👉 Background: Inghams is Australia’s largest chicken processor founded by Walter Ingham back in 1918. It now has over 286 facilities across Australia and supplies chicken to supermarkets, restaurants and fast-food chains across Australia and New Zealand.

‍👉 What happened: Inghams saw its share plunge 20% in a single day last week ($260 million in value) after their FY25 numbers were well undercooked. Inghams warned of a revenue fall of 1.5% for FY25, while its net profit was down 10%.

‍👉 What else: The main reason was Woolies (aka its biggest customer) decided to diversify to other suppliers, which meant Inghams had too many chickens and not enough buyers. These excess chickens were dumped into wholesale markets… and this really hurt their margins.

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‍What's the key learning?

‍💡Customer concentration risk occurs when a company relies heavily on one or a few customers for the bulk of its revenue. It leaves them vulnerable if those customers change contracts, renegotiate terms, or just cut volumes.

💡While Woolworths is still Inghams' biggest customer, cutting volumes has hurt their sales and margins and share price, because a high customer concentration can often be a signal of risk for an investor… for these very circumstances.

💡Inghams ain’t the only ASX-listed company with customer concentration risk. Remember Appen, the ASX-listed tech company, was heavily reliant on a few major clients, like Google. In 2024, Appen warned of a terminated contract from Google… and its share price plummeted 40%. It’s a reminder that companies with high concentration of revenue from a single source, are at risk… at any moment.