Pilgrim’s Pride Short on Workers Uses Robots to Meet Demand

(Bloomberg) -- Pilgrim’s Pride Corp. is seeing a welcome rebound in chicken demand as more restaurants reopen, but a shortage of workers is hurting profit potential and spurring the No. 2 U.S. poultry producer to turn more to robots.

The Colorado-based company, a unit of Brazilian meat giant JBS SA, said it expects to invest more than $100 million over the next year in automation. Such efforts already led to the reduction of 2,200 positions over the last year, and there could be further cuts of as many as 5,600, Chief Executive Officer Fabio Sandri told analysts on Thursday.

The squeeze hits as vaccination rates accelerate and restaurants across the U.S. see a surge in revenue with more people dining outside the home. The labor predicament underscores shortages noted by the Federal Reserve, which said in its Beige Book report earlier this month that hiring remained a widespread challenge, particularly for low-wage and hourly workers, putting downward pressure on job growth.

Labor is the biggest dilemma right now for Pilgrim’s Pride and is also affecting the broader industry, said Sandri. The company is investing an additional $40 million this year to retain workers and attract new ones, he said.

Tighter Market

“The labor market today seems tighter than the one that we had when we were in full-employment mode,” Sandri said on an earnings conference call. He pointed to extra federal aid to unemployed Americans as one of the reasons behind the shortfall. “Today we are staffed less than we were even before the pandemic.”

Shares of the Colorado-based company fell as much as 5.6%, the most since mid February, to $23.30.

Pilgrim’s Pride had about 30,900 employees in the U.S. as of December. The prospects of fewer positions follows upheaval throughout the industry due to the pandemic.

Thousands of meat-plant workers across the country have been infected with Covid-19 and hundreds have died as the disease spread through cold and crowded factories. Disruptions were so vast that many plants last year were forced to close temporarily, resulting in shortages of meat.

Pilgrim’s Pride is considering “all options” to deal with the current labor crunch, Sandri said.

Fed Chair Jerome Powell was dismissive of anecdotes of labor shortages this week, explaining it mostly as an allocation problem, while also noting that millions of workers thrown out of employment during the pandemic are still on the sidelines.

The labor tightness, combined with surging sales of chicken, had poultry supplies running thin at some restaurants.

Rising orders from restaurants is good news for Pilgrim’s and other poultry producers that last year switched to focusing on smaller birds to satisfy grocery-store demand. Now, prices are rising rapidly for the process of deboning the big chickens, boosting first-quarter profit above expectations.

Earnings Insights

• Adjusted earnings per share of 42 cents topped consensus average estimate for 35 cents and the year-earlier performance of 12 cents.
• Net sales rose 6.5% to $3.27 billion, beating the forecast for $3.24 billion.
• European operations continue to see “operational improvements, offsetting high feed costs, not yet reflected in prices, lower year-over-year food service volume due to lockdowns, and Covid-19 mitigation costs.”
• Mexico “maintained the strength from the second half” of last year, aided by improved overall economic conditions.

Get More

• Click here for the earnings statement
• The Colorado-based company earlier hosted a conference call; listen to replay here

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