What Does It Take to Be A Giant Egg Retailer?
Do you know how egg farming works? The process that comes before you get it from your nearest retailer?
In this episode of the Page One Podcast, Luke Peters sits with John Brunnquell as they talk about what it takes to sell and grow inside retailers in the specialty egg industry. John spent his entire career in the egg industry founding Egg Innovations in the 1990s.
He shares the positive impact they have experienced in the retail egg industry due to COVID-19 and how that will work in the long-term. Listen to hear the different types of hen farming methods and the contribution each makes in the egg industry in the US.
- How the dramatic short-term changes that have occurred due to the pandemic.
- Learning to deal with the increased demand for a product over a short time.
- The integrated model of chicken farming when it comes to dealing with divisions of large retailers.
- The difference between cage-free, free-range, and pasture-fed chicken and their percentage in the American chicken market.
- What it takes to get freed space and win huge grocery companies across the country as a brand.
- [0:34] Intro
- [2:22] He tells the history of how Egg Innovations was born.
- [4:02] How the COVID-19 has positively impacted the egg industry with a 40% increase in the traditional value.
- [6:33] The two sides of the egg industry- the increased sales of retail and decreased sales of wholesalers.
- [7:32] The ways they’re using to build up their inventory to cover for the oversupply.
- [8:51] The impact of the current situation on the retail market in the long term.
- [9:55] He explains how they use the integrated model to run the business at Egg Innovations.
- [13:12] He talks about the marketing plans they have to create more brand awareness.
- [13:56] He explains the difference between cage-free eggs and free-range eggs.
- [15:36] Does the use of antibiotics on a bird make it inorganic?
- [16:33] He explains the percentage of chickens that are consisted of each category.
- [20:21] He explains how he gets freed space and what it takes to win groceries.
- [21:42] Where you can find Blue Sky across the country.
- [22:54] What is the truth about the relationship between eggs and salmonella?
- [25:29] The backyard hobby of raising hens and its non-economic impact.
Speaker 1: Voiceover: Welcome to the Page 1 Podcast, a twice weekly podcast featuring a variety of guests and thought leaders on topics ranging from channel strategies to tariffs, influencer marketing, best in class product launches, and all the details about how to accelerate your eCommerce sales with the big box retailers, or what we call rCommerce. Now here’s your host, Luke Peters.
Luke Peters: Thanks for joining us on the Page 1 Podcast. I’m your host, Luke Peters, CEO of NewAir Appliances and Retail Band Digital Strategy Agency. Right now, we’re in a coronavirus world and I know that is on everyone’s mind. I’m going to adapt all of these interviews to ensure that you listeners are getting the most out of the Page 1 Podcast. You can expect us to get right to the point and provide valuable business insights with a focus on COVID-19 impacts in how business leaders are succeeding and transitioning in this time of change.
Luke Peters: Quickly, right now I’m offering a free evaluation of your online sales strategy. If you’re interested, find me on LinkedIn or email me at Luke@retailband.com. In this episode, you are going to learn from John Brunnquell on COVID-19 impacts of the egg industry, what are specialty eggs, and what it takes to sell and grow inside retailers right now. I’m excited to do this interview with John, because I actually had chickens in my backyard when I was growing up. We have a crazy story growing up in Orange County, we had a big family, chickens, corn, pot belly pigs, lizards, and all kinds of other stuff in our backyard, all kinds of tomatoes, and almost every vegetable you can name, and a ton of fruits as well.
Luke Peters: I’m a farmer at heart without living on a farm. Anyways, let’s get back to John. John spent his entire career in the egg industry, founding egg innovations in the 1990s. He saw early on that more nature you made a hens environment, the happier and more productive she is. John’s a board member or officer of multiple industry associations, including the Organic Egg Farmers of America. John, I think that’s a good description and good starter, but why don’t you add a little bit more, just tell the audience briefly about your business.
