During a year when volatility in the meat and poultry industry is fueled by animal disease outbreaks, extreme weather, a shrinking domestic cattle supply, an unrelenting labor shortage, looming uncertainty about the November presidential election, and ongoing global conflicts, the perspectives of the meat and poultry processing industry’s stakeholders is a topic of interest to many. To identify current and future perceptions of US processing professionals, MEAT+POULTRY commissioned a survey with its longtime research partner, Cypress Research, Kansas City, Mo. The MEAT+POULTRY Industry Outlook and Business Health Survey was a confidential, online survey using a targeted sample of M+P’s subscriber database. The survey results were based on responses from 209 industry professionals within the meat and poultry processing sector, who completed the survey in June and July 2024.
The goals of the survey were to identify trends related to both overall industry outlook and company-level outlook. The survey also identified trends in current and future key business activity metrics among processors, including company operations and production, supply chain status, labor conditions, capital investment plans as well as identifying specific business challenges.
Profile specifics
Forty-two percent of respondents represented meat and poultry processing companies with annual sales of more than $100 million with operations that include slaughtering and processing beef, pork and poultry. Ninety-five percent of the companies’ operations represented processing and further-processing plants, while 43% reported their operations were in the slaughter/fabrication category. Not surprisingly, almost half (48%) of the companies’ facilities were located in the Midwest and Southeast.
The primary job roles of respondents represented chief executive officer/executive managers, operations, sales and marketing, and plant and general management. A majority of those completing the survey (92%) reported that their responses were on behalf of their entire company’s operations or regional operations versus just a single processing plant (8%).
Source: Cypress ResearchOutlook overview
When asked about their general outlook for 2024 and for the year ahead, 44% of respondents said their outlook for this year was “very positive” and for 2025, 46% said their outlook was “very positive.”
That optimism was significantly lower when asked about their outlook for the broader, US meat and poultry industries as well as the global meat and poultry industries in 2024, with only 17% and 13% respectively, reporting “very positive” outlooks. Similar declines were reported when respondents were asked about their outlooks for the upcoming year, with only 19% of them reporting “very positive” outlooks for the US industry in 2025 and 17% responding with “very positive” outlooks for the global meat and poultry industries.
One of the observations from the research team at Cypress relating to this survey was about the difference in respondents’ outlook for their own companies versus the industry at large. Marjorie Hellmer, president of Cypress Research added that based on the survey results, processors were hesitant to extend their optimism beyond their own front doors.
“Within food processing, we feel that the most accurate outlook is always at the company level,” she said.
Outlooks were a bit more bullish for the remainder of 2024 among mid-size and smaller processors (which includes those with reported annual sales of less than $100 million), but it’s still very positive overall. Ninety-three percent of industry professionals representing those companies with annual sales of more than $100 million were “somewhat” or “very positive” about their company’s outlook for this year versus 39% of small and mid-size processors.
Conversely, when looking to the year ahead, many of those same mid-size and smaller company representatives were overwhelmingly positive about 2025, with 88% reporting “somewhat positive” to “very positive” outlooks, about 5% more than that segment’s outlook for 2024.
Given some of the challenges addressed by other questions in the survey, including labor shortages and rising costs of doing business, including energy, Hellmer said this level of positivity is noteworthy and illustrates the resilience of the industry across company sizes. That is not to say there are not some yellow flags in certain parts of the industry, including the ongoing challenges facing the beef industry and how that is affecting the processing sector this year and into the future.
“We have 209 professionals that are saying, ‘We’re generally very positive,’ and we don’t see that every year when we have done this kind of research in the meat industry,” she said. “There have been some tough years when there wasn’t nearly as much positivity.”
Business ops expectations
When asked about their own company’s operations, the survey asked processors to rate various aspects of their 2024 business activity compared to the previous year’s as increasing, steady or decreasing. Categories included: revenue, prices charged to customers; level of production; capital spending; and overall costs, including hourly wages, energy, packaging and ingredient costs.
In terms of revenue in 2024, about half (49%) of industry professionals said they expected revenue to increase this year and just 16% anticipated revenue decreasing. The survey also reflected that nearly 60% reported charging their customers more for their products this year and about 40% responded that they are holding prices steady. Looking ahead to next year, the largest share of respondents (57%) was optimistic, expecting their company’s revenue to increase in 2025 over this year and pricing to increase among fewer companies, at 53%. Forty-five percent of respondents expected prices to remain steady in 2025.
When asked about capital expenditures in 2024, 52% of respondents said their companies would spend more this year compared to 2023. An additional 37% planned to maintain spending at the previous year’s level.
Decreasing capital spending in 2024 was reported for just 10% of respondents. Looking ahead to 2025, processors whose capital expenditures are expected to decrease, included a slightly lower 49% of companies represented while a slightly higher 43% indicated their spending would remain steady in the coming year.
