1 00:00:03,120 --> 00:00:09,560 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:10,000 --> 00:00:12,920 Speaker 2: The chicken sandwich war on Twitter has people clucking all 3 00:00:12,920 --> 00:00:13,800 Speaker 2: over the country. 4 00:00:13,960 --> 00:00:18,200 Speaker 1: It's chicken chaos and Milwaukee long lines outside Popeyes. If 5 00:00:18,200 --> 00:00:21,040 Speaker 1: you didn't jump on that Popeyes chicken sandwich, craze your 6 00:00:21,079 --> 00:00:23,959 Speaker 1: two lake. Popeyes is officially sold. 7 00:00:23,640 --> 00:00:28,080 Speaker 3: Out, beatings, stabbings, and even car crashes. People behaving very 8 00:00:28,120 --> 00:00:31,680 Speaker 3: badly in Los Angeles and across the country for that fact, 9 00:00:31,960 --> 00:00:35,280 Speaker 3: trying to get their hands on Popeyes chicken sandwich. 10 00:00:35,120 --> 00:00:36,040 Speaker 2: In LA two people. 11 00:00:36,080 --> 00:00:40,680 Speaker 1: On August twelfth, twenty nineteen, Popeyes released their famous chicken sandwich. 12 00:00:41,080 --> 00:00:44,120 Speaker 1: It was a humble fried chicken breast with pickles and 13 00:00:44,200 --> 00:00:47,600 Speaker 1: mayo on a brioche bun, priced at a very reasonable 14 00:00:47,720 --> 00:00:48,720 Speaker 1: three ninety nine. 15 00:00:48,920 --> 00:00:51,199 Speaker 4: Some people called it a masterpiece, some others were just 16 00:00:51,320 --> 00:00:53,800 Speaker 4: thrilled to see a delicious alternative to Chick fil A. 17 00:00:54,320 --> 00:00:57,200 Speaker 4: To be honest, I can't actually remember whether I had 18 00:00:57,240 --> 00:01:00,320 Speaker 4: it or not. I'll just say those are really those 19 00:01:00,320 --> 00:01:02,680 Speaker 4: are really delicious. I totally get it. I get why 20 00:01:02,760 --> 00:01:04,000 Speaker 4: people love all these sandwiches. 21 00:01:04,880 --> 00:01:08,120 Speaker 1: I'm sure you remember what happened after this, Joe, Dozens 22 00:01:08,160 --> 00:01:11,640 Speaker 1: of imitators were launched. I mean Taco Bell, of all places, 23 00:01:11,680 --> 00:01:15,679 Speaker 1: even did a version a crispy chicken sandwich. Taco and 24 00:01:15,800 --> 00:01:18,400 Speaker 1: Chick fil A came out swinging. They claimed that they 25 00:01:18,520 --> 00:01:23,360 Speaker 1: and not Popeyes, were the original inventors of the chicken sandwich. Meanwhile, 26 00:01:23,400 --> 00:01:27,199 Speaker 1: Popeye struggled to keep the sandwiches in stock. Fights broke out. 27 00:01:27,440 --> 00:01:30,120 Speaker 1: There was even a lawsuit. A guy from Tennessee asked 28 00:01:30,160 --> 00:01:33,280 Speaker 1: for five thousand dollars in damages after he couldn't get 29 00:01:33,280 --> 00:01:37,399 Speaker 1: hold of one. The chicken sandwich craze was pure mayhem, 30 00:01:38,319 --> 00:01:40,320 Speaker 1: or should I say mayhen. 31 00:01:40,880 --> 00:01:43,600 Speaker 4: But what's really important about the chicken sandwich wars is 32 00:01:43,600 --> 00:01:46,520 Speaker 4: that they never really ended. Okay, you weren't seeing them 33 00:01:46,600 --> 00:01:48,960 Speaker 4: hit the headlines in quite the same way anymore. But 34 00:01:49,000 --> 00:01:51,680 Speaker 4: on menus around the country, chicken is more popular than ever. 35 00:01:51,960 --> 00:01:55,040 Speaker 4: Burger chains have been launching chicken wings, donut shops have 36 00:01:55,120 --> 00:01:57,320 Speaker 4: chicken wraps. So you might have an opinion on who 37 00:01:57,400 --> 00:02:00,320 Speaker 4: ultimately won the chicken sandwich battle, But the real winner 38 00:02:00,320 --> 00:02:02,560 Speaker 4: of the war was the chicken itself, or maybe I 39 00:02:02,560 --> 00:02:04,440 Speaker 4: should say the real winner is the American eater. 40 00:02:05,080 --> 00:02:08,480 Speaker 1: Yeah, there are more chicken products on offer than ever. 41 00:02:08,639 --> 00:02:12,560 Speaker 1: In fact, America's consumption of chicken continues to grow, even 42 00:02:12,600 --> 00:02:16,240 Speaker 1: as appetites for other types of meat like beef have stalled. 43 00:02:16,639 --> 00:02:20,119 Speaker 1: The average American consumed a whopping one hundred and sixteen 44 00:02:20,120 --> 00:02:23,040 Speaker 1: pounds of chicken in twenty twenty three, and that number 45 00:02:23,080 --> 00:02:26,359 Speaker 1: is only expected to grow, making chicken by far the 46 00:02:26,400 --> 00:02:30,000 Speaker 1: most consumed meat in America. Each of us is eating 47 00:02:30,080 --> 00:02:33,520 Speaker 1: something like twenty adorable chickens worth of white meat every year. 48 00:02:33,840 --> 00:02:37,120 Speaker 1: And what's interesting is that's been happening even as poultry 49 00:02:37,160 --> 00:02:41,000 Speaker 1: prices have surged. Freshole chicken used to cost about a 50 00:02:41,080 --> 00:02:44,600 Speaker 1: dollar sixty per pound a decade ago. It now goes 51 00:02:44,639 --> 00:02:48,840 Speaker 1: for almost two bucks. That's an almost twenty five percent increase, 52 00:02:49,160 --> 00:02:52,280 Speaker 1: and higher than the jump in broader inflation, which, as 53 00:02:52,280 --> 00:02:55,080 Speaker 1: we all know, has been a huge deal in recent years. 54 00:02:55,560 --> 00:02:58,359 Speaker 4: So, speaking of inflation, egg prices have become a prime 55 00:02:58,400 --> 00:03:01,799 Speaker 4: example of recent price pressure, with wholesale egg prices surging 56 00:03:01,840 --> 00:03:04,640 Speaker 4: by two hundred and seven percent between twenty twenty two 57 00:03:04,720 --> 00:03:08,320 Speaker 4: and twenty twenty three. Chicken farmers blamed outbreaks of bird 58 00:03:08,320 --> 00:03:10,359 Speaker 4: flu for the increase, but some saw it as corporate 59 00:03:10,400 --> 00:03:13,799 Speaker 4: price gouging, result of a handful of powerful companies supposedly 60 00:03:13,840 --> 00:03:17,240 Speaker 4: taking advantage of consumers at a difficult time, and generally 61 00:03:17,400 --> 00:03:19,240 Speaker 4: it looks like the bird flu was a big part 62 00:03:19,280 --> 00:03:21,080 Speaker 4: of the story. But it did happen at a time 63 00:03:21,160 --> 00:03:23,800 Speaker 4: when prices for all kinds of things were surging, so 64 00:03:23,880 --> 00:03:26,800 Speaker 4: it's easy to understand why people saw it as as 65 00:03:26,840 --> 00:03:27,480 Speaker 4: a macro thing. 66 00:03:27,919 --> 00:03:31,760 Speaker 1: So we have to ask what exactly has been driving 67 00:03:31,760 --> 00:03:35,160 Speaker 1: the price increases in eggs and that sweet, sweet chicken meat. 68 00:03:35,600 --> 00:03:38,120 Speaker 1: Why has the chicken industry evolved in the way that 69 00:03:38,200 --> 00:03:40,880 Speaker 1: it has, and what does it say about the nature 70 00:03:41,000 --> 00:03:46,920 Speaker 1: and future direction of America's economic model. 71 00:03:50,360 --> 00:03:53,440 Speaker 4: Welcome to Beat Capitalism, in which we explore some of 72 00:03:53,480 --> 00:03:56,360 Speaker 4: the thorniest issues facing the US economy through the medium 73 00:03:56,440 --> 00:03:57,440 Speaker 4: of chicken. 