Natural casing price hikes hit producers

Premium sausages have been an industry success story over the past few years. Sales in the sector continue to see double-digit growth year-after-year - and certainly show no signs of slowing down.

However, a black cloud is looming over a sector that takes pride in its ingredients. Sausage-makers' reliance on natural or hog casings to give their products a premium edge could see the sector facing some difficult choices in the coming months.

With demand in China high for pork products and production in that country down by up to half, hog casings are starting to run short on the rest of the world's markets.

Jim Brisby, sales and marketing director at sausage producer Cranswick, says the sector is being hit by a double whammy of growing demand in the UK and shortages in the casing sector.

“The premium sausage sector is continuing to grow, with value sales up 19.8% in the last 52 weeks. At the same time, the Chinese market is also growing massively.

"A lot of UK casing is sent to China for washing and it is staying there - so we have a combination of growth of our own market, and product not being available​."

The contraction in the UK herd is simply adding to the sector's woes, he adds.

The situation is hitting the whole market, says Martin Blythe of Martin Blythe Casings. "We're having major problems with hog casings; we've seen the prices rise from around €7 to €12 (£5.50 to £9.45) recently. The main problem is that China has halved its kill, so they're wanting more pork products from elsewhere. In fact, I've just been quoted €16 (£12.60) a bundle."

Blythe says product from the Continent has been a little cheaper, but with everyone beginning to scramble around looking for a good source of casings, prices there are rising too, climbing to around €13 to €14 a bundle.

"Prices are ridiculous,"​ he says, and it's unlikely to change any time soon. "We don't see any light at the end of the tunnel just yet and expect this situation to continue for another six months."

Gordon Wicklow, of wholesale supplier Scobie & Junor, says many in the sector are overwhelmed at the sudden wave of price increases, sausage casings being just one.

"Things just seem to be going up and up. We haven't done an official price rise for six to seven years, but this year we've done 10 already."

Prices Rise Again

Lee Hamilton, sales director at casings manufacturer Devro, says the situation is being closely watched. "We've just been to Foodex Meatex and it was on everyone's lips about the recent trend in hog price increases."

And he is not expecting the situation to alter in the foreseeable future. "We're expecting prices to go up further and we're expecting a stronger reaction in the next eight to 10 weeks when supply really tightens."

Another potential danger for the industry, besides the hike in price, is the possibility that sources will simply dry up altogether, or at least tighten to the point where manufacturers start having to consider an inferior specification on hog casings as an alternative.

Andrew Keeble, who runs premium sausage brand Debbie & Andrew's, says he is starting to see inferior casing being sold into the market.

And Brisby says that while Cranswick is not suffering any quality issues at the moment, he suspects others might not be so lucky.

"Our specification is hand-pulled, not knife-pulled, but there is a limitation on how many hand-pulled suppliers there are out there.

"Prices have doubled and we're now buying consignment-to-consignment as a result. At some point it has got to stop, but we cannot see that happening just yet."

Blythe says that while his company has managed to maintain quality, he is starting to see the tightening effect elsewhere.

"I have noticed some manufacturers have switched to whiskered or knife-pulled product recently,​" he says.

Of course, there is perhaps a simple solution for the sausage sector in the face of its current troubles - a switch to collagen casings. But with considerable investment in the development of the premium sector, are manufacturers willing to gamble with a sector that is seeing such strong growth by fiddling with a successful formula?

Keeble thinks there is an opportunity for collagen, but he says it would be an uphill struggle for the manufacturers to push it through.

"The premium sausage market is led by the buyers at the big retailers as much as by public perception. I don't think consumers put that much importance on what type of casing is used. I don't think they mind.

"The buyers will always say it has to be in natural casing and they do look nicer in the packet. But, from an eating point of view, there are advantages to collagen - it is uniform, and you don't get complaints about chewy casings."

Vince Minchella, from collagen specialist Naturin/Viscofan, agrees the retailers are a big influence: "As with everything, things are driven by the retailer and the growth in the last five to six years in premium sausages, in double-digit figures, has been fuelled by those retailers. They're demanding the natural casings.

"We have customers who used to have little or no use for natural casings and now they use a lot. And until there is pressure from the retailers to change, I cannot see much happening."

Retail View

Tom Harvey, Sainsbury's category manager, echoes those views: "I think we would be quite concerned about moving away from natural casings for premium - we tend to use collagen on our lower-tier products. Natural casing is quite critical in the premium sector."

It would appear, then, that the main problem with collagen is one of perception in the sector. The more uniform look of collagen, with less meat on show, is traditionally associated with the poorer quality, economy ranges of sausages, or mass-manufactured products.

The premium end of the sector, in smart black trays and slick packaging has a more natural, less regimented look, and it is that appearance which buyers are pushing for.

Brisby says: "Premium product just wouldn't look right in collagen." He rules out a shift from natural to collagen for one simple reason. "It isn't an option because it's a different product."

Wicklow agrees: "If products are already selling in natural casing, I cannot see them moving back to collagen. They are two very different products.

"Collagen has improved but I honestly don't see a switch unless quality problems become a major issue on natural casings. At the end of the day, working with naturals has never been easy."

