By Annie Gasparro and Kelsey Gee
The smallest part of the bird is becoming one big problem for
restaurants.
As farmers raise fewer--but bigger--chickens, chicken wing
supply is getting tighter, forcing restaurants to look at frozen
wings, boneless wings and other ways of stretching their chicken
supply to still make money on Super Bowl Sunday.
"Wings are always going to be popular...but the days of giving
them away are over," said Bruce Reinstein, a restaurant consultant
at Consolidated Concepts, who works food service providers such as
Chevys and Houlihan's. "It's not like you can produce a chicken
with four wings," he said.
This weekend alone, the National Chicken Council says 1.23
billion wing segments--the drumettes and that other flat
piece--will be consumed at restaurants and Super Bowl parties.
Meanwhile, wing prices have surged 14% over last year.
While restaurants are raising menu prices some, the tough
economy limits their pricing power when it comes to what's
generally considered an inexpensive dish. If prices got too high,
consumers might trade down to pasta, said Heather Jones, an analyst
with BB&T Capital Markets.
Sysco Corp. (SYY), one of the nation's biggest suppliers of food
to restaurants, said it has seen an increase of about 18% to 20% in
wing orders from retailers this Super Bowl season, compared with
2012.
"Generally speaking, wings have become poultry's hottest
commodity, and we're seeing all-time highs in demands and pricing
as a result," said Charley Wilson, a spokesman for Sysco.
Last summer's drought caused an increase in the price of chicken
feed, leading farmers to decrease their flock sizes and raise
bigger chickens instead. Farmers sell meat by the pound, so one
six-pound chicken is worth the same as two three-pound ones to
them.
Bigger chickens yield more breast meat and larger thighs,
keeping retail prices relatively steady for most parts of the bird.
But not for wings.
When wing prices were cooler, "There was not too much
forward-buying by retailers," said Bill Roenigk, chief economist
with the National Chicken Council, an industry trade organization.
"This year, looking at wing prices in the fall, retailers and
suppliers at chicken companies could see this tightness of supplies
coming...and retailers have gotten a little more adroit," in their
negotiations with suppliers.
The supply of frozen wings nationwide was up 68.4% as of the end
of 2012, from the prior year, he noted. Frozen wings are cheaper
because consumers generally don't love the idea of eating non-fresh
meat at a restaurant.
Sysco said it has been successfully promoting boneless wings as
a "cost-effective alternative" to traditional wings. "And diners
like them," Mr. Wilson said. Boneless wings are not only cheaper,
they can be used in other menu items, like Caesar salad.
Buffalo Wild Wings Inc. (BWLD) is downplaying its signature dish
in its marketing, and is changing how it serves wings to offset the
costs.
"Our restaurants have transitioned to larger size wings in
response to the continuing shift in the poultry industry to larger
bird production," Chief Executive Sally Smith said on a conference
call in October.
Buffalo Wild Wings said that in the first two months of the
fourth quarter, its traditional wings cost an average of $2.07 per
pound compared to the average fourth-quarter price in 2011 of
$1.42--marking a 46% increase. But for boneless wings, the chain
has long-term contracts going all the way through March 2014,
alleviating cost pressures.
Buffalo Wild Wings began testing a new menu last fall, which it
plans to roll out nationwide in the first half of this year. It
offers vague order sizes for wings, such as "snack size," instead
of specific wing counts.
"Our goal is to recoup some of the lost margin...by moving to
the flexible portions," Ms. Smith said.
Buffalo Wild Wings doesn't expect customers to mind, since they
are getting more meat.
"The good news is I don't think the chickens can get any
bigger," Ms. Smith said.
Sanderson Farms Inc. (SAFM), the nation's fourth-largest poultry
producer, says it ran into that problem. It actually had to keep
slaughterhouses running on Saturdays in order to kill chickens at a
younger, lighter stage, because "They were too big for our plants
to run and too big for our customers, frankly," Chief Executive Joe
Sanderson said on the company's latest conference call.
While Buffalo Wild Wings highlighted burgers on their menu last
month, some restaurants might promote dishes made with other parts
of the bird, such as the thigh, or even market wings as
"jumbo-sized," so they could charge more, Mr. Reinstein said.
Wings are popular with the younger generation because they are
customizable, in terms of order size and flavors, and they are
shareable, said Jeff Fromm, head of Millennials research for
Barkley, a marketing firm.
Domino's, though known for its pizza, has also made wings a big
part of its menu. But since cheese is cheaper right now, Domino's
is able to offset the cost impact.
"You've got bigger wings across industry than you used to, but
our customers expect wings by the count, so we're going to stick
with that, and hope it evens out in the end," Domino's Chief
Executive Patrick Doyle said.
Write to Annie Gasparro at annie.gasparro@dowjones.com and
Kelsey Gee kelsey.gee@dowjones.com
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