74 00:03:58,080 --> 00:04:00,640 Speaker 1: In this special three part series, from All Thoughts, we 75 00:04:00,680 --> 00:04:02,920 Speaker 1: are going to examine eggs. 76 00:04:03,040 --> 00:04:04,840 Speaker 4: Get it so, there's going to be chicken puns. 77 00:04:04,880 --> 00:04:07,240 Speaker 1: Huh, there are definitely going to be chicken puns. Get 78 00:04:07,360 --> 00:04:10,200 Speaker 1: used to it. Now, we are going to examine all 79 00:04:10,240 --> 00:04:14,000 Speaker 1: of these questions and more, because it turns out chicken 80 00:04:14,120 --> 00:04:16,960 Speaker 1: has a lot to say about things like inflation and 81 00:04:17,040 --> 00:04:21,080 Speaker 1: the relationship between workers and big companies, and it creates 82 00:04:21,120 --> 00:04:25,080 Speaker 1: some big existential questions about what kind of economy. We 83 00:04:25,240 --> 00:04:34,080 Speaker 1: actually want to have first up, what actually happens when 84 00:04:34,120 --> 00:04:36,839 Speaker 1: the price of a chicken sandwich or an egg, or 85 00:04:36,880 --> 00:04:39,039 Speaker 1: even a simple chicken wing takes fun. 86 00:04:49,600 --> 00:04:54,120 Speaker 5: The Chicken Sandwich Wars were an extremely challenging time for 87 00:04:54,279 --> 00:04:58,200 Speaker 5: me as a person. It was hard on my family, 88 00:04:58,520 --> 00:05:01,160 Speaker 5: It was hard of my friends because every time I 89 00:05:01,240 --> 00:05:03,280 Speaker 5: had read a press release about these things, I had 90 00:05:03,279 --> 00:05:06,040 Speaker 5: to go buy one. I ate so many chicken sandwiches 91 00:05:06,120 --> 00:05:09,039 Speaker 5: during that war. I was the real casualty. I'm the 92 00:05:09,080 --> 00:05:11,040 Speaker 5: one that had it totter into my you know, drive 93 00:05:11,080 --> 00:05:14,279 Speaker 5: two hours to the nearest Popeyes to go try the sandwich. 94 00:05:14,320 --> 00:05:14,640 Speaker 6: I didn't. 95 00:05:14,720 --> 00:05:17,880 Speaker 1: That's Justin McElroy. He's one third of the My Brother, 96 00:05:18,000 --> 00:05:21,280 Speaker 1: My Brother and Me podcast, and the Chicken Sandwich Wars 97 00:05:21,400 --> 00:05:24,120 Speaker 1: were a big deal for him. He spends part of 98 00:05:24,120 --> 00:05:27,600 Speaker 1: the podcast reading out fast food press releases, and there 99 00:05:27,640 --> 00:05:30,359 Speaker 1: were a lot of those flying around at this time. 100 00:05:30,720 --> 00:05:34,120 Speaker 5: A lot of American fast food competition, especially during the 101 00:05:34,160 --> 00:05:36,799 Speaker 5: time period this is happening, our mid to late two thousands, 102 00:05:37,279 --> 00:05:39,800 Speaker 5: is really a race to the bottom of who can 103 00:05:39,839 --> 00:05:43,599 Speaker 5: sort of like reorganize the ingredients in the kitchen in 104 00:05:43,640 --> 00:05:47,240 Speaker 5: the most disturbing way to try to net headlines. You know, 105 00:05:47,320 --> 00:05:49,520 Speaker 5: we'll put some doridos in it. Look, we found some 106 00:05:49,560 --> 00:05:51,279 Speaker 5: FreeDOS lying around. We shove that in it. 107 00:05:51,320 --> 00:05:52,000 Speaker 2: Do you like this? 108 00:05:52,240 --> 00:05:55,040 Speaker 5: Is this anything? And a lot of it seemed pretty desperate. 109 00:05:55,080 --> 00:05:58,279 Speaker 5: And I think what was so interesting about Popeye's chicken 110 00:05:58,320 --> 00:06:01,320 Speaker 5: sandwich is that they had the the courage as a 111 00:06:01,320 --> 00:06:05,200 Speaker 5: brand to say, what if we just made something good? 112 00:06:05,480 --> 00:06:08,560 Speaker 5: And that was kind of the whole hook was it 113 00:06:08,600 --> 00:06:11,160 Speaker 5: was really good to eat, and it was wild and 114 00:06:11,200 --> 00:06:13,640 Speaker 5: this is just a sandwich that was It got famous 115 00:06:13,640 --> 00:06:15,839 Speaker 5: for being extremely good to eat, which I think was 116 00:06:15,880 --> 00:06:17,640 Speaker 5: a real breath of fresh chicken. 117 00:06:18,000 --> 00:06:21,680 Speaker 4: So, as the nation's de facto chicken war correspondent, Justin 118 00:06:21,720 --> 00:06:24,160 Speaker 4: has thought a lot about why this particular combo took 119 00:06:24,160 --> 00:06:27,160 Speaker 4: off like it did. Sure, there was a novelty value, 120 00:06:27,320 --> 00:06:28,560 Speaker 4: and they were delicious. 121 00:06:29,160 --> 00:06:33,320 Speaker 5: I tend to believe that the best chicken sandwich is 122 00:06:33,360 --> 00:06:34,760 Speaker 5: the one that's nearby. 123 00:06:35,200 --> 00:06:36,839 Speaker 4: But chicken sandwiches were also cheap. 124 00:06:37,400 --> 00:06:40,800 Speaker 5: I know, we are wild about these things as a nation. 125 00:06:41,480 --> 00:06:44,360 Speaker 5: Especially one of the great things is that it's cheaper 126 00:06:44,400 --> 00:06:46,279 Speaker 5: than beef. So we are just wild about that, and 127 00:06:46,320 --> 00:06:48,279 Speaker 5: I think we'll continue to be as long as we 128 00:06:48,320 --> 00:06:50,480 Speaker 5: got all these millions of people to feed. 129 00:06:51,240 --> 00:06:53,920 Speaker 1: Chicken is still relatively cheaper than a lot of other 130 00:06:53,960 --> 00:06:56,680 Speaker 1: types of meat. But that doesn't mean that prices for 131 00:06:56,760 --> 00:07:00,200 Speaker 1: chicken products never went up. Today, a popeye spice see 132 00:07:00,240 --> 00:07:03,640 Speaker 1: chicken sandwich costs close to six dollars in many cities. 133 00:07:03,960 --> 00:07:07,040 Speaker 1: That's about a fifty percent increase from its launch price 134 00:07:07,160 --> 00:07:11,040 Speaker 1: of three ninety nine, and that price went up despite 135 00:07:11,240 --> 00:07:14,480 Speaker 1: that intense competition among the sandwich makers. 136 00:07:14,920 --> 00:07:17,760 Speaker 4: In that respect, the chicken sandwich wars might be emblematic 137 00:07:17,800 --> 00:07:20,560 Speaker 4: of some wider pricing trends. People have chicken, whether it's 138 00:07:20,560 --> 00:07:23,160 Speaker 4: in sandwich form or something else. We keep buying it 139 00:07:23,200 --> 00:07:25,800 Speaker 4: even as prices go up and companies keep giving us 140 00:07:25,880 --> 00:07:26,840 Speaker 4: new ways to consume it. 141 00:07:27,360 --> 00:07:30,200 Speaker 1: To understand that, we need to talk about my personal 142 00:07:30,400 --> 00:07:34,840 Speaker 1: favorite chicken item, wings. But the demand for chicken wings 143 00:07:34,920 --> 00:07:39,280 Speaker 1: is pushing the price to historic levels. So how high 144 00:07:39,360 --> 00:07:41,000 Speaker 1: will the cost of eating wings go? 145 00:07:41,320 --> 00:07:44,280 Speaker 6: Your Super Bowl party is going to cost about fourteen 146 00:07:44,400 --> 00:07:46,800 Speaker 6: percent more than it did last year. 147 00:07:47,200 --> 00:07:50,280 Speaker 4: A lot of this is the labor shortage the supply chain. 148 00:07:50,080 --> 00:07:53,840 Speaker 1: Crunch Restaurants and suppliers say prices for chicken wings have 149 00:07:54,000 --> 00:07:55,120 Speaker 1: gone through the roof. 150 00:07:55,400 --> 00:07:57,280 Speaker 6: It's a no brainer. The wing Stop is getting in 151 00:07:57,320 --> 00:07:59,880 Speaker 6: on the chicken sandwich wars, but with its own twist. 152 00:08:00,680 --> 00:08:03,360 Speaker 4: Wingstop is one of the biggest wing chains in America, 153 00:08:03,400 --> 00:08:06,160 Speaker 4: and even they got into the chicken sandwich game. In 154 00:08:06,200 --> 00:08:09,280 Speaker 4: twenty twenty two, the company launched its own sandwich offering, 155 00:08:09,760 --> 00:08:13,080 Speaker 4: introducing not just one, but a dozen different flavors of 156 00:08:13,200 --> 00:08:15,120 Speaker 4: chicken and carb combos. 