The world’s second-largest meat processor says it will keep raising its prices.
In its third quarter, which runs to July 3, Tyson Foods hiked up its average price for pork by 39%, beef by 12%, and chicken by 16%, it said Monday.
CEO Donnie King said during an earnings call that the company planned to raise prices for retailers again next month to cope with higher costs – he estimated that “unprecedented inflation” reached 14% in the quarter.
“Costs are hitting us faster than we can get pricing at this point,” King said.
“We will continue to take price to match the nature of the cost that’s coming to us,” he added.
Companies including Procter & Gamble, General Mills, and Coca-Cola have also announced price hikes to offset rising costs, triggering higher prices at both stores and restaurants.
Read more: Why the private equity playbook failed Kraft Heinz
The labor shortage and supply chain chaos are causing product shortages and price hikes across the US, and meat is no different.
King said that Tyson was forced to raise prices in the quarter because of rising costs of animal feed, packaging, and freight. The company is also spending on COVID-19 expenses, and on higher wages during the labor shortage.
In the third quarter alone, chicken feed ingredients cost $270 million more than usual, Stewart Glendinning, the company’s chief financial officer, said. The company also spent around $55 million on COVID-19 expenses, he added.
Tyson is being hit by the labor shortage
This US is currently in the midst of a huge labor shortage that’s causing businesses to cut operating hours, slash production, and raise prices.
“Labor is our single biggest issue we face,” King said. This stemmed largely from the spread of the Delta variant, he said.
“We are more inefficient than we have historically been,” King said. “Essentially it takes us six days to get five days worth of work.”
King said that Tyson had increased wages, created flexible shifts, and added childcare facilities on-site to attract more workers. He added that the company was investing more in automation and technology to eliminate more difficult, hard-to-fill tasks, and shift available workers to “more value-added activities.”
Tyson announced last week that it was mandating COVID-19 vaccines for its entire US workforce by November 1. It said that nearly half of all staff have been vaccinated so far.
Tyson said in its earnings release that there had been strong global demand for meat, which allowed it to sustain the higher prices. The company said that its third-quarter sales were up nearly 25% year-over-year to $12.5 billion, and its net income increased 43% to $753 million.
*story by Business Insider