Jennie-O Turkey Store profits decline 45 percent

Jennie-O Turkey Store saw its profit decline 45 percent for the second quarter of fiscal year 2019, as the company faced the lingering impact of two product recalls and start-up challenges as it upgraded a processing plant.

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(Courtesy Hormel Foods)
(Courtesy Hormel Foods)

Jennie-O Turkey Store saw its profit decline 45 percent for the second quarter of fiscal year 2019, as the company faced the lingering impact of two product recalls and start-up challenges as it upgraded a processing plant.

Parent company Hormel Foods reported its Jennie-O Turkey Store segment achieved a segment profit of $17.8 million for the quarter, while its net sales were up a half percent on a year-over-year basis to $305.3 million. Volume was up 2 percent for the quarter.

Sales improved in foodservice during the quarter, as did sales of whole birds. However, retail sales declined as a result of recalls, Hormel Foods CEO James Snee said in the quarterly earnings call on May 23.

Recalls and effort to rebound

In late 2018, Jennie-O Turkey Store issued two recalls related to possible Salmonella Reading contamination in raw ground turkey products. The first was issued in November and involved nearly 91,400 pounds of products. The second recall was issued in December and involved more than 164,000 pounds of products.

Despite product removal from stores and consumer apprehension due to the recalls, Snee is confident the brand will rebound.

“Throughout the recall event, we have maintained a close watch on key brand health metrics and are pleased to report all measures show the Jennie-O brand is strong. Starting in the third quarter, we will reactivate promotional activity and advertising in order to gain back our loss distribution,” Snee said.

He also stressed that the company is taking a leadership role in the turkey industry in battling the incidence of Salmonella.

“We continue to work with the turkey industry on the issue of Salmonella. Our efforts across the entire supply chain have helped decreased levels of salmonella in our facilities,” said Snee. “We have also maintained our leadership role of educating consumers on how to safely handle and prepare raw turkey.”

Plant renovation

The company recently invested heavily to automate its whole bird facility in Melrose, Minnesota. With the renovations, the plant “is now the most automated production facility we own, and certain automation components are new to Hormel Foods and the industry,” Snee explained.

Within one week, the facility was switched from a “highly manual plant to an automated plant,” Snee said.

However, Snee acknowledged, “the startup was more difficult than anticipated,” as it took longer than expected for the plant to reach full speed. The extremely cold weather during the quarter compounded the problem, he added.

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