157 00:08:16,040 --> 00:08:18,280 Speaker 7: So we saw an opportunity to do it different, to 158 00:08:18,280 --> 00:08:23,200 Speaker 7: do it the Wingstop way, and the launch was pretty 159 00:08:23,240 --> 00:08:26,880 Speaker 7: incredible because we planned it out. We did all of 160 00:08:26,920 --> 00:08:31,040 Speaker 7: our forecasting and we were confident we had plenty of 161 00:08:31,080 --> 00:08:35,600 Speaker 7: inventory when we launched to be able to meet any 162 00:08:35,640 --> 00:08:38,240 Speaker 7: sort of scenarios we could come up with around demand. 163 00:08:38,760 --> 00:08:41,480 Speaker 7: But the fact was we sold out in a week, 164 00:08:42,000 --> 00:08:45,920 Speaker 7: which is pretty remarkable to just see. The strategy was right, 165 00:08:46,000 --> 00:08:48,640 Speaker 7: the timing was right. The only thing was wrong is 166 00:08:48,640 --> 00:08:51,120 Speaker 7: we didn't plan for that much volume. But we were 167 00:08:51,160 --> 00:08:54,360 Speaker 7: able to take a step back, build up supply and 168 00:08:54,440 --> 00:08:57,080 Speaker 7: relaunch again. And it has been a bit of a 169 00:08:57,120 --> 00:09:00,400 Speaker 7: game changer for our brand because we're bringing in a 170 00:09:00,600 --> 00:09:04,800 Speaker 7: record number of new guests into our brand quarter after quarter. 171 00:09:05,400 --> 00:09:09,720 Speaker 1: That's Wingstop CEO Michael Skipworth and He says chicken sandwiches 172 00:09:09,760 --> 00:09:12,199 Speaker 1: did a couple things for his business. They got a 173 00:09:12,240 --> 00:09:14,960 Speaker 1: bunch of new customers through the door and boosted sales, 174 00:09:15,000 --> 00:09:17,040 Speaker 1: of course, but there was something else too. 175 00:09:17,559 --> 00:09:20,679 Speaker 7: There's also a supply chain side of the strategy. The 176 00:09:20,720 --> 00:09:23,600 Speaker 7: more breastmeat that we use, which is where that chicken 177 00:09:23,640 --> 00:09:27,040 Speaker 7: sandwich filet comes from, where our bonuss wings come from, 178 00:09:27,480 --> 00:09:30,520 Speaker 7: the better it puts us in a position to negotiate 179 00:09:30,679 --> 00:09:34,600 Speaker 7: our overall buy with these poultry companies and help us 180 00:09:34,679 --> 00:09:37,880 Speaker 7: execute our supply chain strategy, which is really one that's 181 00:09:37,880 --> 00:09:40,080 Speaker 7: centered around in chicken wings. 182 00:09:42,720 --> 00:09:44,440 Speaker 4: And this is where we need to talk about where 183 00:09:44,440 --> 00:09:46,280 Speaker 4: wings actually come from. 184 00:09:46,520 --> 00:09:47,320 Speaker 1: Is it from chicken? 185 00:09:47,760 --> 00:09:50,160 Speaker 4: Yes, But according to Michael, chicken wings are one of 186 00:09:50,200 --> 00:09:53,040 Speaker 4: the most volatile commodities out there, and obviously they're a 187 00:09:53,120 --> 00:09:56,240 Speaker 4: huge component of Wingstop's business. The company says it's the 188 00:09:56,240 --> 00:09:58,000 Speaker 4: biggest customer for wings in the country. 189 00:09:58,679 --> 00:10:02,000 Speaker 7: About volatility and chicken wings and what that can do 190 00:10:02,840 --> 00:10:07,240 Speaker 7: to the Wingstop restaurants p and L. It could be 191 00:10:07,360 --> 00:10:11,600 Speaker 7: as much as a ten percentage point swing in our 192 00:10:11,640 --> 00:10:17,400 Speaker 7: food cost, which is incredible amount of fluctuation. Now, the 193 00:10:17,440 --> 00:10:21,920 Speaker 7: reason you see so much volatility in the price of 194 00:10:21,960 --> 00:10:26,800 Speaker 7: wings is the reality of the fact that these poultry companies, 195 00:10:27,400 --> 00:10:31,760 Speaker 7: they are not growing these chickens for the wings. They're 196 00:10:31,880 --> 00:10:35,880 Speaker 7: setting the size of the flock, how many birds they're 197 00:10:35,880 --> 00:10:39,400 Speaker 7: going to harvest based on breast meat demand. The chicken 198 00:10:39,440 --> 00:10:42,559 Speaker 7: wings themselves represent six to eight percent of the bird 199 00:10:42,800 --> 00:10:46,040 Speaker 7: It's a fall off product. And so why you see 200 00:10:46,280 --> 00:10:50,800 Speaker 7: so much volatility in the price of wings. It clearly 201 00:10:50,880 --> 00:10:54,560 Speaker 7: is a supply and demand dynamic, but the demand is 202 00:10:54,600 --> 00:10:58,000 Speaker 7: not what's driving the supply. It's really centered around the 203 00:10:58,040 --> 00:11:01,400 Speaker 7: overall market for breast meat, and so that's what's created 204 00:11:01,440 --> 00:11:05,400 Speaker 7: a lot of volatility in that commodity. And there can 205 00:11:05,440 --> 00:11:09,720 Speaker 7: be years where that spot market hits, you know, below 206 00:11:09,760 --> 00:11:13,200 Speaker 7: one dollar a pound, and then take a year like 207 00:11:13,280 --> 00:11:17,920 Speaker 7: twenty twenty one, after the pandemic, where every single brand 208 00:11:18,000 --> 00:11:20,920 Speaker 7: out there added chicken wings to their menu, you saw 209 00:11:20,960 --> 00:11:23,720 Speaker 7: that spot market hit an all time high of three 210 00:11:23,720 --> 00:11:25,520 Speaker 7: dollars and twenty one cents a pound. 211 00:11:36,720 --> 00:11:39,240 Speaker 4: Like a lot of things in the aftermath of the pandemic, 212 00:11:39,280 --> 00:11:42,040 Speaker 4: the price of chicken wings soared after twenty twenty, jumping 213 00:11:42,080 --> 00:11:44,560 Speaker 4: more than seventy percent between twenty twenty one and twenty 214 00:11:44,640 --> 00:11:48,080 Speaker 4: twenty two alone. There were the usual supply chain disruptions, 215 00:11:48,120 --> 00:11:50,640 Speaker 4: A lot of poultry processors had to curb production because 216 00:11:50,640 --> 00:11:53,800 Speaker 4: of worker shortages. Labor costs went up, so did chipping 217 00:11:53,800 --> 00:11:55,440 Speaker 4: and packaging costs. 218 00:11:55,080 --> 00:11:58,240 Speaker 1: But there was higher demand too. Americans reacted to the 219 00:11:58,320 --> 00:12:00,959 Speaker 1: trauma of the pandemic in what I think is a 220 00:12:01,120 --> 00:12:05,720 Speaker 1: very relatable way. They ordered wings, lots of them. Demand 221 00:12:05,720 --> 00:12:09,240 Speaker 1: for chicken wings jumped when we were all isolating. After all, 222 00:12:09,360 --> 00:12:12,880 Speaker 1: wings are both delicious and can be transported pretty easily. 223 00:12:13,280 --> 00:12:16,199 Speaker 1: Anyone who's ever ordered a couple dozen at two am 224 00:12:16,240 --> 00:12:19,720 Speaker 1: because they're the fastest and most delicious thing around probably 225 00:12:19,840 --> 00:12:20,559 Speaker 1: knows this well. 226 00:12:20,880 --> 00:12:22,800 Speaker 4: At the height of the price bike, some restaurants were 227 00:12:22,800 --> 00:12:25,680 Speaker 4: even labeling chicken wings at quote market price, you know, 228 00:12:25,760 --> 00:12:28,760 Speaker 4: like lobster. Some grocery stores put limits on the amount 229 00:12:28,760 --> 00:12:31,319 Speaker 4: of drums and flats you could purchase. For a company 230 00:12:31,360 --> 00:12:34,000 Speaker 4: like Wingstop, the soaring cost of its primary product proved 231 00:12:34,000 --> 00:12:38,120 Speaker 4: to be an opportunity as well as a challenge, and for. 232 00:12:38,080 --> 00:12:42,920 Speaker 1: One analyst, chicken wings became key to understanding the entire economy. 233 00:12:43,400 --> 00:12:46,880 Speaker 2: I'm Sam Rynes, and I'm a macro strategist with Wisdom Tree. 234 00:12:47,120 --> 00:12:49,680 Speaker 4: Part of Sam's job is to predict winners and losers 235 00:12:49,720 --> 00:12:52,600 Speaker 4: in the macroeconomy and in the years after the pandemic, 236 00:12:52,720 --> 00:12:55,240 Speaker 4: if you wanted to understand who is winning, you needed 237 00:12:55,240 --> 00:12:56,360 Speaker 4: to know Chicken wings. 