At the start of 2014, commodity prices for traditional chicken wings are trending down from 2013, and certainly much lower than the record highs of 2012 — but industry watchers and operators warn that price deflation is fleeting and that wing chains need to keep their menus as dynamic as possible.

“If we look at the past five years and the trends against wings, it’s a roller coaster, and what’s moving the needle is supply and demand,” said DeWayne Dove, vice president of purchasing for SpenDifference, a Denver-based supply chain consulting firm. “A lot of concepts will jump in and get good deals on spot buys, and when those are gone, you’ll see pressure on the market.”

SpenDifference’s initial projections for the commodities market in 2014 for traditional chicken wings were for inflation between 0 percent and 5 percent, Dove said. However, several favorable events have occurred since those calculations. Prices for corn have hit record lows, which likely will cause an increase in poultry production. Also, McDonald’s USA purchased far more wings than it could sell in last year’s limited-time promotion for Mighty Wings, leading to much higher freezer stocks of traditional wings available to other operators, Dove noted.

SpenDifference now projects decreases between 10 percent and 15 percent for breast meat prices, as well as a range between flat to negative 5 percent for chicken wing prices.

“We’ll see that in the first quarter of this year, when the Super Bowl and March Madness drive demand,” Dove said. “There are large levels of freezer stocks out there right now, and that’s where guys are getting great spot buys.”

But the oversupply and low prices will not last forever, he added, so rather than just try to make high with chicken wings, brands should keep pursuing diversified menu strategies that grow sales of wings and other less volatile items.

“If I were a restaurant, I would say let’s maintain our menu mix for wings and still look for other opportunities,” Dove said.

Not just winging it

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Dove traced the volatility in the wing market the past several years and pointed to 2012 as a particularly inflationary year, when the average price for a pound of wings rose 82 percent compared with the year before, jumping from 99 cents per pound to $1.80 per pound. Some prices peaked above $2 per pound in 2012 after manufacturers put packaging and shipping charges on their product.

Average prices decreased modestly by 20 percent last year, Dove added, and they fell below $1 in December 2013, before inching back up to $1.07 the morning of Jan. 3.

The volatility drove many wing chains into developing non-wing menu items that would make their food costs more resilient.

Mark Snyder, chief operating officer for 56-unit Hurricane Grill and Wings, said the West Palm Beach, Fla.-based brand “took the good with the bad” and did not change the rate at which it promoted traditional wings too much while dealing with the inflation of 2012.

Hurricane is now paying closer to its commodity prices for traditional wings, Snyder said.

But even though Hurricane’s food cost pressures should moderate in 2014, the brand’s leaders don’t foresee much of a comeback in consumer confidence or discretionary spending, he said. As such, Hurricane will continue to focus on menu innovation in order to drive traffic.

“We’ve tried to deliver through LTO new news that is relevant to the brand and offers more variety,” he said. “Wings are our biggest-selling item, but we try to throw a wider net to attract people who maybe don’t love wings. That will continue into 2014.”

Roger David, chief executive of Cincinnati-based Buffalo Wings & Rings, agreed that although wing prices are coming down significantly, it’s important to maintain a good menu mix.
 
“Burgers, salads and quesadillas are great, and they’re underleveraged opportunities,” he said. “People love us for our wings, but there are occasions where you want a burger, and we don’t want you to think twice about getting it at Buffalo Wings & Rings.”

The chain has reported 32 consecutive quarters of systemwide same-store sales growth, David said, adding that the chain was on pace for a comparable-sales increase of nearly 6 percent for 2013.

The investments Buffalo Wings & Rings made to the brand the past few years while tightening its supply chain controls kept it at the 60-percent benchmark for combined food cost and labor cost, according to David. While the deflation in the market for chicken wings will bring the brand’s prime cost down to 58 percent in 2014, “it’s significant but not a game changer,” he said.

The price is right

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Like other wing chains, Buffalo’s Café had tried to drive sales of other parts of its menu during the past few years, when the commodity market for traditional wings was a major headwind. It also benefited from co-branding with Fatburger, a sibling chain owned by the same parent company, Beverly Hills, Calif.-based Fog Cutter Capital.

But in 2014, “we’re lucky to enjoy reasonable pricing in chicken and can push it aggressively,” said Andy Widerhorn, who serves as chief executive for both chains. “We have an ‘Everyone is family’ marketing campaign, and wings are great entrees to share, so it’s definitely something we’ll emphasize.”

Buffalo’s has 15 full-service cafés in three states and about 10 Buffalo’s Express units that are co-branded with Fatburgers, Wiederhorn said.

The most significant difference this year for Buffalo’s and other wing purveyors, he added, is that brands can regain their profit margins without having to raise prices significantly, if at all.

“We avoided raising prices as best we could, and we swallowed that margin compression because we couldn’t say, ‘We don’t have wings today,’” Wiederhorn said. “We were pretty middle of the road, offering some other items and a modest price increase.”

Year-over-year, wings are about 40 percent cheaper on the commodity market for Hurricane, Snyder said. But the chain plans to stay the course on pricing and promotion of wings for peak pre-Super Bowl season and most of 2014. In the run-up of commodity prices the past two years, Hurricane had taken a price increase, including a 1-percent gain in 2013 and a 5-percent rise in 2012.

“Wings are a huge seller for the Super Bowl, and last year we took the hit [when prices were higher],” he said. “Even though prices are below that today, the market will go up between now and the Super Bowl.”

Contact Mark Brandau at [email protected].
Follow him on Twitter: @Mark_from_NRN