Cage-Free Eggs Are Out, Pastured Ones In as Tastes Change, Again

(Bloomberg) -- The bar is rising for what’s considered a happy chicken, sparking the hottest trend in the market: the pasture-raised egg.

Pastured eggs come from hens that spend most of their time outdoors, dining on bugs and taking dust baths while also indulging in their favorite activities, like scratching and perching. That’s a step up from cage-free, a label that consumers are finding is slightly less idyllic than they may imagine.

It wasn’t that long ago that consumer demands for better animal treatment sparked the rise of the cage-free egg. Hens moved from the confines of 67-square inches (170-square centimeters) to the wilds of the barn, with space to walk and stretch their wings -- but rarely, if ever, outside. The pasture movement goes further, sending animals outdoors for ample sunshine and space to spread out. Compared with cage free, pasture is tantamount to bird paradise.

“These birds are jammed day in and day out in their own manure, and humans won’t go inside because it hurts their eyes -- that’s cage-free eggs,” said Matt O’Hayer, chief executive officer of Austin, Texas-based Vital Farms, a leading U.S. pastured-egg seller. “Give me the mosh pit over the crowded elevator, but it’s still a mosh pit.”

Rising Sales

Many consumers seemingly agree. Sales of pastured eggs, which didn’t exist as a marketing tool a decade ago, jumped 32 percent this year through Oct. 8, according to Vital Farms, which cited data from researcher IRI. Free-range eggs, similar to pastured eggs except the chickens have less space, increased 8.5 percent. Cage-free eggs were up 3.9 percent, and the standard product from caged birds rose 0.3 percent.

At the same, premiums are coming down. Pasture-raised eggs used to fetch a whopping $12 a dozen at supermarkets. Greater competition among farms and lower costs drove prices down to below $5 recently in some stores.

Some of the biggest shifts in the protein industry in the past decade have come from increased consumer demands over animal welfare and sustainability. Eggs are a microcosm of the trend.

As giants like McDonald’s Corp. and Walmart Inc. pledged to upgrade, the cage-free hen population has exploded to 60 million in the U.S., double what it was in 2016. Cal-Maine Foods Inc., the biggest U.S. egg producer, said in June it had increased its cage-free capacity. Voters in California passed a ballot initiative this month ensuring all eggs in the state are cage-free.

‘Commodity Egg’

“Cage-free is going to be a commodity egg,” said John Brunnquell, president of Egg Innovations, the biggest pasture-raised and free-range producer with 1.2 million chickens. Increasingly efficient cage-free farms are driving down costs, and soon those eggs “will dominate the landscape,” said Brunnquell, who supplies Whole Foods Market Inc.’s 365 private-label brand.

As that change takes place, demands for better welfare are likely to keep increasing -- that’s where the pastured egg comes in.

To be sure, even at $5 a carton, pastured eggs still fetch a hefty premium that many consumers aren’t willing to pay. Standard grade A large eggs averaged $1.78 a dozen in the 10 months ended Oct. 31, government data show. Pastured and free-range eggs are also still a small sliver of total production. Out of 330 million hens in the U.S. egg industry, fewer than 10 million go outside, Brunnquell estimates.

Most giant retailers already sell free-range or pastured eggs, and offerings are increasing, producers say.

There are also incentives for farmers to make the switch. Producers can get higher, more-sustainable incomes and longer contracts by offering pastured eggs, industry executives said. Vital Farms says it has a long waiting list of farmers that want to supply the brand.

Dan Arnsperger, president of Rogers, Arkansas-based free-range producer Happy Egg Co., said the company has 33 small farms in the U.S. and may add 15 to 20 next year. He estimates that 30 percent of shoppers are willing to pay the premium for free-range eggs because of animal-welfare concerns.

In the past, “eggs suffered as a commodity where brands didn’t matter,” said Billy Roberts, a senior food and drink analyst at researcher Mintel. “But in recent years, with more premium offerings, there’s a market in consumers’ mind for egg options.”

To contact the reporters on this story: Lydia Mulvany in Chicago at lmulvany2@bloomberg.net;Deena Shanker in New York at dshanker@bloomberg.net

To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net, Millie Munshi, Anne Riley Moffat

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