238 00:12:57,040 --> 00:13:00,800 Speaker 1: According to Sam wings are the perfect pandemic study. Of 239 00:13:00,840 --> 00:13:04,640 Speaker 1: all those one off disruptions. It gave companies a reason 240 00:13:04,720 --> 00:13:08,920 Speaker 1: to raise their prices, a strategy he calls price over volume. 241 00:13:10,880 --> 00:13:17,120 Speaker 2: Price over volume is the idea that companies coming out 242 00:13:17,160 --> 00:13:23,000 Speaker 2: of the pandemic and through the Ukraine crisis used the 243 00:13:23,080 --> 00:13:27,560 Speaker 2: excuses that they had to increase prices well beyond what 244 00:13:27,600 --> 00:13:31,880 Speaker 2: they would have in the pre pandemic, pre Russia invasion 245 00:13:31,920 --> 00:13:36,520 Speaker 2: of Ukraine period in order to maintain their margins in 246 00:13:36,559 --> 00:13:39,920 Speaker 2: that environment. That came at the expense of volumes. So 247 00:13:40,080 --> 00:13:42,880 Speaker 2: the idea of price over volume is companies found it 248 00:13:43,000 --> 00:13:47,600 Speaker 2: much more interesting to increase prices than to attempt to 249 00:13:47,679 --> 00:13:52,960 Speaker 2: maintain their volumes over time. So your wingstops, your McDonald's, 250 00:13:53,000 --> 00:13:56,840 Speaker 2: your Burger Kings, Taco Bell, KFC. A lot of these 251 00:13:57,520 --> 00:14:00,800 Speaker 2: restaurants really figured out that you know, you kind of 252 00:14:00,800 --> 00:14:03,360 Speaker 2: have it out there that labor's getting more expensive, that 253 00:14:03,480 --> 00:14:06,320 Speaker 2: your protein is getting more expensive, so you can raise 254 00:14:06,360 --> 00:14:09,760 Speaker 2: prices and you can raise prices pretty dramatically relative to 255 00:14:09,800 --> 00:14:14,520 Speaker 2: what you could previously. They learned very very quickly that 256 00:14:14,720 --> 00:14:19,240 Speaker 2: it is much much cheaper to gain margin by changing 257 00:14:19,320 --> 00:14:22,360 Speaker 2: a price tag than it is to invest in putting 258 00:14:22,360 --> 00:14:25,480 Speaker 2: more volume out there. It flows straight to the bottom line, 259 00:14:25,960 --> 00:14:28,760 Speaker 2: and you don't have to move prices down anywhere near 260 00:14:28,920 --> 00:14:32,200 Speaker 2: as quickly as anticipated, if at all. 261 00:14:33,560 --> 00:14:35,640 Speaker 4: At a time when there were lots of shortages and 262 00:14:35,720 --> 00:14:38,520 Speaker 4: higher costs, price over volume could be a pretty compelling 263 00:14:38,520 --> 00:14:41,800 Speaker 4: strategy for businesses. In twenty twenty one, as chicken wing 264 00:14:41,800 --> 00:14:44,040 Speaker 4: prices were nearing their height, when we Stop said it 265 00:14:44,080 --> 00:14:46,320 Speaker 4: had increased menu prices by about ten percent. 266 00:14:46,680 --> 00:14:48,960 Speaker 2: You know, they talked about how their suppliers had worked 267 00:14:48,960 --> 00:14:51,000 Speaker 2: with them and so their realize costs were only up 268 00:14:51,080 --> 00:14:55,040 Speaker 2: like seventy percent. Still, that's you know, you sell chicken 269 00:14:55,080 --> 00:14:57,600 Speaker 2: wings and they're up seventy percent in pricing, that's a 270 00:14:57,640 --> 00:15:01,760 Speaker 2: pretty big deal for you. What was intriguing about that 271 00:15:02,120 --> 00:15:04,720 Speaker 2: was it gave them an excuse to raise prices, right, 272 00:15:04,960 --> 00:15:07,840 Speaker 2: So what did Wingstop do? Wingstop raised prices, and they 273 00:15:07,920 --> 00:15:09,600 Speaker 2: raised prices significantly. 274 00:15:10,160 --> 00:15:14,280 Speaker 1: Those price increases didn't necessarily mean that Wingstop was suddenly 275 00:15:14,320 --> 00:15:17,440 Speaker 1: making a bucket load of chicken money, but being able 276 00:15:17,480 --> 00:15:20,840 Speaker 1: to charge more did help protect their profit margins at 277 00:15:20,840 --> 00:15:25,120 Speaker 1: a difficult time. As Zam points out, Wingstop wasn't unique 278 00:15:25,160 --> 00:15:28,320 Speaker 1: in this respect. A bunch of other companies like Pepsi, 279 00:15:28,560 --> 00:15:33,080 Speaker 1: Home Depot, even Walmart arguably did something similar for sam. 280 00:15:33,120 --> 00:15:35,920 Speaker 4: What really differentiates the price over volume idea is what 281 00:15:35,960 --> 00:15:38,720 Speaker 4: happened when chicken wing prices started to come down, but 282 00:15:38,760 --> 00:15:42,720 Speaker 4: Wingstop's menu prices didn't suddenly drop alongside them, so. 283 00:15:42,640 --> 00:15:47,720 Speaker 2: They raised prices. Where it began to show through was 284 00:15:47,720 --> 00:15:51,520 Speaker 2: on the other side of the chicken wing crisis. Chicken 285 00:15:51,520 --> 00:15:54,520 Speaker 2: wing prices fell and they fell back to where they 286 00:15:54,560 --> 00:15:57,920 Speaker 2: had been previously, and they fell back, you know, call 287 00:15:57,960 --> 00:16:02,280 Speaker 2: it from almost three dollars per pound back to around 288 00:16:02,480 --> 00:16:04,960 Speaker 2: eighty five cents a pound. And those are peak to 289 00:16:05,200 --> 00:16:07,560 Speaker 2: kind of trough pricing. But if you think about that, 290 00:16:07,560 --> 00:16:11,200 Speaker 2: that's a pretty powerful thing. When you haven't moved your price, 291 00:16:11,200 --> 00:16:14,200 Speaker 2: if your Wingstop, so you've got the chase up in price, 292 00:16:14,560 --> 00:16:17,160 Speaker 2: You're not moving your price lower to kind of give 293 00:16:17,200 --> 00:16:20,040 Speaker 2: back to the consumer. You're maintaining that price now. So 294 00:16:20,080 --> 00:16:23,560 Speaker 2: all of a sudden, your margins have really begun to expand, 295 00:16:24,080 --> 00:16:26,720 Speaker 2: and that's not going to go anywhere, anytime fast. 296 00:16:28,240 --> 00:16:30,440 Speaker 4: So the price increases of the past could still be 297 00:16:30,440 --> 00:16:33,520 Speaker 4: a tailwind for a business like Wingstop Today, the company 298 00:16:33,600 --> 00:16:36,160 Speaker 4: says it's increasing menu prices by a smaller amount, just 299 00:16:36,200 --> 00:16:39,080 Speaker 4: one to two points, which is closer to the historical average, 300 00:16:39,160 --> 00:16:41,520 Speaker 4: but they're still rising and from a higher starting point too. 301 00:16:41,840 --> 00:16:45,560 Speaker 1: In an economy where consumers keep spending and entire industries 302 00:16:45,600 --> 00:16:48,920 Speaker 1: are raising prices all together at the same time, prices 303 00:16:48,960 --> 00:16:52,400 Speaker 1: can go up and stay there even when input prices 304 00:16:52,640 --> 00:16:55,360 Speaker 1: the cost of actually making the stuff start to fall. 305 00:16:55,760 --> 00:16:58,480 Speaker 1: It's an added wrinkle in the way we think about prices, 306 00:16:58,760 --> 00:17:01,120 Speaker 1: and one that could come back to rear its ugly 307 00:17:01,160 --> 00:17:03,680 Speaker 1: head even as inflation has slowed. 308 00:17:06,040 --> 00:17:09,120 Speaker 4: The Meg is a twenty eighteen science fiction film about 309 00:17:09,119 --> 00:17:12,040 Speaker 4: a seventy five foot megalodon, a giant shark basically that 310 00:17:12,200 --> 00:17:15,080 Speaker 4: terrorizes a group of scientists working in the Pacific Ocean 311 00:17:15,640 --> 00:17:18,440 Speaker 4: for Sam Ryans. Though Meg is something different that could 312 00:17:18,480 --> 00:17:19,399 Speaker 4: still be pretty scary. 