Chicken Scarcity
It’s not an opinion that chicken is super popular in the fast-food industry. Ranging from the wing war between Wingstop and Buffalo Wild Wings to the chicken sandwich war between major chains like McDonalds, Chick-fil-a, Popeyes, and KFC, you can make an argument that chicken is the most popular meat now. Not only will consumers agree with you, but the companies will wholeheartedly nod yes. A positive nod though? That is unlikely.
As we all know, chicken, like other meats, is a commodity. If you have paid attention to commodities in 2021, you know that prices have been soaring, which is an understatement. Specifically for meat, demand has outpaced supply substantially, with fast food chains seeing an increase in sales as the country is reopening. Looking into the chicken sandwich war, demand is at an all-time high with major fast-food chains all competing against each other. You might think that a lot of competition would reduce the shortage, but this simply isn’t the case. For example, KFC, one of the giants, had to remove chicken items like tenders to compensate for the shortages, while also announcing that they’ve had to pay high prices for the meat. Boneless chicken breast prices have doubled since the beginning of the year, and wings are facing the same problem. Wingstop has said that they’ve paid 26 percent more for their chicken wings, and this all contrasts from the beginning of 2021, where chicken was cheaper than the historical average.
However, we can look to an area that is benefiting: chicken producers. One major business we’ve seen flourish is Pilgrim Pride, the second largest chicken company. In their earnings report, they saw a 50 percent increase in profit, and competitors Tyson and Sanderson Farms expect the same in their earnings also. Giants like KFC are forced to buy at high prices because demand is super strong, so they need as much supply from these companies as possible. Fast food companies still see a bright future, saying that they will continue to excel when the supply chain effects are straightened out in the coming months. One stock you should keep an eye on is Restaurant Brands International, the parent company of Burger King. Burger King announced their new crispy chicken sandwich as a new competitor, which could possibly succeed. What do you think about the future of chicken prices? Also, who do you think wins the chicken sandwich war? For me, I believe Popeyes, and Chick-fil-a sit at the top, but you might have a different opinion.
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.
