We Expect Chicken's Favourable Production Dynamics to Underpin Inghams' Poultry Demand

We forecast Inghams returning to earnings growth, with top line driven by population growth and some per-capita increases in chicken consumption, aided by process enhancements and further improvements in the feed conversion ratio for chicken. Despite Inghams' dominant market share, and the industry's duopolylike structure, competition in poultry is intense. Poultry is largely commoditised, and Inghams possesses limited opportunity to differentiate its products, leading to our view that the firm lacks a sustainable competitive advantage required to award an economic moat. Further, Inghams' customer base is highly concentrated, with around 60% of its total sales comprising five customers, including supermarket giants Woolworths and Coles, and quick-service restaurant KFC. In our view, the balance of power lies with these key customers.