The Collagen Advantage

But not all sausage manufacturers are dismissive of the collagen casing. Keeble points to the fact that his company's best-selling product, the premium Harrogate sausage, is in collagen casing.

"Sales on that are still growing, which suggests that people do not mind collagen casings. From a manufacturing point of view, we'd rather use collagen."

He also points to the fact that another top-end product, Kerry Food's Porkinsons sausage, is also made with collagen casing.

But while Keeble sees the potential for collagen and has experienced the benefits, he still thinks it would be a risk to make a complete switch.

"I think we'll always try and use a natural casing. We're at the top end of the market and if we suddenly switch to collagen completely, I think we'd be in trouble."

However, in the face of the current hog casing market, he rules nothing out: "If the quality on natural casing deteriorated and we couldn't get it, we'd have to look at changing. The evidence we're seeing is that consumers don't mind collagen casings."

Minchella echoes the view on consumers. "We've done a lot of research into consumer perception, and, by and large, they don't know what they're buying. Having said that, they do have eyes and can see the difference between the products in terms of consistency."

He agrees that the collagen sector has been maligned in terms of perception.

"From our point of view, we're playing catch-up with the natural casings industry. We've got this tag of being artificial, despite the fact that collagen casing is a natural product - people still refer to it as artificial, and that's a clear indication of how the market stands."

Hamilton says there is work needed to change people's views: "Collagen is natural; it's made from animal protein. We definitely want to change perceptions in the market and make people aware of the fact it's natural. People see collagen as the lesser product and that's not the case."

Minchella says it is something his company is pushing for: "Traditionally, collagen casings have been associated with economy and value ranges, and high-volume production. But slowly and surely, we're trying to break down those barriers."

He says there is some evidence of that starting to happen in the sector: "If you look at events like Champion of Champions [MTJ's premier sausage competition], people wouldn't have considered entering a collagen sausage, but time moves on and we are now starting to see entries made with collagen. This shows the barriers are coming down, but I'm sure it will still be a long time before a sausage in a collagen casing wins Champion of Champions."

It is not like the product does not have some advantages over its hog casing counterpart either. Keeble says: "From an eating point of view it's better - it's uniform and you don't get complaints about chewy casings."

Minchella agrees there are good points with collagen: "It offers a lot of advantages - it has a more tender bite and uniform yield. Unfortunately, it does not communicate to the consumer that it is premium. They associate that uniform look, all nice and neat, with economy."

However, attitudes are changing, and part of that change has come from innovation and development on the part of the manufacturers. Naturin/Viscofan is certainly pushing for improvements, says Minchella. "I believe collagen products have improved,"​ he says. "We are strongly focused on that and we're not alone. Our competitors in the sector are innovating all the time.

"A key factor holding us back on the development of collagen has been due to the structure of protein - when you apply heat to it, it straightens out.

"We've now come up with an innovation that gets around that and the sausage has a gentle curve when cooked, it just makes it look that little bit less uniform. And we believe that's a major step in delivering a collagen product to market that looks the part."

Pork Alternative

At Devro, Hamilton points to the company's pork-based collagen products as a potential alternative to hog casings. "Most collagen casings are bovine-based, but we've developed a porcine range, and that has seen strong growth. That growth has accelerated in the last few weeks alone. And that's all new business for us."

He says the porcine casing give better clarity, which allows for greater meat show on the sausage, which is proving attractive to manufacturers.

And it is not just the big manufacturers who are starting to show an increasing interest in the collagen offering. Hamilton says the company is seeing a growing demand within the traditional craft butcher sector, an area more commonly associated with hog casings.

"We have a butcher-style range, which has been established for some time now, but in 2007, we saw a noticeable increase in usage, and that grew even stronger towards the second half of the year."

Sales in that sector have grown by around 4%, he says.

Minchella says Naturin/Viscofan is also seeing a rising interest from butchers who are struggling to find the quality they want from hog casings.

Hamilton says the price rises are forcing manufacturers to re-evaluate their options. "There are people considering a change because of the hike in prices. People who would have been firmly using gut casing before are now talking to us," he says.

Minchella agrees that the situation could benefit the collagen market, although he feels both have a place in the sector. "The way prices are going, from an economic point of view, it's perfectly natural to consider collagen, otherwise people won't be able to make sausages, or they won't be at the standard you want."

But regardless of the fact the wider supply situation is providing an opportunity, the collagen sector has to consider its options in the premium market, as Minchella points out. "The economy sausage sector, the traditional area for collagen, is falling, while the premium is in growth - it's natural for the collagen sector to want to move into that area."

Eyes on the Prize

So perhaps the current problems facing the hog casing sector could prove a helpful advantage. Hamilton certainly thinks so: "We were looking for growth in that area anyway, but we're going to capitalise on the current situation. I think hog pricing is going to be high for the foreseeable future and it's going to get worse before it gets better."

However, Blythe is more philosophical: "We saw the same problem in sheep casing not so long ago. Prices went very high, around £9 a bundle, and now it's half that. You cannot have the good times all the time."

So, while the industry remains unsure how long the tightening in the supply of hog casing is likely to last, there remains a window of opportunity for the collagen sector to stamp its mark on an industry that has previously ignored what it has to offer.

Time will tell if that opportunity becomes a reality.



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