Restaurants Find It Tough To Find Chicken

This article was written by  Jonathan Maze and Heather Lalley for Restaurant Business.

Chicken is in such high demand at the nation’s restaurants that it is getting increasingly difficult for companies to find it.

Supply challenges are hitting all sorts of chains that serve chicken, including bone-in chains, burger concepts selling chicken sandwiches, pizza chains selling wings and of course the traditional wing chains themselves.

The problem has led to higher prices for chicken, and especially chicken wings, where prices are expected to stay at record levels for the foreseeable future.

“We believe that these prices are likely to continue to be elevated in 2021 as suppliers are struggling, just as many in our industry are, to hire people to process chicken, thus placing unexpected pressure on the amount of birds that can be processed and negatively affecting supply of all parts of the chicken in the U.S., not just wings,” Charlie Morrison, CEO of the wing chain Wingstop, said on Wednesday.

Prices for bone-in wings on the spot market are up more than 50% year over year, Morrison said. The company said that its “effective price increase” for wings was 25.8% thanks to pricing and deals with suppliers.

But it’s not just chicken wings. Concepts that sell chicken sandwiches are also experiencing a problem.

KFC, which introduced a new chicken sandwich earlier this year, is having trouble keeping up with demand. “As we’ve entered Q2, demand for the new sandwich has been so strong that, coupled with general tightening in domestic chicken supply, our main challenge has been keeping up with that demand,” David Gibbs, CEO of KFC parent company Yum Brands, told investors Wednesday.

Anthony Hull, CFO of big Burger King operator Carrols Restaurant Group, told investors in March that there is some “short-term pressure on chicken,” according to a transcript on the financial services site Sentieo.

The problems facing chicken supplies are multi-fold but a lot of it is demand-based. Chicken sandwiches have been on fire. Popeyes Louisiana Kitchen in 2019 introduced a new chicken sandwich and recorded the best quarter in modern industry history in the fourth quarter that year. Since then more than 40 chains have introduced reconfigured sandwiches, including McDonald’s, Wendy’s and Burger King. Chick-fil-A, meanwhile, saw sales soar 13% last year. KFC’s same-store sales rose 11% on a two-year basis, largely on the back of that sandwich.

Chicken wings have seen even greater demand increases.

Wingstop’s sales last year alone grew by $450 million as same-store sales often increased more than 30%. That spawned numerous virtual wing competitors, including It’s Just Wings from Brinker International’s Chili’s and Dine Brands Global’s Applebee’s.

Home chicken wings are increasing in demand, too. “Don’t forget the air fryer revolution,” said Tom Super, senior vice president of communications for the National Chicken Council. “Bottom line—wing demand has been and remains high.”

But operators also say supply issues are causing problems, in part because distributors can’t find drivers and producers can’t find workers. “It’s not the chicken,” Rob Lynch, CEO of Papa John’s, said in an interview. “They don’t have people to turn the chickens into wings.”

Several executives have blamed government stimulus checks for creating the labor shortage—which is also affecting restaurants of all kinds. “Until we see a marked change in the availability of labor for poultry producers, a labor shortage that we believe is largely fueled by the amount of government stimulus, we anticipate that wing prices could remain elevated for the balance of 2021,” Wingstop CFO Michael Skipworth said.

Super also noted that the winter storm in Texas this winter hit major chicken-producing regions, cutting down on supplies—though he would not go so far as too say there is an actual shortage of chicken wings. But he said that any supply problem can hammer the wing market.

“As high as demand is for wings right now, even small gaps in the supply of wings can cause big fluctuations in price,” Super said. “Keep in mind, too, that this weather event took place in February, right after the biggest event of the year for wings: The Super Bowl.”

If there is a benefit for Wingstop, it’s that the price for wings could discourage some of its newfound virtual competitors.

“If I were in the shoes of some of these other brands, I’d probably do something quite similar,” Morrison said. “But we do expect that, at these elevated prices, it will be very difficult for them to blend that into their desired margin structure. And, if that’s the case, that should take some pressure off chicken wings for the balance of the year.”

View the original article here.

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