The Retailer Newsletter of the American Egg Board HIGHER EGG PRICES?
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1 Spring 2007 Volume 9, Issue 2 Inside... EGG CATEGORY Scorecard Scorecard See Page 3 The Retailer Newsletter of the American Egg Board Eggs-plosive GROWTH Sales of specialty eggs, nutrient-enhanced eggs, and liquid egg products are on the rise. According to SPINS, a San Francisco-based marketing research and consulting firm, organic egg sales rose 16 percent, liquid eggs climbed nearly 40 percent, and egg whites were up 52 percent during the 52-week period ending Dec. 2, Omega-3 enhanced, vegetarian-fed, and cage-free eggs continue to be a hot trend among customers looking for a wide variety of choice when shopping. Retailers can differentiate themselves and increase sales by providing customers with a wide variety of specialty and liquid eggs. IS ETHANOL FUELING HIGHER EGG PRICES? News about ethanol these days involves much more than just fuel for cars and a solution to rising gasoline prices. It is also a key driving force behind recent cost increases in the egg category. Corn is the most widely grown and processed grain in the United States; it is also the source of ethanol and the principal feed grain used on egg farms. As demand for ethanol has increased, much of the corn crop is being diverted for bio-fuel production, resulting in substantially higher prices for corn used as a feed ingredient. Prices for corn have risen 78% between August 2006 and March Over the same time, the cost of eggs has risen 55% (see chart). The 2005 Energy Policy Act requires that ethanol account for over 5% of U.S. fuel production by As a result, the demand for corn is increasing at a rate far faster than farmers can increase production. Demand for ethanol may account for as much as 50% of the U.S. corn crop by 2009, leading to higher prices for eggs and many other food items. The impact is widespread. In Mexico, for example, tortillas are now in short supply. Coupled with increased consumer demand for eggs, it is anticipated that egg prices will remain high throughout the coming year. However, other protein sources are increasing as much, or more, on an equivalent basis, making eggs an even better relative value. Retailers must be careful to not cut back on promotional support of the egg category, particularly when consumers will be even more value-driven then ever before. For good nutrition at a low price, nothing beats eggs! Cost per Bushel Average Costs - Corn and Eggs August March 2007 Corn Eggs AUG SEP OCT NOV DEC JAN FEB MAR Month Source: USDA Daily Market News Report (eggs). Chicago Board of Trade data (corn) Producer Cost per Dozen
2 Eggsare1 # AEB IN THE NEWS Of the 15 Best Foods to Help You Lose! in the January 2007 issue of Good Housekeeping magazine, eggs are number one on the list. The article cites a study that found that eating two scrambled eggs (with two slices of toast with reduced-calorie fruit spread) helped to curb the appetite of study participants for the next 36 hours. Eggs have been featured in many other popular magazines since the beginning of the year, including: Real Simple (Jan.), Gourmet (Feb.), Bon Appetit (Feb.), O, The Oprah Magazine (Feb. and Apr.), Women s Day (Feb. 1), and Ladies Home Journal (Apr.). Recipes with eggs were included in every magazine. Many other media outlets and popular websites have also been featuring eggs in their health and wellness articles and recipes. All of this positive press coverage is continuing to increase egg consumption and bring new customers to your egg case! Eggs and Cholesterol Demystified A new study published earlier this year in the Medical Science Monitor concluded that eggs are okay everyday! The 9,500-subject study found that eating one or more eggs per day does not increase the risk of coronary artery disease or stroke among healthy adults on a low-fat diet. This confirmed a review of over 30 years of published research on eggs that also found there is no significant impact on blood cholesterol or heart disease risk from eating eggs daily. Eggs are OK! Research also found that the ratio of LDL-cholesterol to HDL-cholesterol is not significantly altered by eating eggs. This ratio is considered a better indicator of heart disease risk than either a person s LDL number or total cholesterol number. Consumers are often confused by the relationship of eggs, cholesterol, and heart disease. Promoting eggs during Cholesterol Education Month in September can help address consumer confusion about eggs and cholesterol. Retailers can also focus on the other health benefits that eggs provide as an easy, economical, and nutrient-dense food that can help with weight management, and the development of a baby s brain during pregnancy. Eggs are an essential part of a healthy diet! Liquid Egg Products are an Easy Choice for Many Customers Liquid egg products have been growing in popularity, and for good reason. Customers have discovered both the convenience and nutritional advantages of using liquid eggs as part of their diet. They provide an easy, no mess, and convenient alternative to traditional shell eggs while still