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CME: Major Shift in KFC Offering

01 May 2013

US - "I think I ate the bones!" KFC is hoping that phrase becomes the "Where’s the beef?" of the 2010s. We’re not sure it is quite as catchy, especially since it isn’t delivered by dear little Clara Pellar, write Steve Meyer and Len Steiner.

But whether it catches on or not, it represents a major shift in KFC’s offering since it marks the first time that we can recall that KFC has used Colonel Sanders’ Original Recipe on boneless chicken. They have offered boneless products of various sorts for many years but never with the "secret recipe of 11 herbs and spices." Why the change?

We think it is primarily due to the change in the mix of birds being produced with the number of heavier birds destined for boning increasing and the number of smaller birds falling. The charts below illustrate the shifts with the top one showing numbers in the four weight classes published each week by USDA and the bottom one showing the share of total slaughter represented by each weight class. All data are for year-to-date through 25 April for the respective years.

USDA’s report contains these notes about the uses of the various bird sizes:

  • Under 4.25-lb. birds are normally marketed bone-in into fast food and food service sectors and may include Cornish hens [which are VERY small, averaging 1.25 to 1.5 pounds)]
  • 4.26 to 6.25-lb. birds are normally marketed through retail grocery stores in tray packed or bagged form.
  • 6.26 to 7.25-lb. birds are normally marketed either into through retail grocery stores in tray pack or in IQF (individually quick-frozen) form or are further processed.
  • Birds weighing over 7.75 pounds are normally marketed deboned or as roasters.

Note that the tray-pack and IQF products are chicken parts, not whole chickens. We would add that it is our belief that whole roasters comprise a very small portion of the large-bird category with the vast majority of these birds going into deboned chicken meat production.

It is pretty remarkable that the percentage of birds slaughtered at weights above 6.25 pounds has grown from 33.1 per cent to 37.9 per cent in a year in which feed costs were record high. As with all animals, chickens convert feed to gain better when they are young and worse as they get older and larger. High feed costs usually cause producers to sell animals earlier and lighter, driving average weights down. But the large-bird portion of the broiler industry grew in spite of high feed costs.

The reason is that, even with slightly worse feed efficiency, these birds spread the fixed costs of breeder flocks, hatcheries, grower barns, slaughter plants and processing equipment as well as the largely fixed costs of labor (businesses in rural areas can’t lay off and rehire workers on a whim!) over more and more pounds. Just as has been seen for years in the pork industry, when the inputs are denominated in HEAD and the product is sold in POUNDS, increasing POUNDS/HEAD is a pretty sure-fire way to make more money.

As the supply of smaller birds falls and the supply of big birds grows, users will have to adapt to different products. So, we weren’t too surprised to see boneless white and dark meat introduced into KFC’s signature product line. It is simply an adaptation to a changing market.

Daily Livestock Report - Copyright © 2008 CME. All rights reserved.

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