Detailed Narrative
U.S. Market Dynamics and Strategic Investments
U.S. demand for key customer retail trade pack remained strong in fresh and prepared foods grew. However, sales and profitability were impacted by significantly lower jumbo commodity cutout and daily small bird values. Margins also suffered from planned downtime for upgrades and winter storms. The company is making significant headway in projects to reduce volatility, enhance margins, and drive sales of its differentiated portfolio, including plant layout changes and equipment improvements in Big Bird operations to increase dark meat deboning and portioning capabilities.
European Performance and Consumer Trends
Europe's diversified portfolio maintained steady sales and margins compared to last year, driven by changing consumer preferences towards value offerings in poultry and fresh/frozen meals. Back-office integration and network optimization efforts continue to improve productivity. While poultry and meal offerings resonated, bacon and sausage categories declined due to intensified promotional activity and a shift to private label offerings, particularly impacting the Richmond brand.
Mexico Market Conditions and Expansion
Mexico Fresh sales remained steady, and breaded sales increased double digits. However, margins were compressed by excess production in the live commodity market and increased imports. The company's projects to diversify its footprint in fresh to different regions and increase its presence in prepared foods remain on track, aiming to unlock additional sales growth and diversify profitability. Despite volatility, the company expects supply and demand to balance in the growing Mexican economy.
Protein Supply Outlook and Consumer Sentiment
USDA expects chicken production to increase 2% for 2026, primarily in the first half, driven by increased headcount, improved live performance, and higher average live weights. Minor increases are anticipated in beef and limited growth in pork, leading to a 1.6% rise in net protein availability. U.S. consumer sentiment declined to a 3-month low due to inflation and higher energy prices, driving demand for value-oriented offerings like chicken, which maintains a compelling value advantage over other proteins.
Just BARE Growth and Prepared Foods Expansion
The Prepared Foods segment saw accelerated growth, achieving its highest retail volume in any quarter. Just BARE led this growth, with retail sales rising nearly 40% year-over-year due to increased distribution and improved velocity. The construction of a new prepared foods facility in Walker County, Georgia, remains on schedule to support strong demand, with co-packers currently supplementing production. The brand recently surpassed $1 billion in sales over the last five years.
Sustainability Achievements and Operational Excellence
Pilgrim's Pride has surpassed its 2025 reduction targets for Scope 1 and 2 emissions intensity, set at its sustainable linked bonds. This achievement reflects the team's focus on leveraging sustainability for operational efficiency. The company continues to drive operational excellence, proactively managing cost headwinds in freight, packaging, and other key inputs through productivity initiatives and procurement actions, while maintaining disciplined capital allocation.