Heightened Appetite for Premium Eggs Contributes to Sector Consolidation
August 2021
Demand for free-range, pasture-raised and organic eggs is driving M&A in the sector.
The COVID-19 pandemic put tremendous stress on the U.S. agricultural industry in 2020, but the egg farming community was swift to make changes within its supply chain to redirect supply from foodservice into retail.
With many consumers working and studying from home, 2020 saw meaningful growth in retail egg purchasing due to increased breakfast cooking and baking. The industry expects this trend to continue along the new paradigm of interacting with supermarkets for egg purchases. A repercussion of the trend is that many egg producers are evaluating innovative packaging solutions in light of increased transportation and handling costs, as well as multipack variation preferences.
The wide range of options obtained through egg processing allows farmers and processors to develop new market segments, thereby reducing their reliance on any single distribution channel. Egg processing has evolved from simple liquid eggs into a myriad of new products, fresh and frozen, ranging from hard-boiled eggs to a variety of functional foods where specific nutrients, such as omega-3 polyunsaturated fatty acids, lutein or vitamin D, are added.
Growing consumer interest in food production is creating opportunities for joint marketing in the foodservice channel. Americans are increasingly seeking ethically-produced ingredients when dining out; thus, partnerships with value-aligned foodservice brands offer great synergy potential. In February of this year, Vital Farms partnered with Acosta Foodservice, a sales and marketing agency for the consumer-packaged goods industry, to represent its national foodservice distribution. The partnership has increased Vital’s broadline distribution and presence on restaurant menus, such as breakfast tacos from Texas-based Tacodeli made exclusively with Vital’s pasture-raised shell eggs.
Consolidation is very busy across the egg industry but particularly in premium markets. The consumer movement away from “factory farming practices” towards ethically produced food is fueling mergers and acquisitions among free-range, pasture-raised and organic egg producers. In May, Butterfly Equity acquired a majority stake in Pete & Gerry’s Organics, one of the nation’s largest organic free-range and pasture-raised egg producers. During the same month, Cooper Farms acquired full ownership of CW Egg, bringing liquid egg processing under the Cooper Farms umbrella. In June, Cal-Maine Foods announced that it purchased the remaining 50 percent joint venture interest in Red River Valley Egg Farm, which operates a specialty shell egg production complex with approximately 1.7 million cage-free laying hens, cage-free pullet capacity, feed mill and processing plant. As cage-free eggs become an industry standard and premium eggs gain market share, partnerships and acquisitions will become increasingly strategic.
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