2022-04-25 07:53:01 By : Ms. Spring Lin

When Americans were confronted with the worst pandemic in more than a century, they reacted in some surprising ways. One was to order lots of chicken wings.

U.S. same-store sales at Wingstop Inc., a chain with a strong takeout and delivery game even before Covid-19, rose 31.9% in the second quarter of 2020 over the same period a year earlier, and 21.4% for the full year. As other fast-food purveyors and new-style “ghost kitchens” got in on the wings action, wholesale chicken wing prices more than doubled in 12 months.

As Josh Dzieza of The Verge summed up in an fascinating article on the phenomenon last year, the attraction of wings in a pandemic was that they “handle delivery well” and are “extremely simple to make.” What’s more:

No one brand dominated the category, and there is no proprietary wing type or sauce, so any given restaurant’s overnight wing brand had a decent chance of winning attention on the delivery apps. This made wings an obvious first target for restaurants that had idle kitchens and needed additional revenue. 

That bit about “no proprietary wing type or sauce” is no longer quite true, as the Buffalo Wild Wings chain currently offers Doritos Flamin’ Hot Nacho wings and Applebee’s Cosmic Wings virtual spinoff sells wings in both Original Cheetos and Cheetos Flamin’ Hot flavors. But that kind of reinforces the point of how out-of-hand things have gotten.

Now demand for wings appears to be softening, perhaps because people are actually going to restaurants and eating there rather than getting everything delivered, and restaurants no longer need wings-delivery revenue to get by. When I tried out this explanation on poultry economist Paul Aho he agreed that it sounded plausible, but also offered the observation that wings prices have long been negatively correlated with gasoline prices. His hypothesis: “When gasoline prices get high people have less money to spend on wings at the bar on Saturday night.” Also, he said, wings had gotten so out of whack with the prices for other chicken parts that some reversion to the mean was in order.

Whatever the reason, wings are now selling for about 40% below their May 2021 peak, according to the U.S. Department of Agriculture’s Northeast Broiler/Fryer Parts reports, which track prices and volumes of “ice packed broiler/fryer parts, delivered to first receivers in pool trucklot and trucklot quantities” in the region and offer the most complete daily accounting of U.S. chicken-parts prices. (Broiler and fryer are mostly interchangeable terms for the birds raised for their meat and slaughtered before they are 10 weeks old that dominate U.S. chicken production.) The decline accelerated right after Super Bowl Sunday, a big day for wings consumption, and seems to have halted or at least paused a couple of weeks ago.

Wingstop’s share price is down more than 40% from its peak in September, and while that’s partly attributable to a broader stock market downdraft, it’s clearly more than that. Same-store sales growth slowed in 2021 but was still pretty strong; numbers for the first quarter of this year will be released next month and the market is guessing they won’t be great. Investors may also be concerned about the fact that Wingstop’s veteran chief executive unexpectedly left last month to run a chain of drive-thru salad restaurants.

We’re not talking about the end of chicken wings here. Wingstop shares still sell for more than they did for all but a few days before the pandemic, and wing prices are higher too. The biggest wings purveyor by revenue, Buffalo Wild Wings, has a business built more around in-restaurant consumption than Wingstop’s, and saw sales drop an estimated 15% in 2020. So it could be seeing sales increases now, although as part of privately held Inspire Brands it doesn’t report that information. When I emailed Tom Kaiser, editor of Food on Demand, a digital publication that has chronicled the wings-delivery boom, he pushed back at the suggestion of a possible crash: 

Every food craze is obviously cyclical, but I think chicken wings are likely to be quite durable because of the same fundamentals that propelled the category so quickly during the early pandemic days. Cheap, easy to get, quick to raise on farms, easy to eat, infinitely customizable, and they survive takeout/delivery quite well. That isn’t going away, and now there’s a much larger chicken restaurant ecosystem that largely wasn’t there 5/10 years ago. So I wouldn’t bet against the category.

Also, while wholesale wing prices have fallen sharply, wing prices at supermarkets still seem to be trending upward.

