- Tyson saw double-digit increases in profits and sales in the last quarter, with its operating income up 40%, according to its first-quarter earnings report this week. Sales rose 24% year over year. After Tyson released its latest financials, its shares shot up 12% to $99.20, an all-time high, CNBC reported.
- This growth came as the company passed on higher costs from labor, transportation, feed and more, with its average sales price increasing 19.6%, versus the same period the previous year, CEO Donnie King shared during the company's earnings call.
- Tyson's higher profits in the face of skyrocketing meat prices is likely to draw more scrutiny from the Biden administration, which has criticized the industry for its lack of competition, a dynamic it claims has resulted in higher costs for consumers.
Meat prices overall have increased 13% in the past month, according to NielsenIQ data cited by Forbes. But even as meat prices rise, thanks in part to supply chain issues and higher manufacturing costs, demand continues to grow. Tyson's latest earnings report clearly demonstrates this dynamic.
Input costs for the company have increased significantly, according to Tyson. Labor costs have risen 20% this year, with grain is up 29% and live cattle costs up 22%, King shared during the earnings call. The company spent $185 million in additional animal feed costs, while freight costs are up 32%, according to Tyson.
Meanwhile, demand for many of Tyson's meat products continues to rise. The chicken segment in particular resulted in 37% higher sales year-over-year. King pointed to the success of Tyson's value-added chicken, which has gotten a greater focus and investment from the company.
King said that demand for its products is so high that it has outpaced its ability to supply them. This, along with higher input costs, labor shortages and capacity constraints, have led to higher prices.
“We're not asking customers or the consumer ultimately to pay for our inefficiencies. We're asking them to pay for inflation,” King said during the earnings call. “And the rest of what we do is we try to find ways to be more productive, to lower cost and increase throughputs and so forth.”
In the earnings call, King noted Tyson's investments in automation to combat labor shortages, which has allowed the company to use technology to fill its hardest roles in the meatpacking plants. In Tyson's productivity plan unveiled in December, the company announced it would invest $1.3 billion over the next three years in new automation capabilities.
Despite Tyson's explanations behind its price increases, it is unlikely to satisfy the Biden Administration. In January, the president himself criticized the four biggest producers of chicken, beef and poultry for their market domination, which he said is driving up prices and hurting consumers.
In a column, financial analyst Jamie Powell of The Financial Times called the company’s good fortune a “reminder that in an economy where both wage growth and supply chain bottlenecks are driving inflation, businesses that sell things that people want cannot only deal with the higher costs, but thrive from them.”
The news of Tyson's high profits comes as the meat industry continues to settle a series of lawsuits that have accused different players of price fixing. Last week, JBS became the first meatpacker to reach a settlement with grocers and wholesalers in antitrust litigation that accused it, along with Tyson, Cargill and National Beef, of colluding to suppress cattle slaughter amounts in order to increase beef prices. The Brazilian meat giant agreed to pay $52.5 million, but did not admit to any wrongdoing.