Egg Market Outlook: 2019 and Beyond

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New regulations, shifting customer preferences, and diverse CPG company demands have created a perfect storm of change in what was already one of Europe’s most dynamic ingredient markets. Here’s our take on the latest egg market trends – along with some insights to help inform your procurement strategies.


It’s one of the oldest markets in the world, but as anyone in charge of procuring eggs for today’s CPG and retail giants will tell you, the egg market is anything but predictable.

Between an ever-changing regulatory landscape dictating how eggs can be farmed, consumers putting pressure on companies to only use ethically-sourced ingredients, and diverse CPG companies constantly searching for more efficient and cost-effective ways of sourcing the eggs they need, it’s a highly dynamic market with a lot to keep track of.

For category managers tasked with egg procurement, predictable and sustainable sourcing strategies are the ultimate goal. But with rapidly changing market conditions and demands to contend with, establishing them remains a significant challenge.

It’s a subject we’ve explored in great depth through our work with some of the world’s largest CPG and retail players. Here’s a look at some of the major changes we see shaping the European egg market in 2019 and beyond – along with useful insights to help inform your egg procurement strategy.


Key terms explained:

  • Free range: Eggs produced by poultry kept in natural conditions (typically outdoors), with freedom of movement
  • Caged: Eggs produced by hens kept in confined cages, without freedom of movement
  • Cage-free: Eggs produced by hens with freedom of movement to spread their wings and lay in nests, but not necessarily within natural (outdoor) conditions – also referred to as barn eggs
  • Enriched cage: Larger cages that still confine hens, but are equipped with features to improve their welfare and quality of life, such as a nest and a littered area for scratching and pecking

The future is free-range

Over the past decade, consumer demand for free-range eggs and products made using free-rage eggs has skyrocketed. The shift towards free-range eggs was initially made at the premium end of the market by retailers such as Waitrose and Marks and Spencer, serving the quality and ethical sourcing demands of an informed and non-price-sensitive customer base.

Since then, a growing number of retailers and consumers have come to embrace free-range as their preferred option for the eggs they sell and consume. The increased availability, visibility, and popularity of free-range egg products across the UK has both triggered and been supported by a significant increase in supply amongst the nation’s egg farmers.

The UK is the largest producer of free-range eggs in the EU, and accounted for 40.5% of the region’s free-range laying hens, in 2017. Free-range hens now make up more than 50% of the UK’s total laying hen population, the highest proportion in Europe by far.

With free-range hens projected to account for 63-65% of the EU’s total egg laying hen population by 2025, the UK is positioned to lead European egg production in this newly free-range focused market. The nation’s biggest egg producer, Noble Foods, has committed to going ‘cage-free’ by 2025, showing clear evidence of a shift away from enriched cage farming that will likely be reflected across Europe as a whole as we move forwards.

However, this shift comes at a cost – one that will inevitably impact buyers of all sizes. The average increase in production cost caused by transitioning from conventional cages to free-range farming is 28.8%,  which will inevitably result in higher prices for the companies purchasing eggs – regardless of their market and buying power. 


The UK appears well positioned, but macroeconomic factors are leading to uncertainty

Despite a strong position and established foothold in the free-range farming space, the immediate future of the UK’s egg market remains uncertain as we continue to see the impacts of Brexit unfold.

With a likely migration away from the UK for poultry workers causing a shortage of labour, falling sterling value increasing the relative cost of production, and tariffs encroaching on export profit margins, some are already calling Brexit a bigger threat to the UK poultry industry than bird flu.

These causes of uncertainty have placed a black mark against what otherwise appears to be a viable option for sourcing a wholly free-range egg supply from a single nation – an especially attractive proposition for UK-based CPG companies.

With macroeconomic factors casting doubt over exactly what the future holds for the UK’s egg producers, there is a clear need for large-scale egg buyers to examine the alternatives and consider building sourcing strategies that safeguard against potential future supply issues from UK farms.


Major CPG players commit to ‘cage-free’

With the cost of producing free-range eggs relatively high and pressure to source more ethically-produced eggs mounting, many of the world’s biggest CPG companies are embracing the middle ground by committing to ‘cage-free’ eggs.

‘Cage-free’ refers to a combination of free-range, barn, and organic eggs – all of which may prove themselves to be critical parts of a sustainable egg procurement strategy between now and 2025.

Large-volume egg buyers such as Nestlé and Unilever plan to switch to 100% cage-free eggs, with only a few of their product lines carrying free-range eggs as ingredients. That’s a model that we anticipate seeing mirrored by a large number of other key CPG players moving forwards.

For smaller-scale buyers (such as Boots and other similar retailers) however, the shift to a wholly free-range purchasing strategy seems to be viable, and provides additional ethical value in the eyes of the consumers they serve. While this may be publicly touted as an ethical decision, it appears to only be possible due to the relatively low number of eggs used in their products – a distinction that’s still making ‘free-range only’ a difficult and costly choice for large producers.


Our outlook

In the face of shifting regulations across Europe, options for cost-effective egg farming are narrowing – triggering an increase in both the supply and demand of free-range, barn, and organic eggs.

Those still relying on eggs from enriched cage farming environments will need to consider a major shift in their procurement activity, as pressure mounts to cease all forms of caged egg production.

It affords companies flexibility in both the type of eggs they source, and the places they can source them from – which is invaluable in today’s uncertain macroeconomic environment.

While the UK may prove to still be the go-to market for free-range eggs post-Brexit, other countries such as France, Germany, and the Netherlands provide attractive options for those seeking barn and organic cage-free eggs.

Practically, a balanced egg procurement strategy that involves sourcing from a range of these countries (and others) can deliver the flexibility needed to mitigate macroeconomic uncertainty and enable rapid adaptation to new regulatory standards as they emerge. This however inevitably comes at the cost of greater supply chain complexity.

As the forces influencing the European egg market continue to shift, there’s one thing we can say for certain; that timely insight and market intelligence will become increasingly valuable for all procurement teams managing egg purchasing and supply.

 

If you’d like to talk to The Smart Cube about how we can help you understand and anticipate the forces and changes influencing your critical procurement categories in 2019 and beyond, please get in touch.

Rashi Singh

Rashi Singh

In her eleven years with The Smart Cube, Rashi has risen through the ranks from a research analyst to Senior Manager. Leading a team of 30 people, she is responsible for the end-to-end delivery of projects for clients in the CPG sector. An economics graduate, Rashi is an in-house expert in the F&B and FMCG space, especially on the procurement, supply chain and strategy side. When Rashi is not providing market intelligence to clients, she loves to spend her time doing kathak, a form of Indian classical dance.

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