The food industry witnessed mixed results during the pandemic period with retail channels experiencing a massive spike in demand and foodservice channels going through a slump. As restrictions began to ease and people started venturing out, it was predicted that the surge in retail demand would slowly peter out. However, this does not exactly seem to be the case.
As predicted by some experts, certain changes in consumer behavior that developed during the pandemic, such as having more meals at home, appear to be sticking, thereby driving a healthy demand within retail. Over the past two weeks, a couple of food companies reported their earnings results. Here are some of the key trends that were visible during their most recent quarters:
Healthy retail demand
Processed food companies saw a huge rise in demand for their products in retail channels during the pandemic due to a rise in at-home food consumption. At the start of this year, this demand was forecast to slow down as restrictions eased. Despite a slight deceleration compared to last year, retail demand remains healthy for the most part as people continue to cook and eat more meals at home.
Tyson Foods (NYSE: TSN) witnessed growth across all its segments in the retail channel, driving an increase of over $300 million in sales during the third quarter of 2021. The company saw strong share growth for its Tyson, Jimmy Dean and Hillshire Farms brands during the period.
Beyond Meat (NASDAQ: BYND) posted a revenue growth of 6.2% in its retail channel during the second quarter of 2021, driven mainly by strength in international markets.
The Kraft Heinz Company’s (NASDAQ: KHC) retail business remained above pre-pandemic levels during the second quarter of 2021. The company saw the continuation of pandemic-inspired food consumption patterns which drove demand for products like Kraft Mac & Cheese, which are easy to prepare. Kraft’s US retail business increased its share to 58% in Q2 from 41% in Q1.
Rebound in foodservice
With the widespread distribution of vaccines and lifting of restrictions, the foodservice industry has witnessed a rebound. Tyson Foods saw volume growth in its foodservice channel as outlets continued to reopen. This helped drive a growth of approx. $1.3 billion in sales within foodservice during Q3.
Beyond Meat saw foodservice revenues jump 218% year-over-year in Q2, driven by reopenings. The company recorded triple-digit growth in both domestic and international markets and it expects to see YoY growth in its foodservice business in the near-term. However Beyond Meat warned that any resurgence in the pandemic could hamper this growth.
Kraft also saw a recovery in its foodservice channel during Q2 and the company managed to grow its foodservice distribution in international markets by almost 50%.
Inflation
A key concern highlighted by most food companies is inflation. The rise in input costs impacted their most recent quarters and this trend is expected to continue in the near term. Even though companies have implemented price increases, in some cases they may not be enough to offset the impact of rising costs.
Tyson increased its prices to offset raw material and supply chain cost inflation. The company saw a 16% improvement in pricing during Q3. For the rest of the year, Tyson expects to face pressure from freight rates, labor and raw material costs as well as grain costs in the Chicken segment.
Kraft has seen a rise in its cost pressures over the past few months but the company believes the level of inflation it is seeing is manageable and does not expect these pressures to hinder its strategic progress going forward. Kraft expects to see its gross cost inflation for 2021 remain in the mid-single digit range across its full cost basket.
Click here to access the full transcripts of the latest earnings calls of these companies