Dive Brief:
- Hormel Foods faced higher transportation costs due to a challenging freight environment characterized by tighter capacity, executives told analysts during a Q1 earnings call on Feb. 26.
- The capacity crunch was driven by severe winter weather and industry dynamics, Paul Kuehneman, interim CFO and controller, said in the call. Coinciding with the end of the quarter, from Jan. 20-26, Winter Storm Fern led to a 55% week-over-week decrease in shipment volumes across the North American freight network, according to FourKites.
- “Spot rates began to increase as there were severe winter weather events and driver availability did tighten. These pressures have continued in early quarter two,” Kuehneman said.
Dive Insight:
Hormel Foods saw unexpected increases in freight and logistics costs as the global food brand continues to grapple with elevated pork and beef prices.
“As expected, commodity input costs, mainly for beef, pork trim and nuts, were a headwind in the first quarter. For context, beef remained a significant inflationary pressure across the industry and pork trim increased 12% compared to last year,” Kuehneman said.
The company has been working to offset higher commodity costs stemming from inflationary pressures over the last year.
In 2025, Hormel leaned on its Transform and Modernization initiative to ease margin pressure. The initiative, which targets supply chain transformation and portfolio simplification, has increased the company’s distribution capacity and manufacturing footprint optimization.
Hormel has also increased prices to combat cost pressures, with a first wave landing in Q1. The food manufacturer expects to further benefit from a second wave of retail pricing changes implemented at the start of fiscal Q2, according to interim CEO and director Jeffrey Ettinger.
