Food companies are getting smacked by egg costs
J&J Snack Foods, probably best known for making the Icee and Slush Puppie brands, also distribute products that include eggs, such as churros and cookies.
According to CEO Gerald Shreiber, the rising egg prices could cost his company as much as $10 million a year. That's a big deal for a company generated just $920 million in sales and $72 million in profits in 2014.
Egg prices have risen because of an outbreak of avian flu among egg-laying chickens, which has killed off at least 48 million birds and caused a serious supply shortage.
The price of eggs increased 84.5% from May to June, according to the Bureau of Labor Statistics. That's the highest month-to-month jump since the government started keeping records in 1937. Quartz's David Yanofsky observed that the price of an egg on a per-grams-of-protein basis is higher than chicken breasts for the first time.
Companies from Panda Express to Whataburger have had to make adjustments because of the increase.
While these companies adjusted their menus, Shreiber helped lay out one example of just how bad the financial effects can be for food providers.
"Operating income and food service in this quarter was impacted by about $800,000 due to higher egg cost, which were not recovered through selling price increases and generally higher manufacturing cost in part due to start-up inefficiencies as we expand our manufacturing capabilities," said Shreiber in an earnings call Tuesday.
He said the company was paying about $0.70 a pound for liquid eggs before the spike, and now the price is about $2.30, which will have a significant effect. "And the long run over the next year, it may have as much as a $9 million or $10 million impact in cost," Shreiber said.
He added that the company plans to recoup some of the effect by increasing prices for food service customers and consumers.
This is not necessarily limited to J & J. In its earnings call Wednesday, Panera Bread also mentioned that egg prices were affecting food prices, but the larger size and more diverse offerings of the company helped to blunt the impact.
According to the US Department of Agriculture, prices dipped in June and early July but are beginning to climb again. So these inflated prices on eggs and other food products may be the norm for a while.
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