How to Invest in the Egg Shortage: Vital Farms

This article was written by our contributing writer Dylan Fitzgerald.

Each morning, my girlfriend, Ciara, wakes up and religiously has coffee and eggs. She is what I take great delight in calling an ‘egg inelastic’ person i.e., the price of quality eggs has little to no impact on her buying quality, carefully produced eggs.

While living in the U.S. last year, I realized that there are a lot more Ciaras out there. In short, there are lots of people willing to cough up for things they consume daily, most notably eggs (particularly in produce offering a healthy/sustainable alternative).

I would venture to my local Whole Foods store and watch shoppers grab carton after carton of a colorful 12-pack of eggs. The responsible investor I am, I had to take a look. This is where I first met Vital Farms.

Vital Farms

Vital Farms is a US-based egg producer. Founded in 2007 by Matt O’Hayer, it has grown to become a premium US staple brand. The brand resonates with consumers who seek quality and transparency when it comes to food. They work with over 300 family US farms to produce cage-free, sustainable eggs, and butter with an emphasis on regenerative agricultural practices (minimizing farm inputs and restoring land to its natural state).

Animal welfare and environmental concerns around agriculture have entered the zeitgeist among American consumers. Legislators have taken note. In several states, caged eggs have now been banned.

Most investors will say, ‘Good idea, now show me the numbers’.

Fortunately, the numbers back it up. In 2023, Net Revenue hit 465 million (USD), with 140 million in profits. Currently, their products appear in over 10 million US households. Their main processing plant ‘Egg Central Station’ processes over 6 million eggs daily, supplying 24,000+ retailers across the US.

Their business model is unique in a world of agricultural giants where small farmers are brought into the fold. They attend ‘egg school’ with other local farmers to learn the ropes and the Vital Farms production values. Farmers are given exclusive contracts with transparent, predictable pricing.

Storytelling has become a game changer for brand recognition. Vital farms play their hand excellently with marketing campaigns such as ‘hens behind the lens’ where consumers get to see exactly where their eggs come from. Well-designed packaging, with a consistent social media presence, combine to create a strong foundation for a trustworthy brand.

In terms of its stock performance, Vital Farms (VITL) has shown consistent gains over the past two years. At this point in 2023, the stock was priced at $17. Since then, it has, not without bumps, climbed to $45 today (31/1/25). With an elevated P/E ratio of 39, this stock is expensive by traditional metrics, however, the company has a long runway for growth and an intention to disrupt a wide-reaching consumer staple market.

The Egg Shortage

Two main drivers have pushed VITL higher over the past two years, both of which affect egg prices.

Firstly, avian influenza (bird-flu) outbreaks forced hundreds of US farmers to cull their egg-laying flocks. Government regulation requires any farm where even one bird tests positive to cull the entire flock. Egg supplies have as expected, taken a hit. After the initial October 2024 outbreak, 12% of the US egg-laying hen population has been culled.

As mentioned above, egg consumers are relatively inelastic when it comes to demand (they will buy eggs each week regardless of price).

This is a well-known story of constrained supply and high demand driving up prices.

Secondly, the price of cage-free eggs like those produced by Vital Farms has increased even further. There are a limited number of cage-free egg producers in the US, some of which have been affected by the influenza outbreak, further constricting supply.

Additionally, hens need to eat. On cage-free farms, hens mostly live off the land, eating insects and worms, but they mostly eat grain. Grain is a hen farmer's largest regular cost. Therefore, grain prices impact a farmer’s margins, resulting in higher egg prices.

The Bottom Line

Vital Farms is a well-run company committed to its values of producing quality produce using regenerative agriculture. Increased consumer interest, astute management of headwinds like bird flu and elevated grain prices, and an egg market ripe for disruption pave the way for VITL to perform well over the next decade and beyond

Should you invest $1,000 in Vital Farms right now?

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