providing many of the nutritional advantages. So what is the difference between liquid egg products and regular eggs? Liquid eggs products are eggs whole, whites, yolks or a blend with or without non-egg ingredients that have been completely removed from their shell, processed and pasteurized. The most popular varieties at retail are liquid egg products and egg whites. Some varieties of liquid egg products are made from the egg whites, but have added vitamins and nutrients to make up for what is lost by removing the yolk. As a result, many liquid egg products may be lower in calories, or cholesterol, or have additional vitamins and minerals. In contrast, plain liquid egg whites are just simply that egg whites. The biggest benefit for most consumers, however, is convenience. Most liquid egg products can be used in traditional egg dishes or recipes just the same as a regular egg, without sacrificing consistency or taste. Because liquid egg products are pasteurized, they can also be used as an alternative in recipes that use uncooked eggs, such as Caesar salad. Also, some liquid egg varieties contain added ingredients such as cheese, vegetables, and/or seasonings that can be used as a quick and easy meal solution. Customers simply need to pour and cook perfect for the cooking novice! 2
3 KEY CATEGORY MEASURES Market share Size of department Number of items Shelf capacity DEPARTMENT LAYOUT Minimum 8-foot department Egg case with dairy Consistent planogram High margin items at eye level Space allocated to sales Clear department signage Pricing easy to find Operating standards ANNUAL PROMOTIONS Total promotions Total items promoted Total promotion weeks Total ad space No. of lead features No. of secondary features ADDITIONAL OPPORTUNITY Nutrition information available Recipes available Cross-merchandised items PRICE CHECK (each item) Are You Set To Compete? Many retailers are often surprised to find out that when they think they are doing a good job with their egg program, their competitors may have been moving ahead a little faster. Now is a great time to do a check-up to find out if your egg program measures up to your competition. To maximize your sales and profits, it is important to focus on five major areas: 1) Key Category Measures These are the category basics: market share, number of items, and amount of space. AEB research has clearly demonstrated allocating enough space for eggs has a big impact on total category profit. And, you can t sell what you don t carry in the store. 2) Best Practice Case Layout Adequate space, good signage, and high operating standards get results. 3) Promotion Frequency The egg category is highly responsive to promotion and it generates true incremental sales. Do you benchmark your activity level against your competitors, or are you letting your customers get away? 4) Additional Opportunities Customers want recipes and nutrition information and many studies have shown that they buy more when this information is available. Cross-merchandise eggs with tie-in opportunities to build volume throughout the store. 5) Right Prices Regular price checks will help you stay competitive and maximize profit opportunities. Now is the time to get out and seeifyou have the winning formula for success Use the chart below to keep score! Egg Category Scorecard Our Stores Competitor 1 Competitor 2 Goal 3
4 Summer2007 EGG HAPPENINGS CALENDAR JUNE JULY AUGUST SEPTEMBER Sales Index* Good (85-90) Good (91) Better (96) Better (98) Themes Dairy Month Fourth of July National Food Safety Month National Cholesterol and Events Father s Day 17th Parents Day 24th National Back to Education Month First Day of Summer - 21st School Month National Hispanic Heritage Month Great American Backyard Campout 23rd Labor Day 3rd Grandparents Day 11th Rosh Hashanah 13th First Day of Autumn 22nd Tie-In Breakfast in bed for Mom & Dad Celebrate National Back-to-School and other Months Opportunities Celebrate National Dairy Month with egg promotions with egg promotions. Graduation parties, family reunions, and weddings Labor Day egg promotions Easy entertaining food solutions Hard-cooked eggs, easy meals and breakfast for Salads, deviled eggs, cakes/baked goods Back-to-School food *100 equals average monthly sales for a full year PROMOTING GOOD NEWS ABOUT EGGS It saseasyasa-e-b The American Egg Board (AEB) takes the guesswork out of merchandising your egg category. Whether you need promotional items, retail merchandising materials, recipes, or consumer education brochures, AEB has solutions for you in the Catalog of Materials. In our health-conscious society, consumers are constantly seeking out nutrition and other information about the products they are buying. AEB offers a variety of brochures that will provide your customers with important information for including eggs as part of a healthy diet. Shoppers are always on the lookout for new recipes, and AEB offers plenty of egg recipes and cooking information to help them prepare a variety of egg dishes. Available recipes range from basic egg cooking techniques to skillet and casserole dishes. There is something for every palate, and providing recipes builds sales throughout the store! To get a copy of the Catalog of Materials, contact AEB at or your egg supplier 4
