Supermarket retailers have scrambled to keep their egg sales up as wholesale prices took a roller-coaster ride these last several months.
Up, up, up, and then they started down, but prices haven't plummeted by any means. In fact, the price spikes aren't over, industry sources agree. So retailers are keeping a careful eye on this category, which they used to pretty much take for granted.
Once the most profitable item in the dairy case, the egg is having trouble holding on to that title. In an effort to keep egg sales going, retailers have, among other things, trimmed back margins, sometimes dramatically.
“I heard a lot of complaining from customers when [our retail price for] large eggs got up to $2.19. So we did what we could to keep them under $2. We took less margin,” said Jimmy Higdon, owner of single-unit Higdon's IGA, Lebanon, Ky.
“By now, the prices have stabilized and seem to be parked there for a while. Our retail now is at $1.58 to $1.68 [for large eggs].”
Even while customers complained and carried on about $2 eggs, Higdon's egg sales remained steady.
“Customers were starting to get over the sticker shock, and then prices came down some.”
Higdon explained that the demographics surrounding his store account for eggs being more of a staple than they might be in other areas.
“We have an older clientele, and we're in a rural area where sausage and egg breakfasts are not a thing of the past. People here also still do a lot of baking.”
Back on the East Coast, one large chain found that the large variety of eggs it offers carried it through the price spikes very well.
“We have about 30 varieties, compared to the competition's 15 at the most,” said a category manager at the chain.
Both commodity eggs and specialty eggs held steady even during the price peak, he said, but he conceded he'd had to reduce margins.
“Our retails at one point, when prices peaked about six months ago, were $2, and we had to take away some margin,” he said.
“Mostly, that was because of the competition. We're very mindful of each other.”
When prices were so high, the chain saw unit volume drop somewhat.
“We hit some bumps in the road, but nothing bad. Dollar sales held steady. Unit sales were down from a year ago, but we haven't been running promotions. That could be part of it.”
Talking to retailers in other parts of the country, SN found them saying much the same thing, and national statistics bear it out.
The Nielsen Co.'s recent figures show retailers' dollar sales of fresh eggs up substantially year-to-date, while unit sales are down slightly.
For the food/drug/mass channel, excluding Wal-Mart, dollar sales of all fresh eggs for the 52-week period ending June 14 were up 32.9% from a year earlier, according to Schaumburg, Ill.-based Nielsen. Broken down by private label and branded, the Nielsen data show dollar sales up 36.8% and 23.9%, respectively.
In contrast to those double-digit increases, unit sales (on a 12-count basis) of all fresh eggs for the same time period were down 2.3%. Unit sales of private-label eggs and branded eggs for the same time period were down 2.1% and 3.1%, respectively.
Those unit figures are fairly positive, considering the fact that egg sales in general falter when hot weather hits, industry sources said.
At Stormans Inc., Olympia, Wash., unit sales are down slightly from this time last year, said co-owner Kevin Stormans.
“I believe rising costs are causing people to buy fewer eggs, or just less expensive eggs,” Stormans told SN.
“We've seen an increase in Thriftway brand eggs [the least expensive] and a decrease in jumbo and extra large.”
Meanwhile, some recent research has shown that specialty eggs as a sub-category are not doing as well as in the past, but that's not true for some retailers.
The markets across the country are so diverse that specialty egg sales, as well as commodity egg sales, have proven resilient in some areas.
Eggland's Best, producer of one of the nation's most widely recognized egg brands, has continued to see double-digit increases in its sales every week right up to the present, officials at the Cedar Knolls, N.J., company, told SN.
In fact, when commodity eggs were retailing for record high prices earlier, they were getting near the price commanded by Eggland's Best specialty eggs, Charles Lanktree, president and chief executive officer, told SN.
“And our profits have remained consistent, just as our volume sales have.”
Generic egg prices were up 50% to 60% in some places, while Eggland's Best's prices were up 10% to 12%, Lanktree said.