One reason to bring all this up, other than that it’s fun to make charts about chicken wings (don’t worry, there are more to come), is that wings aren’t unique in having seen a big demand increase during the pandemic that now may be fading as pandemic-induced habits fade. The same behavioral changes that have sent wing prices falling surely contributed to the more than 60% decline in the share price of U.S. restaurant-delivery service DoorDash Inc. since November and the 70% drop over the past year for Amsterdam-based rival Just Eat Takeaway.com NV, which just announced that it wants to undo its 2021 takeover of GrubHub. They may have even played a role in the first-in-a-decade subscriber decline that cratered Netflix Inc.’s stock this week. The pandemic boom in durable goods purchases is also fading, with the Consumer Price Index for durables down 0.9% from February to March, which works out to a 10.6% annualized decline.

This is exactly the turn of events foreseen by those who thought the sudden inflation spike of last summer would prove transitory. It just (1) came a little later than most expected, (2) has been slower to show up in retail prices than wholesale ones and (3) is being overwhelmed in the headline inflation numbers by rising prices for services and non-durable goods.

In the case of chicken wings, there’s the added complication that they are small appendages of a larger product, chickens, that are subject to a variety of different market dynamics. For a taste of the short-run picture, here’s the commentary offered by an anonymous master of laconic prose at the USDA, in the Northeast Broiler/Fryer Parts report from Wednesday morning:

Prices are trending firm for bone-in breasts, tenders and boneless skinless breasts; steady to firm for dark meat cuts and steady to weak for wings. Trucklot buying activity is moderate to good for mid-week trading. Offerings of bone-in and boneless skinless breasts are tight with premiums added, tenders and dark meat cuts are well cleared and held with confidence. Wings are available and slow to clear. Market activity is mostly moderate.

Longer term, the story of American chicken since broiler/fryer mass production took off in the 1950s and 1960s has been that breasts account for most of the value. The rest of the bird is along for the ride, with much of the dark meat frozen and shipped overseas. For a long time, wings, which are technically white meat but don’t look or act like it, fetched very low prices and were often rendered into animal feed. “When that guy in Buffalo starting serving them at his bar, that was a godsend for the poultry industry,” says Aho.

This invention of the Buffalo wing, recounted in a classic 1980 New Yorker article by Calvin Trillin, is said to have occurred at the Anchor Bar just north of the city’s downtown in 1964. Also crucial in broadening wings’ reach was the 1982 founding of Buffalo Wild Wings by two guys who had moved from Buffalo to Columbus, Ohio, and missed their favorite food. The first Wingstop opened in suburban Dallas in 1994. By 2010, which is how far back price data from the Northeast Broiler/Fryer Parts report is available on the Bloomberg terminal, wings had already gone from castoff to pretty valuable — although not nearly as valuable as they were to become in 2020 and 2021.

The hottest chicken part at the moment is the boneless breast, an indication that the boom in fast-food chicken sandwiches is not yet played out. Boneless thighs have attracted new interest in the restaurant industry lately as a substitute for pricier breasts and wings, although the volumes sold are much smaller than those of breast meat.

The cutting of chicken into pieces is mostly automated in the U.S., while deboning mostly isn’t, so Covid outbreaks at processing plants and subsequent labor shortages have affected the supply of boneless breasts and thighs. Chicken farmers also retrenched sharply in the early days of the pandemic in reaction to the collapse in demand from restaurants, leading to a decrease in overall supply just as the great pandemic takeout boom took off. Production has since recovered from that dip, albeit only barely. (Chicken flu outbreaks this year, which have had a big impact on the egg industry, haven’t affected broiler farms as much.)

Another factor affecting wing prices in particular is the supply of frozen wings in cold storage. It hit its lowest level in almost a decade in spring 2021, but has been close to average this year.

There are enough wings out there for everybody, in other words. So order a few, if you’re not tired of them. Maybe go easy on the Cheetos Flamin’ Hots, though.

More From Other Writers at Bloomberg Opinion:

• Momos Are Taking Over the Dumpling World: Bobby Ghosh

• Burgerville Is the Future of Fast Food: Amanda Little

• America’s Chicken Obsession Is Shifting to Dark Meat: Justin Fox

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Justin Fox is a Bloomberg Opinion columnist covering business. He was the editorial director of Harvard Business Review and wrote for Time, Fortune and American Banker. He is the author of “The Myth of the Rational Market.”

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