5 Are Higher Egg Prices Restricting Promotion Activity? The recent run-up in egg costs (see cover story) has now begun to dramatically affect the frequency of retailer promotions. According to the USDA Weekly Retail Shell Egg and Egg Product Feature Activity Report, since December, promotion activity at retail has declined by nearly one third, from an average of 35% of all stores promoting in a given week in the August through November 2006 period, to an average of less than 25% from December 2006 through March Over the past four months, the average cost of a dozen Large Grade A eggs was 31 higher. But, the average promotion price has also increased by an almost identical 30 per dozen over the same period. Retailers have clearly kept pace with the cost increases, but are promoting at a much less frequent rate. However, there are several factors to suggest that retailers really should be promoting even more frequently than in the past! Promotions represent an even % Stores Promoting vs. Average Egg Cost and Promotion Price greater value opportunity than when prices were lower. There is 1.2 greater urgency for the consumer to 1 buy now when eggs are on sale. The relative price of eggs to other 0.8 protein alternatives is actually 0.6 improving. The cost of chicken, beef, 0.4 and other items are increasing faster on a dollar basis making eggs an 0.2 even more attractive meal option 0 than before. % Stores Promoting Higher food costs lead customers to Average Egg Costs Average Promotion Price seek less expensive meal options. This is a terrific opportunity to suggest eggs for mealtimes other than breakfast! The profit return to the retailer is greater. At the same margin rates, egg promotions are now generating substantially more profit dollars and sales than in the past. There is less competition. Those retailers continuing to promote are doing so with substantially fewer competing promotions in the market, making their promotions stand out even more. AEB research has demonstrated that when customers purchase more eggs on promotion, they truly use more eggs at home. The time is right for promoting eggs once again. USDA Forecasts Small Change in Egg Use for 2007 In spite of an anticipated average annualized producer price increase of percent for eggs in 2007, total per capita use in the United States as measured by USDA is expected to decline by only 1.1 percent from eggs per capita in 2006 to in (USDA World Agriculture Supply and Demand Estimate, May 11, 2007). This suggests that eggs still represent an outstanding consumer value in spite of increasing costs. FOODSERVICE DRIVES EggTrends AT HOME Eggs have been receiving a lot of attention in the foodservice area over the past year. Many fast food chains have made breakfast a focus category and have introduced new items that feature eggs. Starbucks, Wendy s, and Taco Bell are in various stages of testing egg breakfast menu ideas. Subway is also looking to expand its breakfast offerings, and Burger King is launching new products to expand its breakfast menu. All of these chains have built their breakfast programs around eggs, and AEB has supported many of them in their efforts. Once these programs roll-out nationwide, breakfast menus will now be available at most of the top fast-food chains in the country. Foodservice trends are a driving force in consumer eating habits at home, and AEB will continue to work with fast-food chains to promote breakfast items featuring eggs. With all of the egg items being advertised at restaurants, customers are sure to be thinking about buying eggs to make at home! 5
6 Here s your new edition of Spring 2007 AMERICAN EGG BOARD 1460 Renaissance Drive Park Ridge, IL Think Fast. Think Eggs. Think Profits. Non-Profit Organization U.S. Postage PAID Permit #722 Palatine, IL How can I get on the eggstra! mailing list? eggstra! is published quarterly and distributed free to the leading supermarket retailers, wholesalers, and egg suppliers across the country. Send us your name, title, company, and address to get on the eggstra! mailing list. RETURN SERVICE REQUESTED American Egg Board 1460 Renaissance Drive Park Ridge, IL or Contact us by fax or aeb@aeb.org Phone: Fax: Visit our Website at WHAT S 4-FEET OF SPACE WORTH? What should a retailer expect by giving more space to the egg category? When eggs are given an extra 4 feet of space the numbers are too good to miss! Trade-offs per store: - Egg share rises from 5.6% to 6.8% - Egg sales increase $27,754 annually - Dairy Dept. gross profit increases $ Net profit increases $4196 per store For a 250-store chain that means $1 Million Additional Profit! Source: Making the Space for Eggs: Room for Improvement Inside... Is Ethanol Fueling Higher Egg Prices? Eggs & Cholesterol Demystified Liquid Eggs are an Easy Choice for Many Customers Are You Set To Compete?.. 3 Promoting Eggs: It s as Easy as A-E-B Are Higher Egg Prices Restricting Promotion Activity? In The NEXT ISSUE: of AEB Launching New Advertising Campaign
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