Dive Brief:
- Pilgrim's Pride is looking to expand its global presence through acquisitions as lower feed costs and surging consumer demand push profits through the roof.
- The JBS-owned chicken giant is considering portfolio additions that would enhance chicken operations, support growth in the prepared foods business or help the company expand its presence in Mexico and other countries outside the U.S.
- Consumers worried about inflation are clamoring for more chicken as an affordable alternative to red meat, executives said. Pilgrim's reported $4.6 billion in net revenue for the second quarter, with profits skyrocketing 164% over last year.
Dive Insight:
Flush with cash, Pilgrim's is ready to capitalize on exploding demand for chicken with new products and a more diverse portfolio that can better match consumer taste trends.
The company, which reported $666 million in adjusted profits for the second quarter, has seen rising demand from fast-food restaurants, delis and grocery stores. Consumer appetites for frozen chicken cuts have dropped as shoppers gravitate toward nuggets or other value-added frozen products that promise big flavors or cut down on cooking time.
In response, Pilgrim's is preparing to launch new products and innovations to spice up its current offerings, betting that the value-added segment can provide more stable margins compared to its commodities business. The company this summer launched “loaded chicken nuggets” with flavors such as ranch and cheesy jalapeno.
"I think what we've been seeing over the last year is that the value-added, prepared chicken category has been, let's say boring," Fabio Sandri told investors on an earnings call Thursday. "And I think we're trying to excite the category with new and innovative products."
Pilgrim's also reported record revenue in Mexico, where it aims to grow its presence "as a food company," also in part through the value-added sector. The company is in the midst of constructing a new hatchery, feed mill and broiler farms in Mexico's Merida region.
New acquisitions and investments in operational efficiencies could help Pilgrim's as it expects chicken supply to tighten in the next few months. The company has struggled with hatchability, reporting increased mortality rates among flocks.
Hatchability issues have become a growing problem for the broiler industry, which is already reeling from the effects of a major bird flu outbreak. While improved bird genetics has allowed hens to lay more eggs, that's been offset by higher mortality rates.
"We are seeing a lower number of birds reaching our plants," said Sandri, noting that the issue has kept production levels roughly flat.
