. 

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1 comment

The Biggest Fraud in 2015 is that Cage-Free Eggs Are More Humane

Posted by Ken Klippen,

Egg farmers nationwide are wondering why consumers are not noticing the greatest case of fraud this year with food companies announcing a new policy of exclusively offering cage-free eggs as the means of improving the welfare of chickens. This is simply untrue and any person who watches chickens roaming about on the ground will see the reasons why. Food companies are reacting to the pressure from the misinformation from animal activists that more space means better conditions.
The National Association of Egg Farmers has tried repeatedly to counter this fraud by explaining to the media and to the top food retailers that cage-free systems means more chickens pecking one another in establishing a pecking order. Thousands of chickens loose on the floor establishing a pecking order increases their stress. Pecking is an inherent behavior among chickens. More chickens together, such as in a cage-free system, means more pecking, and those chickens lower on the pecking order are being pecked the most. That explains why cage-free systems oftentimes have three (3) times more chicken deaths than the modern conventional cages. An increase in deaths is hardly better welfare.
Food safety is also a concern. Some food companies have transitioned to cage-free believing it will lead to better quality eggs. This is another fraud perpetuated by animal activists. Eggs laid on the same ground where the chicken manure is located hardly improves the quality of the egg. In fact it likely increases bacterial contamination from contact with the manure.
Cage-free eggs will increase prices. The Coalition for Sustainable Egg Supply investigated the different production systems and concluded the price to produce a dozen eggs will likely increase 36 per cent. Why would food companies wish to increase food prices when the federal government’s recent statistics on food insecurity (not having enough resources to provide sufficient food) reached 14% of total U.S. households and child poverty in the U.S. has increased since the year 2000.
Egg farmers are advising food companies not to adopt this new policy of buying only cage-free eggs because of the misinformation that they improve the welfare of the chicken or that they improve the quality of the egg. Educated consumers can opt for cage-free at retail outlets, but when food companies announce offering exclusively cage-free eggs, their customers, after reading this, will now know the facts too.

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