It's a shift astute cafe operators could use to their advantage, according to IBISWorld analysts.
The egg farming industry, worth an estimated $659.6 million in 2014-15, is seeing a significant shift towards free-range eggs at all stages of the supply chain.
Over the five years through 2014-15, industry analyst IBISWorld is expecting the production of free-range eggs to grow at an annualised 15.1 per cent, compared with just 1.9 per cent annualised growth in cage eggs. Organic eggs, which also tend to be free-range, have grown at an annualised 48.0 per cent over the five-year period.
The push towards free-range is however not without risks, according to IBISWorld industry expert Brooke Tonkin.
"There are significant costs associated with altering farming methods. Elsewhere along the supply chain, operators need to make the choice between attempting to exploit the higher margins of free-range eggs and taking advantage of the lower input costs of cage eggs."
While there is not yet any binding national criteria for free-range egg classification, the industry is moving closer to a legislated standard.
The state governments have recently agreed to discuss a national standard, and the Federal Court ruled this year that free-range chickens must have access to outdoor areas every day.
IBISWorld expects that these moves will increase consumers' confidence in their free-range purchases, leading to further demand.
Appealing to 'ethical' preferences
Operators of cafes, restaurants and other food-service outlets already tend to operate with tight margins, so for many, the shift to free-range eggs could have significant bottom-line implications.
However, there is an opportunity for food-service operators to use free-range eggs to position their products as premium, while appealing to consumers' ethical preferences.
"Eggs make up only a small portion of the input costs on a typical breakfast, so a shift to free-range will allow savvy operators to increase their prices and recover their added costs – and then some," said IBISWorld industry analyst Stephen Gargano.
It is likely that food-service operators – which, combined, are expected to use 1.0 billion eggs in 2014-15 – will follow supermarkets in heavily advertising their use of free-range eggs, in order to attract customers and justify the increased cost of a Sunday brunch. Major players are leading the charge in this segment too, with McDonalds committing to stop sourcing cage eggs by 2017.
"If more fast-food operators take up the use of free-range eggs, they could set a standard that other food-service players will be under pressure to match," Gargano said.
