Inghams Is Effectively Reallocating Lower Demand From Woolworths

We forecast Inghams' top-line growth to be 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 high concentration, competition in poultry is intense. Poultry is largely commoditized, and Inghams possesses limited opportunity to differentiate its products, leading to our view that the firm lacks a long-lasting competitive advantage required to award an economic moat. Further, Inghams' customer base is highly concentrated, with around 60% of sales coming from five customers, including supermarket giants Woolworths and Coles and quick-service restaurant KFC. In our view, the balance of power lies firmly with these key customers.