Meanwhile, this year’s production levels were steady for the biggest share of companies (43%) and just over 40% said production levels increased in 2024 versus last year. Notably, 94% of companies reported their production levels would not decrease in 2025, with an even split of respondents expecting to maintain or increase production and only 6% expecting a decrease.
When addressing overall costs in 2024, a majority of industry professionals reported overall increases this year (71% of respondents), led by rising energy costs (73%) followed by packaging costs (72%), hourly wages for employees (71%) and ingredient costs (70%). In 2025, however, fewer companies are expecting higher overall costs (62%), with ingredients being the category expected to decrease the most among 57% of respondents compared to this year (13% fewer than in 2024).
When considering company size in terms of business activity in the coming year, 70% of industry professionals representing larger companies (over $100 million in annual sales) expect company revenues to increase in 2025, compared to 50% of their small and medium-size counterparts (under $100 million in annual sales). Fifty-seven percent of large companies surveyed expect production levels to increase next year compared to 41% of small and mid-size processors. Among those small and mid-size companies, energy costs, packaging costs and hourly wages were the segments expected to increase the most for between 72% and 73% of respondents.
Supply gaps
While there is anecdotal evidence of fewer pandemic-induced disruptions in production due to supply chain problems and labor shortages, the survey indicated that approximately half of the companies surveyed reported disruptions in the past year. The top two reasons were “delays in receiving key inputs” (26% of companies) and labor shortages (25%). Despite those challenges, the average overall capacity among companies participating in the survey was 78%, with large companies at 81% and small and medium-size processors at about 76%.
In light of supply chain challenges, processors were asked how they have responded, with the biggest percentage of them (73%) stating that they have secured additional back-up suppliers and (because multiple answers were accepted for this question) 48% of companies said they increased their inventories of supplies. Thirty-six percent of companies said they supplemented their staff to meet demand. Nearly 30% of industry professionals said they had to redesign or reschedule the production of a specific product line due to supply chain issues and an equal proportion reassessed their company’s entire supply chain.
Whether supply chain issues are based on economic challenges, which was the case in 2008-2009, or logistical bottlenecks, which were common during the pandemic, Hellmer said the survey supports the argument that many of the companies that survived those trials have also been able to thrive since then.
“If companies didn’t fold [during those challenges], they got smarter and they started streamlining and were better able to adjust to very difficult circumstances,” she said. “And for them, this has made their businesses even tighter, more flexible and more responsive to external disruptions.”
Source: Cypress ResearchLabor pains
It’s no secret that hiring and retaining employees has been a longtime thorn in the side of processors and that challenge continues to linger, based on the survey. When asked, “Does your company have unfilled hourly job positions for which you are struggling to find qualified candidates,” well over half (56%) of the respondents answered “yes.” Nearly 60% of representatives of small and medium-size processing companies responded affirmatively to that question.
In terms of the impact the labor shortage has had on meat and poultry processors, it is evident that many have lost business or are unable to grow due to the circumstances, which is supported by the survey responses. For example, nearly one-fourth of processors said they have not been able to commit to new business and have lost revenue opportunities as the result of workforce shortages. And, just to maintain current operations, 63% of respondents in the survey said, “We have had to increase our compensation significantly to remain competitive in the local labor market.” The labor shortage impact has also forced 45% of respondents to require existing employees to work more hours in an effort to meet their production demands. Other impacts included adjusting job requirements for candidates (according to 35% of respondents) and disrupting the timeliness of production (28%). When asked: “How is your company addressing the industry skills shortage,” the top two responses from processors were to offer higher wages (70% of respondents) and increase automation (52%).
Investing with intention
While the labor issue looms, processors continue planning for the future, which includes capital investments. With 83% of respondents planning for increased or steady spending in 2024 versus the previous year, the proportion earmarking dollars for equipment investments in 2025 included 81% of respondents planning increased or steady spending. This was just slightly lower than 84% of processors whose spending was steady or increased in 2024 versus the prior year.
The top three categories of capital spending planned for 2025, according to the survey, were maintenance and spare parts (55% of respondents); equipment improvements/automation (52%); and upgrades to existing facilities (38%).
In terms of what processors plan to accomplish with their capital spending, the most important goals according to survey respondents included: improving product quality and consistency (78% ranked as important or extremely important); improving food safety accuracy (68%); improving processing capability/flexibility (66%); and increasing capacity for existing products (58%).
Headwinds
The survey also provided a snapshot of challenges facing processors in the next 12-18 months. When asked to rank those areas of their businesses that posed the most significant challenge, recruiting and retaining workers was the leading issue among 44% of respondents with labor costs a close second, at 42%. Another HR-related issue, rising health care and insurance costs, at 40%, rounded out the top three. Not surprisingly, the next level of topics posing significant challenges for about one-quarter of respondents included: strength of the domestic economy; need for more automation; logistics costs; trade concerns; and regulatory concerns. Among a list of 16 potential areas of concern, those topics that respondents ranked as least challenging included food safety and changing consumer preferences (44% of respondents did not consider either to be a challenge).
