Going to the grocery store has become a painful experience for most consumers. But for food companies, soaring food prices can mean sky-high profits.
Tyson Foods, the biggest U.S. meatpacker by sales, says its quarterly earnings topped expectations, prompting the company to raise its outlook for the year.
But Tyson doesn’t want anyone to mutter “price gouging” while searching for bargains at the supermarket meat department.
The Arkansas-based company insists its higher prices are merely a reflection of higher production costs.
“We do not ask the customer to pay for our inefficiencies,” Tyson Chief Executive Donnie King told reporters. “We are asking customers to pay for inflation we see throughout the supply chain.”
For that reason, the company says, its average beef price rose by 24% over the last three months. Chicken prices were up by 14%, while pork was 11% pricier.
Here’s the thing, though: If Tyson’s higher prices are solely offsetting higher manufacturing costs, its profit margin shouldn’t be rising significantly. It should be a wash, more or less.
But the company’s quarterly profit jumped to $829 million from $476 million a year earlier. That’s almost twice as much profit.
Meatpackers have come under scrutiny from the White House and Congress over high prices. But it’s very difficult to prove price gouging.
All we know for sure is that Tyson, for one, is doing just fine, and expects that to remain the case throughout 2022.
And on a day when the Dow fell 654 points and most stocks got braised, Tyson’s shares were up 2%.