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Poultry: Bird watching

Poultry is the number one protein buy for a majority of qsr and casual operators.

Wings, chicken tenders and breasts, fully cooked turkey breasts and deli slices dominate the category. It used to be that chicken and turkey nearly always ended up on the lunch or dinner menu. Lately, however, poultry products are becoming all-daypart items, showing up in breakfast sandwiches, snack wraps, tapas and bar food menus.

Chicken feed
It’s been a year of high production costs, volatile wholesale prices and in some cases, diminished supply. Here’s how these chicken-centric concepts are meeting today’s purchasing challenges.

Tijuana Flats
Maitland, Florida

While it’s not on the same buying level as a KFC or Boston Market, this 67-unit Mexican-inspired chain spends about $1.5 million a year sourcing approximately 1.1 million pounds of chicken. Ron Eubanks, director of purchasing, specs fresh, hormone-free, boneless, skinless random chicken breast only for the concept’s menu of burritos, quesadillas, flautas and other tortilla-based items, dealing directly with one supplier.

“We don’t have to be particular about weight, because all the chicken gets cooked, then diced and sauced at each location—the breasts are never sold whole,” says Eubanks. That gives Tijuana Flats a bit of a break, but even so, Eubanks must carefully monitor the market for price fluctuations. He bids out twice a year, just to make sure the price he has negotiated with his current vendor is fair, and keeps an eye on market trends and futures. These days, suppliers are very reluctant to lock in long-term deals; even six-month contracts are hard to come by.

“Commodities are going crazy right now and no one wants to commit to
a price,” Eubanks claims. His strategy: contract with his chicken producer at a set price for three months and strike deals for other staples (cheese, tortillas, etc.) during periods when the market is stable. “My biggest worry is that the chicken supply will shrink,” he says. Eubanks has heard that some chicken producers are cutting back because production costs—feed, fuel and other factors—are getting so high and demand is slowing.

Columbus, Ohio

With a name like Roosters, there’s no doubt chicken figures big on the menu. “Our number one seller is chicken wings,” says V.P. of Purchasing Tanny Feerer, “and chicken tenders come in second.” His top two specs are fresh jumbo chicken wings and fresh clipped (tendon removed) chicken tenders, followed by 4-ounce chicken breasts, all of which are prepped from scratch and cooked to order at each location.

“We have a good working relationship with one chicken supplier who pays attention to our stringent specs. We need consistency in product and we’re willing to pay for it,” Feerer explains. “Buying from multiple vendors can be hit or miss.” Roosters buys 3 million pounds of chicken a year, so every penny counts, he adds.

Saving pennies has been particularly tricky lately. “There are so many outside factors we can’t control—corn, fuel and the value of the dollar have pushed up chicken prices,” Feerer contends. A weak dollar has made it profitable for chicken companies to export more product, decreasing domestic supply. But locking in prices doesn’t make sense in this volatile market, he feels. There’s so much risk involved, with feed and fuel prices changing every week. Instead, Roosters chooses to share that risk with its supplier and sets prices according to current market conditions. Feerer has also looked into sourcing some of its chicken from a local Ohio producer to save on freight, but that idea is on the back burner for now.

“The restaurant is the last stop on the supply chain,” he points out. “The grower, supplier and/or distributor all have to pass their costs on to us.” Sharing the risks has been a smart strategy for Roosters.

Otter’s Chicken Tenders
Nashville, Tennessee

As a small (two units and three in the works) but expanding chicken concept, Otter’s is in relationship-building mode, shopping around for suppliers who can accommodate them as they grow. Right now, they work with a local chicken distributor who contracts with one producer to spec Otter’s signature 2- to 3-ounce fresh jumbo tenders. “Our larger, hand-breaded, grilled- or fried-to-order tenders differentiate us from other chicken concepts that use 11⁄2-ounce tenders. We also have to source from big-bird plants to meet our specs; others can buy smaller chickens,” explains co-owner Stuart Ottinger.

Ottinger has encountered some challenges this year, as high corn prices and other factors have caused several reliable big-bird suppliers to go out of business or be gobbled up by mega-companies. “Chicken prices have gone up the highest in 10 years so we constantly have to shop around to stay on top,” says Ottinger. “And since chicken is our main protein purchase, we can’t offset prices with burgers or other items.” Although food and commodity inflation is over 12 percent, Otter’s has been cautious about raising menu prices more than 3 percent for fear of “running off customers.”

However, the sales staff is trained to push some of the menu’s higher-margin items to boost check averages. Hand-breaded fried pickles and mushrooms, fresh-baked cookies and larger sizes of soft drinks are often added on to a chicken order—and customers usually come back for more.

Flocking to menus 

While chicken and turkey are roughly flat at lunch, Datassential’s MenuTrends DIRECT reports notable increases over the last three years in places featuring poultry entrees at breakfast.

% increase in number of restaurants menuing at breakfast: Chicken: +5.6%  Turkey: +11.8%

Chicken snacks and LTOs at top chains are also making news, according to Datassential’s MenuTrends DIRECT:

  • Loaded Chicken Wrap; Popeye’s Louisiana Chicken Crispy all-white meat chicken breast tender, red beans and rice in a warm cheddar tortilla
  • Grilled Chicken Tortilla Roll; El Pollo Loco Citrus-marinated grilled chicken, jack and cheddar cheeses
  • in flour tortilla
  • Chicken Snackaritos; Taco John’s Two variations: Buffalo Chicken and Ranch Chicken
  • My Thai Chicken Flatbread; Uno Chicago Grill Flatbread topped with grilled chicken, red peppers, carrots, caramelized onions,  mozzarella, snow peas, cilantro and peanut sauce.