John Brunnquell: Sure, sure. Glad to be here this afternoon, Luke. The first two titles I’ll put on that are most important are father and husband, but as we move forward into the egg innovations, we founded that in 99. I grew up on a family farm and in the eighties and nineties, I could have espoused all the benefits of cages. Then somewhere along the way in the nineties, I walked into my first cage free barn and it kind of destroyed my perspective of cages. I began a journey of learning on what animal welfare is, and more from a science point of view. Along the way, I run, as a CEO, the largest free range and pasture egg operation in the nation. We have about a million and a half birds out on pasture every day.
Luke Peters: Wow, that’s awesome. Truly, I am excited to talk about this. I mean, a lot of our audience, obviously we’re shopping and shopping is totally different now, right in the middle of COVID-19. Eggs always seem to be in short supply. I think there’s a lot of interest in finding out what the difference, and we’ll get into these questions of free range versus organic or versus natural. You have all these things and as consumers we want to eat healthy, but we also want to kind of do the right thing for the environment, especially when the cost isn’t so much more to do that. We’ll get into all those questions, because I know they’re going to be interesting for the audience, but why don’t we start with coronavirus and tell us how it’s impacting your business.
John Brunnquell: The COVID-19 pandemic of 2020 has been a significant challenge in our industry as it’s been in virtually every other industry. Speaking first to the total industry of chalet eggs. At first, we went through a hoarding phase at retail for the first two weeks when people really were scared. There was, as an example, whatever my baseline volume of business was, orders came in at 300% of that volume for two weeks in a row. What we’ve found was concurrently, retail, while they lifted, food service shut down. It was never an issue when there were eggs not on shelf that we didn’t have enough total eggs in the industry, the issue was the supply chain wasn’t geared up to have that massive of a shift to retail in such a short period of time.
John Brunnquell: That was the first leg of it. Then, that took about two weeks. Now, we’re in the next four weeks post hoarding and we’re seeing a very sustained about 40% to 50% lift over traditional volume. I suspect that will stay at that level until the stay at home quarantines are lifted. That really transcends whether it’s the premium eggs like our free range and pasture or even commodity eggs.
Luke Peters: You’re seeing a 40% increase and I’m just going to guess and extrapolate, is that because pre-crisis, people were eating out and not eating the premium eggs and now they’re eating at home and they’re buying the premium eggs, so that positively impacts your sales?
John Brunnquell: Correct. Then, think of all the other places people use eggs. Secondary education, high schools, cruise lines, just with the entire shutdown of the recreational world, casinos, all of these places were end users of eggs. That side of the business dropped as much as 90% for some people. As they stayed at home, all of a sudden they’re feeding their children a cooked breakfast because they’re working at home. Very dramatic lifestyle changes have occurred at least on the short term.
Luke Peters: That’s really interesting. Actually this crisis has actually positively impacted you and maybe other organic or natural food type of companies.
John Brunnquell: Correct. In the egg industry, it’s really two stories. If you are dominantly serving retail, which we do, it’s been significantly positive, at least in the short term. If you dominantly serve the food service sector, it’s been significantly negative. Very few companies just spread themselves evenly across both sectors. It’s really created a fair amount of division within the egg industry of, I hate to say winners and losers, but however you want to correctly phrase it.
Luke Peters: Yeah. How does a company like yours ramp up production? I mean, so you have over a million and a half, or I think you said a million and a half hens. Right? They’re producing a certain amount of eggs a week now you’ve got a 40% increase. I don’t think they, are they just going to lay 40% more eggs? What was happening with those eggs before the crisis? How does it work?
