As sentiment about the US economy drops to an eight-month low and a stock sell-off continues, meat producers are bucking the trend and consumers continue to stretch their budget for wings and drumsticks.
"Most consumers see protein as essential for a healthy diet, and so they'll prioritize protein over other consumer staples," Tyson Foods ( TSN ) CEO Donnie King told Yahoo Finance in an exclusive interview. "Even in the recessionary times ... we're able to maintain volume and and meet the consumers where they are."
On Monday, Tyson Foods reported Q3 earnings that beat estimates on both the top and bottom lines, with overall volume growing by 1.10%.
King said the low-end consumer has become more price sensitive, with some going to private label, but middle- and higher-income customers have maintained their pricing power.
"You got a more discerning consumer out there," King added, though he said the consumer is not in a "materially different place" than last quarter.
The price of meat has shot up in the past five years. Between June 2019 and June 2024, the cost of chicken per pound has jumped 26% from $1.59 to $2.01. Ground beef prices are up 36% from $3.95 per pound to $5.36.
Tyson Foods raised prices overall 0.6% in Q3, but said price growth is moderating, partially due to stabilizing grain prices making feed costs more affordable. The effect of cheaper grains will continue to trickle through and reflect in chicken, pork, and meat product prices, King said.
"With consensus estimates likely rising and the important Chicken segment doing very well versus expectations, we expect a relatively healthy day for the stock," JPMorgan's Ken Goldman wrote in a note to clients early Monday morning.
Other meat giants have also stayed resilient. Pilgrim's Pride Corporation ( PPC ) is eyeing potential acquisition targets after posting better-than-expected quarterly numbers last Thursday. The chicken producer also beat estimates on both revenue and adjusted earnings per share.
Tyson's stock closed up 2% on Monday and Pilgrim's was up 4%, while the S&P 500 dropped 3%.
On its earnings call, Pilgrim's CEO Fabio Sandri said, "Consumers have relied on chicken fulfilling their everyday center of plate protein needs in a challenging environment."
Retail pricing "has steadily declined since the end of 2022 and reached its lowest level over the past 18 months in June," he added.
But consumers are more cautious about discretionary purchases. With restaurant inflation outpacing grocery inflation — grocery prices were up 1.1% year over year in July compared to a 4.1% increase for food away from home, per the latest CPI data — more Americans may opt to stay in instead.
While Coca-Cola ( KO ) delivered another solid quarter in late July, CEO James Quincey told Yahoo Finance that the company is still seeing the "continuation of, essentially, the lower-income consumers being under pressure."
Quincey also said that consumers are going to restaurant chains less and looking for value meals when they do, or trading down at grocery stores.
PepsiCo ( PEP ) reported mixed earnings last week, including slowing US demand as Brian Sozzi reported. On the company's earnings call, CEO Ramon Laguarta said, "Consumers are making choices, and they can make choices to cook versus buy finished goods or finished products, or they can make a lot of decisions around how they spend their money and how do they feed themselves every day with the lowest budget."
Meanwhile, snack brand Conagra Brands ( CAG ) posted mixed results in its fiscal fourth quarter with volume growth down more than expected at 1.80%.
"The value-seeking behavior we saw in the last year really was across income cohorts," CEO Sean Connolly said on its earnings call, but pointed out its frozen foods segment has performed well as people get tired of preparing meals.
"After the consumer has to cut back for a while, they grow weary of those workaround behaviors, and they come flying back to convenience, which is why the investments we've made in frozen to nudge consumers have materialized and we saw growth in our frozen single-serve meal business in the quarter."
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BrookeDiPalma