Will Kroger's store brand cage-free eggs threaten other producers?
- Kroger will launch a private label line of cage-free eggs this fall, a lower-cost option for consumers that increases competition among egg processors and manufacturers.
- Under the Kroger store brand, the retailer will expand beyond its current offerings of cage-free eggs under its Simple Truth brand and support its commitment to sell only cage-free eggs by 2025.
- Price continues to drive purchase decisions, and as demand for cage-free eggs and more humane treatment for food animals increases, private label products could threaten manufacturers' market share.
Raising chickens in a cage-free environment costs more—about $40 per bird to build a cage-free production facility, according to chicken industry officials. But because demand is so high, and consumers have seemed willing to pay more for the final product, more egg producers have made upgrade investments.
Kroger's announcement could be just the beginning for manufacturers' competition from retailers and their private label brands. Store brands are challenging manufacturers' dominance in many categories as retailers strike a balance between quality and value, instead of focusing exclusively on price. Additionally, store brands don't need as much marketing and can therefore have lower consumer costs.
Retailers discovered the value in cage-free egg production last year, when the avian flu forced the traditional egg supply to dwindle. The potential profitability of Kroger's cage-free eggs could lead more retailers to follow its lead.
Manufacturers are still reeling from the decline in demand for eggs in general, leading to the USDA's recent announcement of an $11.7 million bailout for the egg industry. Having retailers join in the cage-free movement with private label brands could sustain sales declines for manufacturers if they can't find ways to alleviate higher costs and be more competitive in pricing at stores.
- FoodMarket.com Kroger Expands Cage-Free Egg Offerings