313 00:17:19,720 --> 00:17:20,760 Speaker 1: Is it a giant chicken? 314 00:17:22,160 --> 00:17:22,960 Speaker 4: No, here's Sam. 315 00:17:23,680 --> 00:17:27,239 Speaker 2: What companies learned was really that consumers pay attention to 316 00:17:27,640 --> 00:17:31,160 Speaker 2: the Meg right and kind of the scary shark out there, 317 00:17:31,640 --> 00:17:33,760 Speaker 2: which is milk eggs and gasoline. 318 00:17:34,040 --> 00:17:37,320 Speaker 4: That's the meg milk, eggs and gasoline. 319 00:17:37,880 --> 00:17:41,479 Speaker 2: And when you have egg prices that are going up 320 00:17:41,560 --> 00:17:45,399 Speaker 2: dramatically and doing it very quickly, you better have an 321 00:17:45,400 --> 00:17:49,720 Speaker 2: excuse to you for that price to be moving, and 322 00:17:49,840 --> 00:17:52,240 Speaker 2: you better be able to explain why the cost of 323 00:17:52,320 --> 00:17:55,800 Speaker 2: everything that includes eggs is also going up, whether it's mayonnaise, 324 00:17:55,840 --> 00:17:59,919 Speaker 2: whether it's bread, et cetera. That's really going to have 325 00:18:00,040 --> 00:18:03,000 Speaker 2: an effect on the consumer psyche. But at the same 326 00:18:03,040 --> 00:18:06,760 Speaker 2: time they're not necessarily going to step back from consuming it. 327 00:18:06,880 --> 00:18:12,880 Speaker 2: So a lot of the companies out there, whether it's Pepsi, 328 00:18:13,000 --> 00:18:18,199 Speaker 2: whether it's Craft, Hinds, ConAgra, they found that consumer demand 329 00:18:18,240 --> 00:18:22,679 Speaker 2: is rather inelastic, that there is not anywhere near the 330 00:18:22,760 --> 00:18:27,120 Speaker 2: sensitivity to price that they thought there was pre pandemic, 331 00:18:27,359 --> 00:18:28,080 Speaker 2: pre invasion. 332 00:18:38,160 --> 00:18:41,480 Speaker 1: People love chicken so much that even as prices go up, 333 00:18:41,640 --> 00:18:44,960 Speaker 1: they keep buying. I gotta admit, Joe, my personal price 334 00:18:45,080 --> 00:18:50,200 Speaker 1: elasticity for chicken wings is extremely anelastic. It is the 335 00:18:50,240 --> 00:18:54,680 Speaker 1: opposite of a rubber band or a rubber chicken. If 336 00:18:54,720 --> 00:18:57,359 Speaker 1: prices go up, I am definitely still buying. 337 00:18:57,760 --> 00:19:00,920 Speaker 4: Point taken. But the idea that price and by extension 338 00:19:00,920 --> 00:19:04,199 Speaker 4: inflation might act a little differently in extraordinary times. It's 339 00:19:04,200 --> 00:19:06,479 Speaker 4: starting to gain some traction, and Sam isn't the only 340 00:19:06,520 --> 00:19:07,480 Speaker 4: one who's thinking about this. 341 00:19:08,080 --> 00:19:10,359 Speaker 8: My name is zabel A Viba. I'm an economists at 342 00:19:10,359 --> 00:19:13,439 Speaker 8: the University of Massachusetts, Amhurst, and I've been working on 343 00:19:13,640 --> 00:19:16,600 Speaker 8: inflation for a number of years, first in the context 344 00:19:16,720 --> 00:19:19,560 Speaker 8: of China's position to a market economy, which was all 345 00:19:19,560 --> 00:19:22,600 Speaker 8: about structural ruptures, and then in the context of the 346 00:19:22,680 --> 00:19:24,800 Speaker 8: overlapping emergencies of recent years. 347 00:19:25,119 --> 00:19:27,919 Speaker 1: The soaring price of chicken wings wasn't the result of 348 00:19:27,960 --> 00:19:31,320 Speaker 1: a single thing. The events of twenty twenty clawbird supply 349 00:19:31,440 --> 00:19:34,960 Speaker 1: chains and led to labor shortages. Russia invaded Ukraine in 350 00:19:35,040 --> 00:19:37,880 Speaker 1: early twenty twenty two, which caused the price of grains, 351 00:19:38,080 --> 00:19:41,000 Speaker 1: the basic building block of poultry feed, to go up. 352 00:19:41,400 --> 00:19:43,680 Speaker 1: Then there was an outbreak of bird flu, which we'll 353 00:19:43,680 --> 00:19:46,960 Speaker 1: talk more about in a second. Demand for wings spiked 354 00:19:47,000 --> 00:19:50,480 Speaker 1: at that same time, and companies like Wingstop responded to 355 00:19:50,520 --> 00:19:53,919 Speaker 1: that environment by raising their prices. Put it all together 356 00:19:54,040 --> 00:19:56,920 Speaker 1: and you had a recipe for record wingflation. 357 00:19:57,440 --> 00:19:59,800 Speaker 4: Isabella says. The worry is that these types of inflationary 358 00:19:59,800 --> 00:20:03,679 Speaker 4: e which she calls overlapping emergencies are becoming more common, 359 00:20:04,000 --> 00:20:06,760 Speaker 4: and this isn't just a US phenomenon. Globally, prices for 360 00:20:06,800 --> 00:20:09,320 Speaker 4: poultry are still up thirty three percent since the pandemic. 361 00:20:09,680 --> 00:20:12,560 Speaker 8: When we talk about the overlapping emergencies of recent years, 362 00:20:12,640 --> 00:20:15,919 Speaker 8: I would refer to a conjunction of different things that 363 00:20:16,000 --> 00:20:17,760 Speaker 8: have been kind of in the making for a while, 364 00:20:17,800 --> 00:20:19,879 Speaker 8: but that have been culminating in recent years and that 365 00:20:19,920 --> 00:20:22,960 Speaker 8: are also not really going away. The first is, of course, 366 00:20:23,000 --> 00:20:26,119 Speaker 8: climate change. It's no longer an issue that kind of 367 00:20:26,160 --> 00:20:29,919 Speaker 8: will bother our children or grandchildren, but it's an issue 368 00:20:29,920 --> 00:20:32,800 Speaker 8: that is relevant in the here and now. Global warming 369 00:20:32,880 --> 00:20:36,800 Speaker 8: is a reality. Extreme weather events have become very frequent 370 00:20:37,000 --> 00:20:39,080 Speaker 8: pretty much anywhere in the world. If you ask people, 371 00:20:39,200 --> 00:20:41,360 Speaker 8: can you think of an extreme weather event, they will 372 00:20:41,400 --> 00:20:44,000 Speaker 8: probably be able to name one that is not very 373 00:20:44,000 --> 00:20:47,200 Speaker 8: far away from them. And on top of this situation 374 00:20:47,320 --> 00:20:52,119 Speaker 8: around climate and weather, we have mounting geopolitical tensions. We 375 00:20:52,200 --> 00:20:55,640 Speaker 8: have an unstable global order that is as unstable as 376 00:20:55,640 --> 00:20:58,600 Speaker 8: it hasn't been in many years, if not decades, which 377 00:20:59,000 --> 00:21:02,520 Speaker 8: all of these things can have implications for the stability 378 00:21:02,560 --> 00:21:06,600 Speaker 8: of production networks, for the stability of distribution, and therefore 379 00:21:06,720 --> 00:21:11,439 Speaker 8: ultimately for the stability of economies, societies and democracies and 380 00:21:11,520 --> 00:21:14,800 Speaker 8: states and so on, which then of course has again 381 00:21:14,880 --> 00:21:19,080 Speaker 8: feedback dimensions into the degradation of the natural environment, into 382 00:21:19,160 --> 00:21:24,280 Speaker 8: climate change against climate change, and into the geopolitical environment. 