Super-sized birds, wings can be bad business for restaurants

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Posted: Saturday, March 30, 2013 12:00 am

At America's sports bars, chicken wings are as essential to March Madness as man-to-man defense and the three-point shot.

But as this year's NCAA Basketball Tournament rolls ahead, the cruel economics of the chicken wing is squeezing restaurant chains and putting upward pressure on prices for customers.

With breeding advances, the size of America's chickens — and their wings — is relentlessly rising. As CEO Sally Smith of Buffalo Wild Wings recently explained to stock analysts: “Five wings yield more ounces of chicken than six used to.”

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Sounds like good news for wing joints, right? Wrong. Chains such as Buffalo Wild Wings sell by the unit — a six-piece plate with fries and a beer, anyone? — but buy by the pound. Take one wing away, even if the rest are meatier, and customers might not be happy.

The average chicken carcass nowadays is almost 50 percent bigger than it was 30 years ago. But, as agribusiness consultant Len Steiner put it, an 8-pound bruiser of a bird “still has only two wings.”

Wholesale wing prices soared 76 percent on average in 2012 over 2011, hitting highs not seen in at least 20 years, according to U.S. Department of Agriculture data.

Other factors are also pressuring prices, particularly last year's drought. It drove up the price of corn, the main component of chicken feed, which is the biggest cost in raising a bird. Chicken farmers cut back on their flocks, tightening wing supply.

And demand is growing, driven in part by the success of fast-growing Buffalo Wild Wings. Even fast-food behemoth McDonald's is testing wings.

“Chicken wings have gotten into so many restaurant concepts that it's put a real strain on (supply),” said Steiner, who co-writes the Daily Livestock Report for the Chicago Mercantile Exchange.

The advance of chicken technology is on display at a barn near Rice, Minn., where David Schumann raises birds for the upper Midwest's largest producer, GNP Co.

Schumann is one of about 400 farmers, mostly in Minnesota, who raise chickens for St. Cloud, Minn.-based GNP. He and his wife, Tracy Scapanski-Schumann, run the chicken barn with a computer's aid. Water rations, feed flow and air temperature — chicks like it hot; older birds, not so much — are all automated.

These days, it takes about 42 days to grow a 5-pound bird, compared with about 60 days three decades ago, said Bill Lanners, GNP's director of live strategies.

Credit the chicken breeding companies.

“They use some pretty amazing technology,” Lanners said. The breeders are not relying on genetic manipulation. It's a matter of using science to select chickens with the best genetic stock.

In the past decade, the average weight of a chicken carcass has grown 16 percent, according to data from Steiner and the U.S. Department of Agriculture. That comes after a 15 percent gain from 1993 to 2003 and an 11 percent increase during the prior decade.

The gains are driven by superbirds.

“Big bird deboners are pushing up bird size dramatically,” said Brian Roelofs, GNP's sales and service director, referring to 8-pounders that are deboned and sold in pieces.

The chicken market is carved into three portions: small bird (roughly 4 pounds), medium (roughly 6 pounds) and large (roughly 8 pounds).

Chicken chains such as KFC and Popeyes rely on small birds. The medium bird is big in supermarket coolers, where GNP's Gold'n Plump brand is sold.

Along with trays of fresh chicken breasts, GNP sells wings by the pack. Some basic chicken math helps spell out the wing dilemma. A tray pack of four breasts requires two chickens, but a pack of 18 wings requires nine chickens.

So the smaller bird markets — GNP's bread and butter — just don't generate enough chicken wings at low enough prices for big purchasers such as Buffalo Wild Wings, Roelofs said.

That's where the superbird business, centered in the South, comes in, knocking out a huge supply of chicken pieces, including wings. The larger birds make economic sense, despite the wing market quirk.

They cost less per pound to produce and yield more precious breast meat, a consumer favorite, which can be fashioned into all sorts of things: chicken tenders or nuggets, “boneless” chicken wings and chicken breast sandwiches at restaurants.

The bigger the bird, the better for breast meat production. And with plenty of big birds, that means plenty of wings that are then scarfed up by wing buyers like Buffalo Wild Wings and others.

Buffalo Wild Wings, to deal with its own rising costs, raised prices across its entire menu by about 4 percent last fall.

It also began devising ways to cope with the issue of bigger wings. The firm is testing changes in wing portions at 64 of its approximately 900 U.S. restaurants.

During a conference call with stock analysts last month, Buffalo Wild Wings executives talked about servings centered on ounces, instead of pieces, of meat.

“We have been testing different ounces of meat in let's say the single, double (servings),” Smith told analysts.

That means five wings are sometimes sold in a small order instead of six.

Asked if customers are pushing back, Smith said no.

“I think a lot of it has to do with how we explain to our guests, whether we say, 'OK, today we are serving five wings for a small order or six wings,' and making sure that (the) guest understands.”

Still, getting the equation right has been “a little more difficult than we anticipated,” Smith said.

“It's been really difficult to have a consistent message or consistent number of wings to the guests.”

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