John Brunnquell: That’s exactly right. The timing was a little bit beneficial because we were heading into an Easter holiday. We were, as most of the egg industry, we were building up our inventory of eggs just because of a traditionally busy holiday for us. Obviously the COVID superseded that. We went into the pandemic with a large inventory, but that has since been entirely depleted. We are producing hand to mouth at this point. Because we do free range and pasture, these are very thinly traded markets. Because of our Blue Sky Family Farm brand meets certain multiple animal welfare standards, it’s not like we can go out in the open market and purchase eggs to cover orders. Quite honestly, for the last two weeks we’ve been shorting orders and just having a constant communication with the retailers of what we’re doing and trying to be fair about it. You are correct. The chickens are going to produce an egg a day, whether you need them or don’t need them.
Luke Peters: That’s funny. Cool. Kind of wrapping up the COVID part of this, how is this going to affect the industry longterm?
John Brunnquell: There’s going to be a number of longer term effects, right now, again, on the food service side, it’s significant red ink. That part of the industry is adding more red ink onto about 18 months-two years of a poor egg market in general. We would not be surprised, although we have no inside information, that there may be some bankruptcies or some consolidation. We anticipate seeing a reduction in the size of the national egg flock over the summer because of now very depressed prices. Then, we think there’ll be a rebound later in the fourth quarter.
Luke Peters: Well, then quickly before I get onto some questions about, I mean, I just got all kinds of things that I think are interesting and then some other questions about eggs in general, but also about the business, because that’s also going to be important to the listeners. Before we do that, are you able to give kind of a scale of the company, maybe you can talk about acreage. You already talked about the number of hens, can we talk about acreage and maybe number of employees to give a listeners just a scope for the size?
John Brunnquell: With Egg Innovations, we work with divisions, not entire companies, but divisions of all the nation’s leading retailers. We do divisions of Sam’s, Walmart, Kroger, Safeway, Whole Foods, et cetera. We do that through what we call an integrator model where the family farmer owns the bird, excuse me, owns the building and we own the birds. We have 55 family farmers spread over five states. In our free range egg production, we give the hens 22 square feet per bird outside. To put that in perspective, 20,000 hens get 11 acres. In our pastured operations, that same 20,000 birds gets 50 acres. The birds are very much out on pasture using a fair amount of land, and we have probably at this point a hundred employees when you look at all of our operations.
Luke Peters: That is actually really awesome. You have kind of this integrated model where you’re integrated with all of these family farms. Is that because it’s more your strength as a company is on the kind of branding distribution and supply chain side, and then that’s where you can really tie in and help them?
John Brunnquell: The luxury of founding the company is I got to impart my social values, if you will, on what Blue Sky Family Farms meant. Because I’m a third generation family farmer, my dad still lives on the homestead, one of the things we like to see at Egg Innovations is to see another generation of farmers farming. One of the things we could do at Egg Innovations is we could take away the volatility of the egg market and we could take away the volatility of feed costs. That way, the family farmer could focus on production of eggs, which they do incredibly well. It’s very much a partnership. We absorb risks that can be done at a remote level and the farmer is the on site expert, I mean, they’re with the birds every day. It’s worked very well.
Luke Peters: Yeah. I love it. I think that’s great. Then you can probably grow quicker that way and kind of increase your vision that way a lot quicker than if you’re having to buy all those acres yourself. John Brunnquell: That would be correct. I mean, yeah, we certainly transfer some of the capital intensiveness over to the family farm.
Luke Peters: Are any portion of your sales online? Is that something that can even happen with eggs? Is this all, hopefully it didn’t sound like a dumb question, but a lot of our listeners are selling online. I’m just curious how much can happen online or is it pretty much all in store type of business?
John Brunnquell: We are Whole Foods largest private label vendor of eggs. Indirectly, if you shop at Amazon for the 365 label, you would be purchasing our eggs, but we don’t do any direct online ourselves.
Luke Peters: Got it. What have you done as far as branding goes outside of just creating an amazing business with all the relationships with the partners, but is there anything special online that you guys have done from a branding perspective, or has it mostly just been building the core values of the business through kind of your personal relationships with the different retailers?
