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Pilgrim's Pride (PPC) Firm on Solid Europe Unit, Capacity Growth

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Despite tough market conditions stemming from the coronavirus pandemic, Pilgrim's Pride Corporation (PPC - Free Report) continues to stay afloat on the back of its well-chalked strategic endeavors. Moreover, this well known fresh and frozen chicken products company is gaining from sturdy European operations as well as efforts to expand capacity for key products. Let’s delve deeper.

Strength in European Operations

Pilgrim's Pride’s European business has been performing well. During the fourth quarter of 2020, net sales from European operations rose 4.1% year over year to $849.2 million. Effective operational strategies, strong pork exports and robust domestic demand have been contributing to the company’s performance in the region. In fact, management expects that improved operational efficiencies, investments made in automation, focus on higher yields and better management of input costs will continue to favor results in the region. Prior to this, European operations surged 63.4% to $845.7 million during the third quarter due to better operational efficiencies and robust retail demand among others.

Strategic Efforts to Boost Offerings

Pilgrim's Pride’s customer centric approach has propelled it to come up with unique offerings that provide competitive advantages. In fact, the company’s focus on key customers helps it to refine portfolio and create competitive advantages over its peers, especially amid the coronavirus-led disruptions. In fourth-quarter 2020 earnings call, management announced a number of projects in 2020 to further support growth of its key customers. In this regard, the company is doubling the case-ready capacity in its Cold Spring, Minnesota plant. Also, Pilgrim's Pride is increasing the mix of more stable margin case-ready items. Moreover, the company is expanding the manufacturing of differentiated higher attribute to Just BARE brand items by 20%. It is also converting a commoditized large bird deboning plant to effectively support demand. We note that Sanderson Farms, Inc. (SAFM - Free Report) , also engaged in the production of fresh and frozen poultry products, is undertaking prudent measures to expand capacity.

Coming back to Pilgrim's Pride, the company also consistently strives to strengthen its portfolio through innovations. In this respect, the company has been expanding in the fresh food offerings space. Further, it is on track to expand gluten-free products. Also, the company has been increasing its product mix for organic category, including No-Antibiotics-Ever products, to cater customers' evolving tastes. We note that other meat companies such as Hormel Foods Corporation (HRL - Free Report) and Tyson Foods Inc. (TSN - Free Report) have also been expanding organic offerings and have especially been exploring growth opportunities in plant-based meat alternatives.

Wrapping Up

Pilgrim’s Pride has been witnessing sluggishness in its U.S operations for a while now. In fourth-quarter earnings call, management stated that although demand from industrial foodservice customers in the region was stable it was still below year-ago period’s level. The company also stated that it does not anticipate volumes to return to earlier levels till the population is more widely vaccinated.

Nevertheless, we expect the company to keep gaining from the favorable market conditions in Europe. Also, the company’s well-chalked strategies for capacity expansion have been yielding. Moreover, the company is steadily augmenting marketing support of its brands, as they expand and enter new regions. It also resorts to frequent supply chain improvements to enhance efficiency and reduce costs. Such upsides are likely to keep the company poised for growth in the forthcoming periods.

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