383 00:21:25,520 --> 00:21:28,240 Speaker 4: There's another thing playing out too. When all these different 384 00:21:28,240 --> 00:21:31,680 Speaker 4: emergencies hit the headlines, consumers hear about it, they pay attention, 385 00:21:32,160 --> 00:21:34,679 Speaker 4: and so when companies decide to respond to higher input 386 00:21:34,720 --> 00:21:37,800 Speaker 4: prices by raising their prices, those price increases might seem 387 00:21:37,800 --> 00:21:40,439 Speaker 4: reasonable to customers, especially if everyone is doing it at 388 00:21:40,440 --> 00:21:41,040 Speaker 4: the same time. 389 00:21:41,920 --> 00:21:44,280 Speaker 1: It's a different way of thinking about prices to the 390 00:21:44,280 --> 00:21:47,679 Speaker 1: way we usually do in traditional economics. We tend to 391 00:21:47,680 --> 00:21:50,440 Speaker 1: think about price as the result of the relationship between 392 00:21:50,480 --> 00:21:53,640 Speaker 1: supply and demand. When demand is high and supply is low, 393 00:21:53,760 --> 00:21:57,560 Speaker 1: prices go up, and the inverse happens too, prices go 394 00:21:57,680 --> 00:22:01,560 Speaker 1: down when demand is low. Companies are supposed to compete on. 395 00:22:01,560 --> 00:22:04,560 Speaker 4: Cost, But when they are all these emergencies and one 396 00:22:04,560 --> 00:22:07,320 Speaker 4: off disruptions in the news, price stting starts to look 397 00:22:07,359 --> 00:22:10,399 Speaker 4: a little bit more complicated. If everyone has an excuse 398 00:22:10,440 --> 00:22:13,320 Speaker 4: to raise prices because there's a major emergency like a 399 00:22:13,359 --> 00:22:16,480 Speaker 4: global pandemic, then maybe businesses don't really feel as much 400 00:22:16,480 --> 00:22:18,800 Speaker 4: pressure to lower prices in. 401 00:22:18,680 --> 00:22:22,520 Speaker 8: The context of these overlapping emergencies, and specifically in the 402 00:22:22,520 --> 00:22:26,879 Speaker 8: context of tangible shocks that consumers see and listen to 403 00:22:27,040 --> 00:22:31,200 Speaker 8: on the news watch on TV, such as climate disasses 404 00:22:31,240 --> 00:22:35,359 Speaker 8: such as war, such as supply chain blockages like, for example, 405 00:22:35,400 --> 00:22:37,920 Speaker 8: the images of the Port of la that so many 406 00:22:37,920 --> 00:22:41,240 Speaker 8: consumers have seen. In that kind of context, when they 407 00:22:41,320 --> 00:22:43,760 Speaker 8: walk into the store and they see that prices have 408 00:22:43,840 --> 00:22:47,439 Speaker 8: gone up, they think that these price increases legitimate, or 409 00:22:47,440 --> 00:22:49,920 Speaker 8: that these price increases make sense. They don't come out 410 00:22:49,920 --> 00:22:53,480 Speaker 8: of thin air. This is to say that firms navigate 411 00:22:53,600 --> 00:22:57,359 Speaker 8: prices also as social relationships, as part of the relationship 412 00:22:57,400 --> 00:23:01,000 Speaker 8: with their customers and on the demands. This means that 413 00:23:01,040 --> 00:23:04,000 Speaker 8: the elasticity of demand is not God given, but it's 414 00:23:04,040 --> 00:23:07,880 Speaker 8: context dependent. The willingness of people to pay its context dependent. 415 00:23:08,200 --> 00:23:11,159 Speaker 4: And of course, even if prices for essentials like chicken 416 00:23:11,240 --> 00:23:13,240 Speaker 4: go up, we can't just stop eating food. 417 00:23:13,280 --> 00:23:15,640 Speaker 1: Although the intermittent fasting growers might try. 418 00:23:16,080 --> 00:23:17,960 Speaker 4: We might consume less of it or try to find 419 00:23:18,000 --> 00:23:21,000 Speaker 4: cheaper alternatives, but we can't stop buying it all together. 420 00:23:21,200 --> 00:23:24,199 Speaker 4: And as Isabella points out in an inflationary environment, it 421 00:23:24,240 --> 00:23:26,200 Speaker 4: might even be that people spend more on basics. 422 00:23:26,800 --> 00:23:30,800 Speaker 8: Generally speaking, the more essential or the more basic good is, 423 00:23:30,840 --> 00:23:34,000 Speaker 8: the lower the price elisticity. Right, you can even get 424 00:23:34,040 --> 00:23:38,119 Speaker 8: that kind of perverse effects where if inflation is high 425 00:23:38,160 --> 00:23:42,120 Speaker 8: and consumers fee squeeze, they might end up spending more 426 00:23:42,200 --> 00:23:46,440 Speaker 8: money on essentials than on less essential goods, and hence 427 00:23:46,480 --> 00:23:50,800 Speaker 8: their price elaticity for these essentials might even be declining 428 00:23:50,840 --> 00:23:53,800 Speaker 8: in an inflationary environment, and I would argue that firms 429 00:23:53,840 --> 00:23:56,320 Speaker 8: are very much aware of that. If you, for example, 430 00:23:56,320 --> 00:23:59,040 Speaker 8: look at the earnings costs of Tyson and the question 431 00:23:59,119 --> 00:24:02,959 Speaker 8: of demand elysis city on chicken, then you see that 432 00:24:03,040 --> 00:24:06,159 Speaker 8: they refer to chicken as a protein that is a 433 00:24:06,200 --> 00:24:09,800 Speaker 8: staple that people have as part of their day to 434 00:24:09,920 --> 00:24:13,320 Speaker 8: day diet, as their daily bread if you want so, 435 00:24:13,320 --> 00:24:17,480 Speaker 8: so that the demand elasticity is relatively low. So yes, 436 00:24:17,640 --> 00:24:21,560 Speaker 8: I would argue that in the context of food and agriculture, 437 00:24:21,840 --> 00:24:25,719 Speaker 8: when we talk about basic food staples, the demand elthicity 438 00:24:25,880 --> 00:24:28,840 Speaker 8: tends to be relatively low, which means that if price 439 00:24:28,920 --> 00:24:31,560 Speaker 8: is showed up, you do not get a strong demand 440 00:24:31,600 --> 00:24:35,800 Speaker 8: response and instead you basically get a very heavy cost burden. 441 00:24:36,000 --> 00:24:38,520 Speaker 8: Carried by consumers that cannot do without this stuff. 442 00:24:40,680 --> 00:24:43,760 Speaker 1: The meg strikes again. Not only do we pay more 443 00:24:43,800 --> 00:24:47,040 Speaker 1: attention to the price of essentials like milk, eggs, and 444 00:24:47,160 --> 00:24:49,879 Speaker 1: gas and chicken meat, but we don't have much of 445 00:24:49,920 --> 00:24:53,399 Speaker 1: an option to stop buying them. Everything might taste like chicken, 446 00:24:53,560 --> 00:24:56,479 Speaker 1: but that doesn't mean we'll all just stop buying the 447 00:24:56,520 --> 00:25:00,600 Speaker 1: real deal. And speaking of essentials, let's talk eggs, the 448 00:25:00,880 --> 00:25:01,960 Speaker 1: egg centils. 449 00:25:02,480 --> 00:25:06,080 Speaker 6: My name is Glenn Hickman. I'm the president of our 450 00:25:06,200 --> 00:25:11,240 Speaker 6: family business, Hickman's Egg Branch in Buckeye, Arizona. We have 451 00:25:11,320 --> 00:25:14,600 Speaker 6: a few million chickens and we sell eggs around the Southwest. 452 00:25:15,000 --> 00:25:19,000 Speaker 1: Glenn Hickman runs the biggest egg operation in Arizona. It's 453 00:25:19,000 --> 00:25:22,760 Speaker 1: still family owned, eighty years after Glenn's grandmother started the 454 00:25:22,760 --> 00:25:24,959 Speaker 1: business with just a few egg laying hens. 455 00:25:25,600 --> 00:25:29,280 Speaker 6: This our eightieth year, and there's a picture hanging in 456 00:25:29,320 --> 00:25:31,960 Speaker 6: my office that my dad is still live. He's ninety 457 00:25:31,960 --> 00:25:34,320 Speaker 6: five years old and he's in kind of a baby 458 00:25:34,359 --> 00:25:38,919 Speaker 6: stroller with his father who is feeding some chickens that 459 00:25:38,960 --> 00:25:41,720 Speaker 6: are you know, you would call cage free or free range. 460 00:25:41,960 --> 00:25:45,360 Speaker 4: Today Hickman Family Farms includes a feedmal and a processing 461 00:25:45,400 --> 00:25:48,200 Speaker 4: plant that's capable of shilling more than seven hundred and 462 00:25:48,240 --> 00:25:49,760 Speaker 4: fifty thousand eggs per hour. 463 00:25:50,560 --> 00:25:53,280 Speaker 6: Size Wise, you know, Hickman's is probably larger than some 464 00:25:53,400 --> 00:25:57,560 Speaker 6: and smaller than the biggest Onesmit, the egg business is 465 00:25:57,560 --> 00:26:01,560 Speaker 6: still pretty concentrated. There's not much more than twenty or 466 00:26:01,600 --> 00:26:05,639 Speaker 6: twenty five producers that really produce probably eighty five percent 467 00:26:05,680 --> 00:26:08,000 Speaker 6: of the product that's out there, so you know, we 468 00:26:08,160 --> 00:26:09,560 Speaker 6: have a few million chickens. 