Inghams sees strong shift as cost of living pressures hit households

The nation’s largest chicken producer has seen sales boom as cost of living pressures mean households forgo restaurants and cook cheaper meats at home.

Consumers are increasingly turning to chicken as the ‘protein of choice’ and which is cheaper than red meat amid cost of living pressures. Picture: Brenton Edwards

Inghams Group, the nation’s largest poultry producer, has reported that now almost 50 per cent of its sales go through retail channels - ostensibly the supermarkets - and with inflation moderating there is a good chance it won’t be forced to hike prices this year as it has done in recently to counter bloated chicken feed, labour and energy costs.

With the cost of chicken below that of red meat, cost of living pressures are driving consumers towards its products that also skew towards budget-conscious cooking at home, the company said.

Chief executive Andrew Reeves says the poultry producer is now in a strong position to maintain its dominant place in home kitchens as well as restaurants and fast food chains as poultry continues to be the “protein of choice”.

“There’s definitely a trend towards in-home dining and that has meant we have quite strong sales in supermarkets, but that’s been offset by a downturn in not just quick service restaurants (fast food) but the whole food service area, so hotels, cares, restaurants, are all pretty subdued at the moment,” Mr Reeves said.

“While there has been a significant acceleration in inflation in recent times, which has seen poultry prices rise to reflect the significant growth in costs, poultry continues to be significantly more affordable than red meat.

“People are looking at their entire expenditure, things they have to pay for, including things that are discretionary.

“I would say probably going to a quick service restaurant is a discretionary spend, and if your budget is under pressure with a variety of bills to meet that’s probably an area where you cut back.”

On Friday Inghams, which operates in Australia and New Zealand, posted a 268.6 per cent gain in its half-year profit to $63.4m as sales for the half rose 8.7 per cent to $1.64bn.

The chicken producer hiked up its interim dividend to 12c per share, up from 4.5c, and payable on April 5.

While the earnings result was within guidance provided by the company late last year, it did undershoot some analyst expectations and its shares slumped 15 per cent to $3.61 on the results.

The cost of living crisis gripping most households played through the Inghams results. In Australia volumes through the retail channel spiked 8.9 per cent for the half and were down 3.1 per cent for fast food chains.

Consumer demand is now skewed heavily to home dining and the retail channel for Inghams upped 1.8 percentage points to 49.8 per cent in the December half, its highest level in years, with fresh cuts such as breast and thigh as well as ready-made barbecue chickens sold in plastic bags (also known as ‘the bachelors handbag’) proving most popular.

In the December half Inghams lifted its prices by just over 8 per cent, compared to 12 per cent in the previous year, to cover rising input costs but those prices could now stabilise. Although cost pressures remain a strain on the business they are starting to moderate which could see Inghams keep its prices down and help widen the gap with red meat.

“At the moment I am not predicting a significant change in prices,” Mr Reeves said.

Mr Reeves said promised tax cuts and stable interest rates could help consumer demand this year.

“Combined effect of tax relief for consumers and modest slowing in the overall rate of inflation may provide some benefit during fiscal 2025.”