Price-Fixing Lawsuits Across Big Meat Companies See Surprising Results

Kristyn Tarpey - Barchart - Mon Jul 11, 2022

Last Week’s Moves

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Welcome to your weekly food & beverage report, where we cover everything you’ll need to know for the week ahead. This week, we’ll explore Chipotle’s new venture fund, dive into price-fixing lawsuits impacting major meat companies, and check in with the state of the drought in the corn belt. Let’s dig in.

After seeing a surge in new purchases, grilling and meat smoking have leveled off, leaving brands off with less-than-ideal financial reports

This April, Chipotle (CMG) launched Cultivate Next, its $50 million venture fund in efforts of finding solutions to challenges facing the restaurant sector. This new investment follows heavy investment from the company in robotics and AI technologies last year, all in efforts to alleviate rail-thin margins brought on by labor shortages and rising food prices. The company is fostering technology from across the globe to try and change the way restaurants run and how customers think about food. Another consideration is the beacon Chipotle’s venture fund creates, especially in a time of dramatic turbulence for the restaurant sector– and investors may be noticing. The brand’s second quarter results will be posted later on July 26.

Mix and match… Chief technology officer Curt Garner noted that Chipotle, inspired by Uber, first took to digitization in 2016 with its app, then quickly built out space in each restaurant so employees don’t need to decide to serve a guest in line versus one who ordered digitally.
Strengths and weaknesses… Generally, Chipotle has seen positive growth numbers since 2016, after the chain had food quality issues. Between 2017 and 2020, Chipotle experienced near double-digit systemwide sales growth. Regardless of strong sales growth, the company’s stock is down over 20% year-to-date.

Lawsuits surrounding big meat companies and price-fixing conspiracy allegations are hearing results; despite mixed success, the Biden administration vows to carry on the fight

Flew the coop… Five executives from Pilgrim’s Pride (PPC) and Claxton Poultry were declared not guilty of conspiring to drive up broiler chicken product prices by a federal jury based in Colorado.The executives include a range of past and current CEOs and former and current vice presidents. The verdict signifies the end of a years-long investigation by the Justice Department of alleged price-fixing among poultry companies, beginning in 2016. The case, then targeting 14 executives, resulted in a mistrial due to deadlocked juries.

History repeats itself?.... In 2021, four Pilgrim’s Pride executives and Koch Foods were criminally charged with a conspiracy to drive up chicken prices by a federal jury.
Not backing down… Despite the not guilty verdict in the five executives’ case, both lawmakers and the Biden administration have vowed to continue to attack price-fixing allegations.

What the cluck… While Pilgrim’s Pride and Claxton Poultry can breathe a sigh of relief, Smithfield Foods hasn’t had the same luck. The meat company has agreed to settle a pork price-fixing lawsuit for $42 million after being brought to court by restaurants and caterers. This comes just one year after Smithfield Foods agreed to settle with a different group of pork buyers for $83 million.

Maintaining innocence… While the company has agreed to pay the settlement, Smithfield Foods is not admitting to any wrongdoing. A federal judge in Minnesota will hold a hearing in October to consider approving Smithfield’s settlement with the plaintiffs, though has already given preliminary approval.