469 00:26:09,760 --> 00:26:12,720 Speaker 1: Hickman is on the supply side of the economy. He 470 00:26:12,840 --> 00:26:15,359 Speaker 1: makes the things that other people are buying, in this 471 00:26:15,520 --> 00:26:19,440 Speaker 1: case eggs, but his customers aren't really you and me. Instead, 472 00:26:19,480 --> 00:26:21,520 Speaker 1: he's selling to the big grocery stores. 473 00:26:21,600 --> 00:26:23,920 Speaker 6: Everyone knows who they are. They're the Walmarts of the world. 474 00:26:23,920 --> 00:26:26,040 Speaker 6: They're the Krogers of the world, They're the safe Ways, 475 00:26:26,040 --> 00:26:29,280 Speaker 6: the all these those are national customers. And then we 476 00:26:29,400 --> 00:26:34,120 Speaker 6: also have you know, regional retailers that operate in different areas. 477 00:26:34,680 --> 00:26:37,600 Speaker 6: And then you also have the institutional grocers, the national 478 00:26:37,640 --> 00:26:40,239 Speaker 6: ones such as Cisco and US Food Service, and then 479 00:26:40,280 --> 00:26:44,960 Speaker 6: you have regional retailers. Also beyond that, you have smaller 480 00:26:45,800 --> 00:26:50,320 Speaker 6: distributors that tend to go into restaurants, you know, produce companies, 481 00:26:50,440 --> 00:26:53,920 Speaker 6: meat companies, smaller institutional grocers. 482 00:26:54,320 --> 00:26:57,280 Speaker 1: In early twenty twenty three, the structure of the egg 483 00:26:57,280 --> 00:27:01,399 Speaker 1: market became exciting for all the wrong reasons. 484 00:27:01,960 --> 00:27:03,280 Speaker 4: That's so bad tracing. 485 00:27:03,680 --> 00:27:06,520 Speaker 1: Look, I'm just gonna say, if you don't like egg 486 00:27:06,640 --> 00:27:10,399 Speaker 1: and chicken puns, you should already have exited the podcast. 487 00:27:11,280 --> 00:27:14,359 Speaker 4: Uh I remember this. Wholesale prices for eggs jumped. If 488 00:27:14,400 --> 00:27:17,200 Speaker 4: you look at the consumer price Index, egg inflation reached 489 00:27:17,200 --> 00:27:19,120 Speaker 4: the stunning seventy percent year on year. 490 00:27:19,480 --> 00:27:24,040 Speaker 1: A new emergency was raging avian flu. Fresh off the 491 00:27:24,040 --> 00:27:26,960 Speaker 1: back of the COVID nineteen pandemic and all those snarled 492 00:27:27,000 --> 00:27:30,120 Speaker 1: supply chains, there was something new to worry about. Bird 493 00:27:30,160 --> 00:27:34,840 Speaker 1: flu is highly contagious. It spreads rapidly, especially among chickens 494 00:27:34,840 --> 00:27:38,200 Speaker 1: that are crowded together in commercial poultry houses. They can 495 00:27:38,280 --> 00:27:41,240 Speaker 1: die within days once it strikes, and it can quickly 496 00:27:41,320 --> 00:27:43,040 Speaker 1: wipe out entire flocks. 497 00:27:43,240 --> 00:27:45,119 Speaker 4: Yeah, and if there's any sign of it in a 498 00:27:45,119 --> 00:27:48,560 Speaker 4: commercial bird or egg operation, chickens need to be culled. 499 00:27:48,960 --> 00:27:51,080 Speaker 4: So the result of the most recent outbreak is that 500 00:27:51,119 --> 00:27:53,199 Speaker 4: more than one hundred million birds have been lost in 501 00:27:53,200 --> 00:27:56,080 Speaker 4: the US. That's an egg price is soaring and even 502 00:27:56,119 --> 00:27:59,280 Speaker 4: turn them into a political movement something chicken sandwich is 503 00:27:59,359 --> 00:28:00,800 Speaker 4: never really made to achieve. 504 00:28:01,720 --> 00:28:03,920 Speaker 6: You know, we're trying to do the best we can 505 00:28:04,040 --> 00:28:07,080 Speaker 6: to get more eggs out there. I think it's unfair 506 00:28:07,480 --> 00:28:13,280 Speaker 6: that when politicians squawk, they use a dozen eggs as 507 00:28:13,320 --> 00:28:17,399 Speaker 6: a benchmark for higher egg prices than those kind of things. 508 00:28:17,800 --> 00:28:20,240 Speaker 6: And I think that's just because people relate to eggs 509 00:28:20,280 --> 00:28:23,120 Speaker 6: that are like in ninety eight percent of all refrigerators, 510 00:28:23,600 --> 00:28:27,040 Speaker 6: so they are staple. But believe me that the egg 511 00:28:27,080 --> 00:28:30,480 Speaker 6: farmers in the United States are trying their ding just 512 00:28:30,680 --> 00:28:33,520 Speaker 6: every single day to produce the maximum amount of eggs 513 00:28:33,520 --> 00:28:35,080 Speaker 6: to satisfy the demand out there. 514 00:28:35,880 --> 00:28:37,879 Speaker 4: Okay, so what is actually happening when the price of 515 00:28:37,880 --> 00:28:40,520 Speaker 4: eggs goes up? How do prices hack? So to speak? 516 00:28:40,800 --> 00:28:44,000 Speaker 1: Now you're getting into it, Joe, Okay, here's Glenn. 517 00:28:44,600 --> 00:28:48,920 Speaker 6: The egg market is kind of an unusual animal. The 518 00:28:49,040 --> 00:28:52,720 Speaker 6: Board of Trade that commodities tradeline at corn, soybeans, and 519 00:28:52,720 --> 00:28:56,040 Speaker 6: those kind of things. That's actual cash pricing that's transacted 520 00:28:56,120 --> 00:28:59,200 Speaker 6: during the day. The egg business tends to be a 521 00:28:59,240 --> 00:29:03,360 Speaker 6: little bit different. There's a national market that's quoted by 522 00:29:03,640 --> 00:29:06,680 Speaker 6: a third party that has no interest in either retail 523 00:29:06,800 --> 00:29:12,400 Speaker 6: or production, and they observe trades between unaffiliated parties. From there, 524 00:29:12,480 --> 00:29:15,400 Speaker 6: they come up with an index that they quote each day, 525 00:29:16,040 --> 00:29:19,480 Speaker 6: and the egg producers tend to sell off that index. 526 00:29:19,560 --> 00:29:23,520 Speaker 6: So if the egg market is quoted up, then we 527 00:29:23,640 --> 00:29:25,920 Speaker 6: go our prices go up, it quotes down and we 528 00:29:26,000 --> 00:29:29,320 Speaker 6: go down. But we really don't have a lot of 529 00:29:29,440 --> 00:29:32,959 Speaker 6: leverage to say, gee, I don't really care what the 530 00:29:33,000 --> 00:29:34,840 Speaker 6: market is. This is what I'm going to sell my 531 00:29:34,880 --> 00:29:38,000 Speaker 6: eggs for. So we tend to all follow the same 532 00:29:38,040 --> 00:29:41,800 Speaker 6: market and we negotiate deals relative to that market with 533 00:29:41,880 --> 00:29:42,880 Speaker 6: our major customers. 534 00:29:44,080 --> 00:29:46,360 Speaker 1: So when Glenn is selling his eggs to a customer 535 00:29:46,560 --> 00:29:49,640 Speaker 1: a big grocery store or someone like that, he starts 536 00:29:49,680 --> 00:29:53,000 Speaker 1: with an egg index price and negotiates a discount from there. 