John Brunnquell: We’re just doing the research right now for a relaunch of the Blue Sky Family Farm marketing campaign. That’s our flagship banner, at this point we’re just finishing up what’s the media going to look like? What’s the social going to look like? We’ve been relatively quiet on the brand marketing, that will step up here in the third and fourth quarters.
Luke Peters: Awesome. That’s smart. Why don’t we get into a couple of questions around eggs? I know your passion is around this and your brand is around this. We have a cage free pasture raised and free range, could you quickly share the differences and why they’re worth the additional price?
John Brunnquell: Sure. Cage free is probably the most confusing term for a consumer. Our data says that 83% of consumers hear cage free but think free range. Cage free, the birds are still entirely confined inside the barn and they do not have an opportunity to go outside. That’s probably the biggest distinction we make over and over is educating consumers if they’re looking for hens that have the opportunity to go outside, cage free does not meet that need. Free range is the next step up, and in free range we’re giving the birds 22 square feet per bird outside. We’re having them outside until about 25 degree temperature in our Northern climates. Then we step up on the final phase to pasture. Pasture, the hens are out 365 days a year. We do that in our Southern part of our footprint, and they also get significantly more space again, they get 108 square feet per bird. The cage free, the free range, and the pasture are about the living conditions. Then, organic or non-GMO, that’s the feed that you can give to any type of that living condition.
Luke Peters: No, this is awesome information. Now, if a bird is organic, now I know you’re dealing with eggs, but if you know the answer regarding actual chicken, and if people are buying the chicken meat, when they’re talking about organic and antibiotics, is organic also going to be free of antibiotics, or what do the regulations allow in those cases?
John Brunnquell: The use of antibiotics in organic is, it depends on the certifier. I would say generally it is highly frowned upon. Generally, what they’re going to say is if the birds are unhealthy, and that’s not a negative, it’s like your child has the flu. If they’re unhealthy, then treat them with antibiotics, but you take them off the organic program. The welfare of the hen is the most important thing over staying with organic and not treating your birds. Organic, that’s going to be the purest form you get. You’re going to have organic grain and then no drugs, hormones, or antibiotics.
Luke Peters: Okay, awesome. Let’s put it all together. It sounds like cage-free, well, actually, before we get onto this, so you have cage-free, free range, and pasture. What percentage of the total egg market though do those three categories comprise?
John Brunnquell: In the United States there are 330 million hens for the, what we call the national egg laying flock, roughly one hen for every person in the United States. Of that 330 million, approximately 250 million are still in cages. Cage free at this point is up around 70 million. That’s the biggest transition going on is every year cage production is dwindling and cage free is replacing it to the point that cage free will be the baseline commodity over the next several years. Free range is, out of the remaining 10 million, free range is about eight to nine million of that. Pasture is about another two to three million. Luke Peters: Wow. Okay. You’re talking 3% or 4% is going to be pasture and free range.
John Brunnquell: Free range, correct. Of the total market at this point, they’re still collectively under 10%.
Luke Peters: Okay. Then quickly on the health benefits, I don’t know a ton about that. I know the shells are stronger on the cage-free or pasture. I think you guys have done some research or do you know any research that tells, hey, obviously, we want the hens to be healthy and happy just for a bunch of reasons, but as far as actually eating the eggs, is there advantages on these pasture raised and free range?
John Brunnquell: The way we look at it at Egg Innovations, the fundamental premise that we have is that the good Lord hardwired every animal on this earth with certain behaviors, whether it’s a monkey, a llama, a horse, and in the case of a chicken it is hardwired to scratch, to perch, to dust bathe, to socialize. Corollary to that thesis is, and when you manage that animal consistently with the way it’s hardwired, good things should happen. That’s exactly what we see. We see lower mortality, lower morbidity, better feed conversion, and higher quality eggs, thicker shells, deeper colored egg yolks. Then, certainly the environment has an influence on the nutritional profile where cage and cage free production get a very specific formulation of feed. With free range and pasture, they’re able to actually go out and enjoy the pasture and that’ll transfer into their food.
