Pilgrim's Pride sees opportunities for growth

by Erica Shaffer
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GREELEY, Colo. – Pilgrim’s Pride Corp. plans to grow production of chickens raised without antibiotics to more than 25 percent of the company’s total production by the end of 2018, CEO Bill Lovette said during a conference call with analysts on April 28. The company also intends to produce certified organic chicken.

“We estimate that currently we’re about 10 percent of all ABF production in the US,” Lovette said. “I expect that once we finish that conversion by sometime in 2019 that we’ll be somewhere over 20 percent of the ABF production in the US.

“On organic,” he continued, “this will be our first experience at producing USDA certified organic. When we get the plant completely converted sometime in 2017, we’ll be approximately 20 percent, if not slightly more than the total organic production in the US as well.”

Fabio Sandri, CFO of Pilgrim’s, said the addition of antibiotic-free and organic poultry is a game-changer for Pilgrim’s, which mostly will compete with small companies that lack the scale and distribution capacity of Pilgrim’s.

Lovette concurred, saying … “a large retailer can come to us or a large food service operator can come to us and buy the whole portfolio of their needs as opposed to having to do business with a lot of different companies.”

Yes. That depends on the value or price. If it’s more advantageous for us to buy that raw material on the market and convert it, then that’s what we’ll do which is consistent with what we’re doing now. So as commodity prices decline, if that should be the case, then absolutely, we would buy that raw material on the open market.

Fully cooked chicken is another avenue for growth, Lovette said. In February, Pilgrim’s announced a capital expenditure project of $190 million, about $25 million of which will go toward Pilgrim’s Moorefield, West Virginia, prepared foods facility to enhance existing fully cooked chicken lines and add an additional line to increase production of the Pierce Chicken brand. Lovette said the new line addition will add about 10 percent capacity to the company’s fully cooked production. Lovette added that Pilgrim’s sees continued demand for Pierce brand fully cooked chicken and it’s a very profitable part of the company’s portfolio.

When asked if the growing fully cooked chicken production would mean buying more chicken from external providers versus raising chicken production, Lovette said the strategy would depend on the value or price of chicken.

“If it’s more advantageous for us to buy that raw material on the market and convert it, then that’s what we’ll do which is consistent with what we’re doing now,” he explained. “So as commodity prices decline, if that should be the case, then absolutely, we would buy that raw material on the open market.”

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