Chicken shortage sends prices soaring
Zenput CEO Vlad Rikhter joined Yahoo Finance Live to break down how the chicken shortage is having an impact on restaurants.
ADAM SHAPIRO: So the team here at Yahoo Finance Live this afternoon was talking about the chicken shortage and the prices going up. And everyone seems to be saying, eat more turkey. I'm not sure that's an option. Let's talk about chicken. Vlad Rikhter is the CEO from Zenput. He's been here before. And you've been talking to the restaurants because you service-- you provide services to I think it's like 50,000 different fast food joints nationwide. What are they telling you? Why is there a shortage of chicken?
VLAD RIKHTER: Thanks for having us on here. So yeah, the shortage of chicken is actually starting all the way at the supplier level. Right, we're-- it started back about a year ago when we shut down some of the facilities initially during COVID. And then there were COVID outbreaks at some of these places that required them to pull back on-- on what they were producing.
And I think you couple that today with-- we've seen this already-- with some of the benefits from the government that are coming out where, you know, employees are choosing to stay home a little bit and taking the unemployment benefits from the government rather than go back to work and this trickles down all the way from the supplier side down to the restaurant, right. And so that combination, with a lot of very tasty meals coming out from some of our customers like, you know, Popeye's created a phenomenal chicken sandwich, and the last couple of years it's taken off. The American consumer has been consuming more chicken recently. So you've got an increased demand of chicken products, and you've got less hands on deck that can turn around and put the-- and put the food out to-- to restaurants. It creates a bit of a havoc.
And so we're up pretty significantly on chicken prices, and there's a shortage happening across the board right now.
ADAM SHAPIRO: Right.
- Vlad, any idea how much of this is being passed down to consumers at this point?
VLAD RIKHTER: From a price perspective?
VLAD RIKHTER: Yeah, I think we're going to see-- from-- at least from what we're hearing from our customers, is that inevitably there's going to be inflation and price increases coming down the pipe, right. Chicken prices that have historically been roughly about $1.30 a pound for a lot of our customer base, but they're starting to see prices that are two-- two-- two-- two-- $2.20 a pound instead, right. So you're seeing a pretty big cut into potentially the profit margin these places, not to mention they've got increased labor costs as well, right? $15 minimum wage, not a lot of-- not a lot of folks that are currently in the market looking for new jobs, and this is putting immense pressure on these places, right?
So we hear this-- we hear this pretty regularly from our customer base, whether they're in the restaurant space, whether they're in grocery, whether they're in convenience-- they're struggling to do whatever they can to make sure that when an employee comes into work their job is easier, things are a little bit more automated, and they can get through the day without having to-- to make sure that they can do the minimum that they need to for, you know, food safety perspective and making sure the consumer is happy when they're there.
ADAM SHAPIRO: You know, I'm thinking of the old Chick-fil-A ad that says, eat more beef, but again, not an option. But this is as you said, also because of a labor shortage, and it's not just restaurants. 7-Eleven-- I mean, before we came into the stream this afternoon, there was news that the 7-Eleven franchise organization that represents the franchise owners is asking 7-Eleven permission to close at 1:00 AM and not go 24 hours because they can't find enough people to staff the stores. What do you think of this?
VLAD RIKHTER: Yeah, so we've heard and seen the same. You know, starting last year, they started to shut some of these down because during shelter in place in many environments there was no need to be opened in the middle of the night. But we hear this on a regular basis. They can't support the location, right. And if you can't support a location with enough labor hours that are there, enough people that can be working there, it becomes difficult to stay open, right? And people are getting back out to buy-- to buy products and are going back out and shopping, but it's not necessarily in such droves that it makes sense to continue to try to stay open.
So we're seeing this across the board. I don't know when we get out of this. I'm hoping towards the end of the summer, but the quote that we've heard from a lot of customers is that they feel like they're in a new pandemic now. The shortage on the supply-- on the labor side and the supply of certain products is causing-- is causing them a lot of strife, right. So imagine in June, July when we're all back out traveling we're trying to go-- you know, we're tired of cooking at home. We want to eat out a little bit more, and there's nobody there to serve us, right? So it's going to cause for some interesting pain over the summer because there's-- there's a lot of intent-- or pent up demand that consumers have in terms of-- in terms of going out there and shopping and having fun again.
ADAM SHAPIRO: Vlad Richter, CEO from Zenput. Thank you for joining us here on Yahoo Finance Live.