Luke Peters: Great. Before we leave this topic, if someone is making the decision of cage free versus pasture raised or free range, how much of an advantage for the bird is it to be, I mean, obviously, you laid out the different square feet, but is cage free really similar to the standard eggs already that are caged, or is that still a big step up if someone’s buying a cage free egg, for the hen’s welfare, I say?
John Brunnquell: Sure. I would say that cage free is clearly a better world than cages. I grew up on a cage farm. Having said that, we at Egg Innovations view it as one big cage instead of thousands of little cages. When I talked about the five key behaviors of a hen, a cage free environment will allow them to perch, it will allow them to dust bathe, but it won’t allow them to pasture, and get outside and express native behavior. It’s a step in the right direction, but it’s not a dramatic step.
Luke Peters: Cool. Makes a lot of sense. Okay. Circling back to business, talk about succeeding in grocers. You guys, obviously you’ve grown a substantial business. You’re working with a lot of the big chains. I think Walmart, Kroger, Whole Foods, and I’m sure many, many more. How do you get fridge space? What else does it take to win in grocery?
John Brunnquell: The dominant thing grocers really value is the brand equity of their brand. Kroger is going to worry about the Kroger label. Whole Foods is going to worry about the Whole Foods label, et cetera. The first step is you have to have a product that simply has integrity if you’re going to play in the animal welfare space. We like to say, if there’s guilt by association, there’s credibility by affiliation. By that, I mean, if you don’t have a third party certifying and auditing your facilities, I would tend to be skeptical of any premium egg.
John Brunnquell: Then you have to be able to tell a coherent story, why are you different? Why does this resonate with the consumer? In our case, very clearly, we’re seeing the younger generation, the millennials, are clearly altering the landscape. We’re able to walk into a retailer. We’re able to talk to them about broad based food trends, but then dial into the egg case. Then, we’re able to make a coherent recommendations for them of based on if you have four facings, you should have these four types of products. Clearly, we’re always going to advocate that at least one of them is our Blue Sky brand.
Luke Peters: For those listening, is Blue Sky sold in all of the retailers or is it just in Kroger?
John Brunnquell: Yeah. Blue Sky you can find in all the Kroger’s West of the Mississippi. You can find it in Whole Foods in about half the nation. Then you can find it in major pockets like Chicago and other major areas. We do a lot of private label as well, because one of our other goals is to take cost out of premium eggs. We don’t believe a dozen pasture eggs should cost $7. Probably 50% to 60% of our sales, we are the preferred choice of the retailer to pack their house brand.
Luke Peters: Awesome. That’s great. Then, so a couple of other specific questions. Let’s talk about salmonella. This is always a funny one. I’m sure a lot of guys can hear that voice from their wife saying, “Don’t touch the raw eggs.” Or, “Wash your hands after touching the raw eggs.” What is the truth behind, I actually have a background in microbiology, but I’ve never gotten sick from salmonella from eggs. I handle them all. I love eggs, I’m always eating them, but usually hard-boiled, but omelets, everything else. What’s the truth behind salmonella and touching raw eggs and even eating raw, or eggs like a soft boiled egg?
John Brunnquell: We’re going to follow the American Egg Board’s recommendation, and that’s never to eat a raw or lightly cooked egg, but broadly there’s, the United States has what’s called the Salmonella Prevention Program. Every egg company is required to have a multifactorial process of inhibiting rodents, we measure the density of different vectors that potentially could cause salmonella. In our case, every egg is treated with UV light when it goes through our plant. We, as an industry, take tremendous steps to inhibit first, and then kill anything that’s on the shell. Even with that, while I know what occurs at Egg Innovations, we could never recommend eating raw eggs or lightly cooked eggs, just because of the rare, rare chance that something could happen.