537 00:29:53,320 --> 00:29:55,560 Speaker 4: And of course that raises the question of where the 538 00:29:55,600 --> 00:29:57,200 Speaker 4: egg index price comes from. 539 00:29:57,480 --> 00:30:01,240 Speaker 6: So the benchmark price is set by this third party, 540 00:30:01,400 --> 00:30:05,920 Speaker 6: and they collect data from many sources. So our industry 541 00:30:06,680 --> 00:30:11,520 Speaker 6: owns a nonprofit called egg clearing House, and so it's 542 00:30:11,560 --> 00:30:13,840 Speaker 6: blind trading. If I need to buy a load of 543 00:30:13,840 --> 00:30:15,600 Speaker 6: eggs or I need to sell a load of eggs, 544 00:30:16,080 --> 00:30:19,120 Speaker 6: I post it on this clearing house. They match buyers 545 00:30:19,120 --> 00:30:23,959 Speaker 6: and sellers, and that information is public. The blind trading 546 00:30:24,000 --> 00:30:27,120 Speaker 6: that participants are not known, but the kind of egg 547 00:30:27,440 --> 00:30:31,440 Speaker 6: is detailed, the area from which it shipped, the area 548 00:30:31,520 --> 00:30:35,240 Speaker 6: from which it delivered, and those kind of things. Additionally, 549 00:30:35,600 --> 00:30:39,640 Speaker 6: we may trade privately with another producer, and when we 550 00:30:39,680 --> 00:30:43,640 Speaker 6: do that, it behooves us to have accurate market quotes. 551 00:30:43,720 --> 00:30:48,240 Speaker 6: So it's better to provide that information to the market reporter, 552 00:30:48,840 --> 00:30:51,240 Speaker 6: whether it comes from a public trading platform or a 553 00:30:51,280 --> 00:30:52,280 Speaker 6: private transaction. 554 00:30:53,080 --> 00:30:57,760 Speaker 1: Joe, which came first, the chicken or the egg price index? Okay, 555 00:30:57,960 --> 00:31:01,200 Speaker 1: So when avian flu starts hitting laying flocks in the 556 00:31:01,280 --> 00:31:04,480 Speaker 1: US and farmers have to coal sick chickens, it takes 557 00:31:04,480 --> 00:31:05,880 Speaker 1: a while to build back supply. 558 00:31:06,560 --> 00:31:10,040 Speaker 6: What mostly affects the price of eggs is whether or 559 00:31:10,120 --> 00:31:13,960 Speaker 6: not we have enough production to meet the normal demand 560 00:31:14,440 --> 00:31:17,560 Speaker 6: when you have to depopulate a flock or a farm. 561 00:31:17,720 --> 00:31:21,680 Speaker 6: That's not normal in our business. Normally, if a typical 562 00:31:21,680 --> 00:31:24,040 Speaker 6: farm has ten buildings and they each have one hundred 563 00:31:24,040 --> 00:31:27,480 Speaker 6: thousand birds, you probably have a flock going in and 564 00:31:27,520 --> 00:31:32,960 Speaker 6: out about every two months, and you have the replacement 565 00:31:33,040 --> 00:31:37,160 Speaker 6: growing capacity to accommodate that. So when you have an 566 00:31:37,400 --> 00:31:40,640 Speaker 6: entire farm that goes out of production. They're cold, as 567 00:31:40,680 --> 00:31:44,360 Speaker 6: you say, and now you have ten barns empty without 568 00:31:44,400 --> 00:31:48,760 Speaker 6: any kind of outside help. If you will, you're going 569 00:31:48,800 --> 00:31:52,280 Speaker 6: to grow a barn of replacement bullets every ten weeks, 570 00:31:52,320 --> 00:31:55,000 Speaker 6: so it's going to take you an entire cycle. 571 00:31:55,520 --> 00:31:58,200 Speaker 4: So supply is clearly a factor in the benchmark egg 572 00:31:58,240 --> 00:32:00,760 Speaker 4: price going higher, but they're still in a questionable what 573 00:32:00,800 --> 00:32:03,360 Speaker 4: happens after that one to eggs hit the shelves of 574 00:32:03,400 --> 00:32:04,200 Speaker 4: grocery stores. 575 00:32:04,480 --> 00:32:07,000 Speaker 1: The bigger the customer, the higher the discount they can 576 00:32:07,040 --> 00:32:10,680 Speaker 1: potentially negotiate from egg farmers like Glenn, but there are 577 00:32:10,720 --> 00:32:14,280 Speaker 1: only so many companies that egg farmers can actually sell to. 578 00:32:14,920 --> 00:32:20,320 Speaker 6: The Consolidation and concentration of the grocery industry has obviously 579 00:32:20,400 --> 00:32:25,840 Speaker 6: had an impact on how every industry responds to that. 580 00:32:26,520 --> 00:32:28,880 Speaker 6: At one point in time, Higman's egg branch had one 581 00:32:28,960 --> 00:32:31,160 Speaker 6: hundred thousand chickens, and we thought we had the bowl 582 00:32:31,240 --> 00:32:34,560 Speaker 6: by the horns. We had plenty of customers that we 583 00:32:34,600 --> 00:32:40,680 Speaker 6: could service. Now a large grocer can consume in a 584 00:32:40,760 --> 00:32:44,200 Speaker 6: region easily the eggs from a million birds each week. 585 00:32:44,800 --> 00:32:49,800 Speaker 6: So we have these relationships now that instead of having 586 00:32:49,960 --> 00:32:52,960 Speaker 6: twenty customers each buying fifty cases of eggs, we have 587 00:32:53,040 --> 00:32:55,840 Speaker 6: one large customer buying the production from a million birds, 588 00:32:56,280 --> 00:32:59,040 Speaker 6: so that concentration is always concerning. 589 00:32:58,640 --> 00:33:02,200 Speaker 1: And chicken occupies a unique position in the US diet. 590 00:33:02,560 --> 00:33:04,520 Speaker 1: We eat a lot of it, whether it's eggs from 591 00:33:04,560 --> 00:33:08,280 Speaker 1: the grocery store in sandwich form or takeout wings. And 592 00:33:08,440 --> 00:33:12,200 Speaker 1: like many things, prices went up in recent years. Understanding 593 00:33:12,240 --> 00:33:14,640 Speaker 1: what help do it can deepen the way we think 594 00:33:14,680 --> 00:33:16,280 Speaker 1: about inflation in general. 595 00:33:16,600 --> 00:33:19,280 Speaker 4: Yeah, there's no single thing at play here. There's a 596 00:33:19,280 --> 00:33:22,080 Speaker 4: lot of demand for chickens. People love it, people need it. 597 00:33:22,280 --> 00:33:24,280 Speaker 4: And when there's lots of demand and supply gets hit 598 00:33:24,280 --> 00:33:28,160 Speaker 4: by overlapping emergencies, whether it's COVID or bird flu, prices 599 00:33:28,200 --> 00:33:28,520 Speaker 4: go up. 600 00:33:28,760 --> 00:33:31,720 Speaker 1: And when all those emergencies are hitting an industry all 601 00:33:31,760 --> 00:33:34,960 Speaker 1: at once, when they're all in the news, companies have 602 00:33:35,040 --> 00:33:38,640 Speaker 1: a reason and excuse even to raise their prices and 603 00:33:38,760 --> 00:33:40,120 Speaker 1: potentially keep them there. 604 00:33:40,480 --> 00:33:43,880 Speaker 4: But recent issues facing the poultry industry illustrate a wider 605 00:33:43,920 --> 00:33:47,120 Speaker 4: point about America's economy and the decisions being made about 606 00:33:47,120 --> 00:33:49,560 Speaker 4: how it should be structured and who benefits from it. 607 00:33:50,240 --> 00:33:53,360 Speaker 1: Next up on beat Capitalism, we are going from buying 608 00:33:53,440 --> 00:33:57,080 Speaker 1: chicken sandwiches to the business of actually growing the birds. 609 00:33:57,720 --> 00:34:01,040 Speaker 1: Welcome to the Thunderdome now with added chicken. 610 00:34:06,880 --> 00:34:07,120 Speaker 7: Beat. 611 00:34:07,200 --> 00:34:12,120 Speaker 1: Capitalism is written by Tracy Alloway, Carmen Rodriguez, and Joe Wisenthal. 612 00:34:11,680 --> 00:34:14,360 Speaker 4: Produced and edited by Carmen with the help of Kilbrooks 613 00:34:14,400 --> 00:34:21,400 Speaker 4: and Dashel Bennett. Our Odd Blots, theme song and sound 614 00:34:21,400 --> 00:34:24,320 Speaker 4: mixing was chickenized by our engineer Blake Maples. 615 00:34:24,680 --> 00:34:28,440 Speaker 1: This meaty serving of chicken industry puns and information was 616 00:34:28,480 --> 00:34:30,240 Speaker 1: fact checked by Dash and Kale. 617 00:34:30,440 --> 00:34:33,440 Speaker 4: Brendan Newnham is our executive producer, and Sage Bauman is 618 00:34:33,440 --> 00:34:34,879 Speaker 4: Bloomberg's head of Podcasts. 619 00:34:35,120 --> 00:34:37,600 Speaker 1: If you enjoyed this three part deep dive into the 620 00:34:37,680 --> 00:34:41,279 Speaker 1: chicken industry, please consider leaving a positive review on your 621 00:34:41,280 --> 00:35:00,600 Speaker 1: favorite podcast platform. Thanks for listening.