JBS cyberattack could put pressure on restaurant margins, analysts say

JBS cyberattack could put pressure on restaurant margins, analysts say

A worker walks past a mural outside the JBS SA pork processing plant in Louisville, Kentucky, the United States, Friday, June 5, 2020.

Luc Sharrett | Bloomberg | Getty Images

the cyberattack on JBS, the world’s largest meat packer, could cause problems for restaurants if the situation is not resolved quickly, analysts say.

On Tuesday, the Brazilian company said in a statement that it had made “significant progress” in resolving the ransomware attack that impacted operations in North America and Australia. JBS expects the vast majority of its factories to be back on Wednesday. He initially disclosed the attack on Monday.

In the meantime, beef prices have gone up. The US Department of Agriculture reported that prime cuts of beef prices rose 1.1% to $ 334.56 per 100 pounds on Tuesday. JBS accounts for about 23% of total livestock capacity in the United States, according to the Steiner Consulting Group.

BMO Capital Markets analyst Andrew Strelzik wrote in a note Tuesday that he expects the pricing environment to return to normal once factories fully resume production. Most large restaurant chains have contracts with their main suppliers to protect them from short-term hazards, like the JBS attack, according to Strelzik.

“We don’t anticipate significant margin implications for restaurants assuming a relatively quick resolution,” he said.

A prolonged impact on JBS’s operations could have bigger consequences for restaurants that serve beef, including shortages or more sustained inflation.

Truist analyst Jake Bartlett likened the situation to a fire in a Tyson Foods plant in 2019, which impacted 5-6% of the U.S. supply and pushed beef prices up the following month.

“The closure of the JBS plant has an impact on a larger part of the supply, but the supply disruption is likely for a much shorter period (the Holcomb plant reopened in about 5 months) “Bartlett wrote. “That said, it’s a bad time for a supply disruption, as growing demand is already straining the supply chain.”

The summer months are already a time of higher demand for beef as the grilling season kicks off. Bartlett said he didn’t know which restaurant chains depended on JBS for their beef supply, but he stressed Texas roadhouse, Shake Shack, Burger King franchisee Carrols Restaurant Group, Cracker Barrel and Darden Restaurants like the companies it covers with the greatest exposure to beef.

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