Luke Peters: Yeah, totally makes sense. Another question, when I was growing up I remember I had a buddy and they wanted to buy an ostrich farm and ostriches were big thing and they made these huge eggs. Whatever happened to the ostrich market? How come the chicken, the hen, is the queen of the egg? You’ve got all these, you’ve got duck eggs, you’ve got ostrich eggs. They’re bigger, I’ve had them both. Is it just because the chicken hen makes more of them at a more reasonable price?
John Brunnquell: I chuckled because as I sit here and talk at my desk, I have an emu egg, a deep green-blue egg that I’m looking at that they engraved the Egg Innovations logo on. To answer your question, it’s just efficiency and economy. The white egg and the brown egg laying hens are just prolific layers, and they do that at a very, very efficient level. When you look at it from cost of protein or cost per serving, they simply are the 900 pound gorilla in the room of efficiency of any type of egg.
Luke Peters: We’ve talked a lot. I think we’ve covered a lot of things about bird welfare. We’ve talked about the different types, cage free, pasture raised, and free range, I guess, before I let you go, and it’s funny, because I started with saying that, “Hey, I grew up with chickens in the backyard.” Again, I was a kid not doing much of the work except picking up the eggs. I think it is a trend that you hear even people in urban areas are, they’ll have chicken coops. Talk about that trend. What you see, is it more, I can’t imagine it’s going to be cost beneficial. You can still go buy a dozen eggs for, even pasture raised, for around five bucks, right? Or something like that. Is it cost beneficial? Is it more because people like to have chickens at the house and it’s fun and they can go out there and kind of have like a little mini family farm or do you have any thoughts about having chickens at the house?
John Brunnquell: The term I use in the industry, it’s the backyard hobbyist. That’s really what it is. If you have a passion for hens and you have a hobby and you’re getting a couple of fresh eggs every morning for yourself, it’s a wonderful way to look at it. It’s not going to be economical compared to buying a dozen eggs at the grocery store. Again, when you have a hobby, economics is not necessarily the first priority.
Luke Peters: Totally. John, any other questions that I didn’t ask that you think might be interesting to the listeners?
John Brunnquell: No. I thought we did a very good job of covering it. Probably the only other thing I would mention, just to show people the kind of nature of how this industry is evolving. I actually graduate in about three weeks from the University of Kentucky with a degree in the avian [athology 00:28:28], and avian athology is bird behavior.
Luke Peters: Oh wow.
John Brunnquell: That degree didn’t exist 15 years ago. That really talks to how much welfare has moved the needle, whether it’s eggs or other animal products over the last 15 years. Clearly society is changing.
Luke Peters: Well, listen, I love capitalism, but I also love people that are doing what you’re doing. Because we have to be sustainable too, and we can’t lose sight of that. Also, food is medicine. We have to have healthy food for the whole country actually. Hopefully you can continue doing what you’re doing and that can expand into other industries. Want to really thank you again for being on the Page 1 Podcast, but before I let you go, how can listeners find more about you, learn more about your company? What’s the best way to do that?
John Brunnquell: Visit our website at Egginnovations.com, or our branded website at Blue Sky Family Farms, and you can also find us on Facebook and LinkedIn.
Luke Peters: We’ll have all those in the show notes for the listeners. This will be, obviously, on all the typical podcast locations, iTunes, Spotify, and on the Retail Band podcast page. I want to thank everybody for listening to this episode of the Page 1 Podcast, sponsored by Retail Band. Hope you enjoyed the interview today. Really appreciate your reviews on iTunes and hope you’ll join us for the next interview. Take care.
Voiceover: Thanks for listening to the Page 1 Podcast with Luke Peters. If you like our show and want to know more, check out our other segments. Also, please help us out by leaving us a rating on iTunes. Want to learn more about rCommerce? Check out www.retailband.com to get more great tips and tricks on how to accelerate your eCommerce sales with the big box retailers.
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Contact John Brunnquell: LinkedIn