Industry Q&A

Gary Baxter, Tyson Foodservice
Chicken products
Springdale, Arkansas

Robin Jensen, Foster Farms
Turkey and chicken products
Livingston, California

Cindy Turk, Maple Leaf Farms
Duck products
Milford, Indiana

What’s happening in chicken, turkey and duck production? Three foodservice poultry pros discuss the latest trends and developments.

Talk about the trends impacting poultry production today.

RJ: “Local” is of great interest right now; it appeals to consumers and allows operators to bump up menu prices. Transparency is also a concern. Purchasers want to know how our birds are raised—are they minimally processed and treated humanely? Our ongoing effort is to keep reducing our carbon footprint in the production of our locally raised chickens and turkeys.

GB: We agree that minimal processing is a priority. We found that operators also want consistent products that offer premium value and profitability. Our new Value Chicken Collection offers products that fit several overriding cost-conscious themes—smaller portions, shareable meals and more bang for the buck. Right-Size Filets, for example, are 2-ounce breast filets targeted for a breakfast sandwich or lunch application; Magnum Wings are an economical, heartier option for wing fans.

CT: Animal well-being and environmental stewardship are also prominent in duck production. Value-added is a big trend, too. Products like our all-natural, fully cooked pulled duck meat, Peking duck egg rolls, duck wing drumettes and marinated boneless duck breasts offer convenience and labor savings in applications that fit flavor and menu trends.

Where are prices going?
RJ: The poultry business has been hit hard by corn prices but turkey and chicken are at an advantage—they take less time to raise and have a lower feed conversion than beef or pork. Plus, the supply is within 3 percent of last year, so availability should be adequate.

GB: The industry suffered because there was too much protein on the market and prices for breast meat became depressed. But what’s happening now is good for poultry—it has a higher perceived value compared to
red meats.

CT: Costs of production have gone up dramatically, keeping pace with rising feed and energy prices. Value-added duck products are still a good deal for fine-dining customers as there is no waste and impressive plate presentation.

How are you helping operators become smarter buyers?

RJ: We offer four pricing tiers for fully cooked turkey products, from whole muscle down to shaved turkey. We can then direct operators to the best price point and menu application for their concept. If a lower cost product can be substituted without ruining a menu item, our sales people are trained to suggest alternatives.

GB: We’re encouraging operators not to cheapen their menus just to save money; we can bring value to consumers without compromising quality. Tyson shows customers which products fit the value theme, provides menu ideas and costs out recipes. We’ve also established a separate marketing team to develop products for emerging chains. We’re doing custom work with raw, refrigerated and fully cooked products.

CT: Our R&D team works with operators to develop solutions that best fit their concept. For example, we developed a fully cooked, grilled duck tenderloin for smaller chains to use in sandwiches and stir-fries. Maple Leaf also has developed proprietary seasoned duck meat pieces, rotisserie halves and other custom products.

How are you monitoring the safety of your supply chain?
RJ: We actually mill our own feed and all our vendors are audited and certified. We’ve also constructed a “clean room” filled with freshly generated air for processing pre-sliced turkey products and use high-pressure pasteurization and post pasteurization to assure wholesomeness.

GB: In our facilities, we use an advanced system to label and track each box of product through the supply chain. We can follow that product through warehousing and distribution to the customer’s loading dock, pinpointing the exact time and location of production in case of a food safety problem.

CT: We start with the feed—we use all-natural grain. Then we follow GMP and HAACP guidelines, taking great measures to assure the cleanliness of the birds and their environment. At the processing plant, we conduct pathogenic testing of all our duck products and hold their release until the testing is complete. 

Market report 

Poultry producers have been beefing about America’s ethanol policy throughout 2008—and rightly so. With about a third of the corn crop being converted into ethanol, animal feed costs have escalated 41 percent over the last year. This, in turn, has driven up production costs for chicken, turkey and other live poultry.

This past August, the Producer Price Index showed the highest year-over-year increase in 27 years. During the same month, the U.S. government voted to maintain its ethanol policy. In the meantime, the 2008 corn crop is forecast to total 12.2 billion bushels, short of 2008/09 demand, claims Bill Lapp of Advanced Economic Solutions in Omaha, Nebraska. In his Economic and Commodity Update prepared for Hospitality Supply Management, an Institute of Supply Management forum, Lapp goes on to say, “tight corn stocks, as well as the need for four to six million acres in 2009, leave the futures market vulnerable to a significant increase over the next six to 12 months.” But it could be worse—corn surged to $7.50 during summer’s weather concerns. It’s now stabilized at around $5.50 a bushel as yield prospects have improved, but that’s twice the price paid in 2006, notes Robin Jensen, director of business development and marketing services for Foster Farms, a poultry producer in Livingston, California.

“All indications are that soaring feed costs are going to force livestock and poultry producers to raise prices and make significant production cutbacks in the coming months or risk going out of business,” says Joel Brandenberger, president of the National Turkey Federation. Bill Roenigk, chief economist and Sr. VP of the National Chicken Council, echoes that warning: “Price increases in chicken have been muted compared to the run-up in feed costs….as long as our access to affordable feed is compromised, we have essentially guaranteed that producers and consumers alike will be denied the price relief we so desperately need.”

Lapp reports that chicken producer margins have declined by 20 cents over the past year and with significant margin pressure, chicken output is expected to decline in 2009. While breast meat prices have declined recently—from a summer peak of $1.55 per pound to lows of near $1.20—tighter supplies are likely to result in restaurants paying higher chicken prices in 2009. Breast meat is likely to peak out over $2 next summer, the HSM Update predicts. Strong export demand has helped support dark meat prices above 50 cents, while wing prices have eased below 90 cents in late 2008.

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