Summary:
- Hormel Foods experienced higher prices for pork and beef in fiscal year 2025, with turkey supplies limited by the avian flu, according to interim CFO and Controller Paul Kuehneman during a Dec. 4 earnings call.
- Cost inflation for pork bellies, pork cutout, and pork trim increased by 25%, 10%, and 20% respectively in the year. Beef prices also saw significant rises throughout the year, Kuehneman informed investors.
- “As we previously mentioned, we implemented pricing adjustments at various points in fiscal 2025,” he explained. “However, due to the timing of certain cost increases, we were unable to completely offset the margin impacts within the fiscal year.”
Insight:
Hormel utilized its multiyear Transform and Modernization initiative to mitigate some margin pressure in fiscal 2025, which ended on Oct. 26, as per Kuehneman. The global branded food company launched the initiative at the conclusion of fiscal 2023, focusing on transforming the supply chain and streamlining portfolio complexity. This effort has resulted in increased distribution capacity and optimized manufacturing operations.
In fiscal 2026, Hormel anticipates the initiative to continue offsetting inflationary pressures and aiding margin growth, interim CEO and Director Jeffrey Ettinger stated. However, the company will no longer separately report savings from the program.
“We believe its financial benefits will be integrated into supporting our enhanced marketing initiatives, countering ongoing inflationary pressures, and enabling margin expansion,” Ettinger expressed.
Beef expenses are expected to remain high and present challenges throughout fiscal 2026, while pork input costs are predicted to decrease from fiscal 2025 but stay above the five-year average, as mentioned during the call. Additionally, turkey supplies are forecasted to remain limited through the first half of 2026.
Tyson Foods also faced supply constraints in its fiscal 2025. The company relied on value-added products and operational efficiencies across production facilities to navigate reduced hog numbers and record-low cattle supplies. The decrease in cattle availability is attributed to drought conditions, cattle producers retaining heifers to rebuild herds, and the resurgence of the New World screwworm, a flesh-eating pest in Mexico.