Maple Leaf Foods Plans Price Increases Amid Rising Costs Despite Sales Growth
Maple Leaf Foods will raise prices in the first quarter of next year to offset inflationary pressures, including an 8% rise in live poultry costs and a 17% increase in fuel surcharges. The company reported third-quarter sales of $1.03 billion and is consolidating its plant-based operations.
Maple Leaf Foods plans to adjust prices for its food products in the first quarter of next year as it navigates what Chief Executive Curtis Frank described as a challenging external environment. The price increases are intended to offset rising inflationary pressures across fuel, feed, freight, packaging, and poultry costs.
During the company’s third-quarter earnings call on Wednesday morning, Frank stated that Maple Leaf is paying 8 per cent more for live poultry compared with the same period last year. Chicken products account for 40 per cent of the company’s overall sales. Additionally, fuel surcharges increased 17 per cent in the last quarter alongside rising costs for labour, packaging, and ingredients. In April, Maple Leaf introduced a fuel surcharge of $0.11 a kilogram on its prepared meats and poultry shipments, which adds as much as $2,200 in additional costs per 20,000-kilogram tractor-trailer of food.
Despite these cost pressures, the company reported strong financial results. Sales increased by 2.4 per cent to $1.03 billion in the third quarter, marking the eighth consecutive quarter of year-over-year growth. Retail and food service sales of poultry grew by 4 per cent. Maple Leaf products are currently found in 92 per cent of households across Canada.
To manage expenses, Maple Leaf announced in mid-September that it would close plant-based meat-processing plants in Seattle and Turners Falls, Mass., to consolidate operations in Indianapolis, Ind. The company is also increasing its reliance on advertising and promotions to manage consumer resistance to price increases.
Looking ahead, Maple Leaf projects its full-year adjusted EBITDA will be around the bottom of its previous outlook range of approximately $520 million to $540 million. The company also reduced its capital allocation range, which will now span from $130 million to $150 million, down from a previous range of $160 million to $180 million.