“The increase in price has not hurt our sales. In fact, I can tell you that Eggland's Best accounts for 17.5% of total fresh egg sales at one of the top 10 retailers in the United States.”
Lanktree said he sees a brilliant future for Eggland's Best, and for the entire egg category.
As people cook at home more frequently in these tough economic times, eggs will be there when people trade down from meat and poultry to less expensive proteins, he said.
And the specialty egg category, going against some sources' predictions, looks to be quite healthy itself.
As Lanktree pointed out, price is a priority with many consumers today, but a growing number of consumers are making their own health a priority and thus are looking for healthier foods.
The East Coast chain's category manager quoted above told SN the company has just launched private-label specialty eggs and expects them to do well. The launch was spurred by the fact that more and more consumers, more sensitive to their own health and well-being, are looking for eggs enhanced with omega-3s, and also are showing a preference for cage-free and free-range products.
In fact, the latter take precedence with consumers over natural and organic, he said. That's possibly because consumers are clear about what “cage-free” and “omega-3s” mean, whereas many shoppers are less certain of what qualifies an egg for an “organic” or “natural” label.
A researcher at Mintel, a Chicago-based consumer research firm, expressed that thought in a recent interview with SN. Mintel's recent research showed that now 59% of respondents believe that organic eggs are no better for you than non-organic. That's up 10% from the 49% who said that in a similar Mintel survey conducted in 2006. By contrast, 38% of respondents in the recent poll said they believe free-range eggs are better for you, up from 21% who said that in 2006. It's not clear why they perceive free-range eggs to be better for them.
“I think it shows that consumers are just generally confused about product claims,” the Mintel researcher said.
Yet the fact that consumers' interest in specialty eggs remains strong is borne out at Stormans' two Thriftway stores in the Pacific Northwest. At both stores, more than half of the egg display cases are devoted to specialty eggs, some Eggland's Best and some Wilcox Farms, a leading regional brand. That may seem like a lot of space to devote to the specialty sub-category, but those eggs generate 65% to 70% of egg sales, Stormans told SN.
“They are what our customers prefer.”
Regional and local demographics play a major role at the two Thriftways.
“Our stores are in Olympia, the state capital. We have a large population of state employees,” said Stormans. “People in our area just desire more healthy, organic, natural-type products, even though price differences between commodity eggs and other types can range from 15% to 40% higher.”
That's the exception, however, for a mainstream supermarket. Most retailers SN talked to said they devoted no more than 20% to 30% of their egg display to specialty eggs.
“On average, about 80% of our case is devoted to our store brand, Red River Farms, with the remainder going to specialties such as Eggland's [Best] and organics,” said Dale Pinkston, business manager, grocery, at United Supermarkets, Lubbock, Texas.
“The vast majority of sales are in large and extra-large [commodity] eggs, but when prices shot up some months ago, everyone dropped down to mediums. Now prices have stabilized due to supply and demand, but if corn prices continue to go up, egg prices are certain to follow suit.”
Egg producers are paying a lot more for feed as a result of soaring corn prices.
“In terms of production, the number of hens in layer flocks is about the same as a year ago, but I'm deeply concerned about fuel prices and feed grain prices,” said Gene Gregory, president and CEO of United Egg Producers, Alpharetta, Ga.
“In the last year, feed and fuel costs have added 30% to the cost of egg production. I'm worried because of the government mandate calling for an increase in corn production for ethanol. It's turning into livestock feeders vs. ethanol plants.”
In the meantime, producers have regulated themselves to bring supply in line with demand.
“If there's an oversupply, the producer will lose money, so after losing in that period of time [two or three years ago], producers realized they had to reduce their flock size, and there was a recovery in 2007,” Gregory said.
Egg producers have managed their supply to meet demand, which has helped bring commodity egg prices down, Gregory and other industry sources pointed out.