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Post Holdings/Michael Foods Whisper

Post Holdings/Michael Foods Whisper

Research Question: Will Michael Foods mitigate the impact of its 25% reduction in egg supply by renegotiating customer contracts and raising prices so profitability falls by only $20 million in fiscal 2015 as the company states?

Report Available: July 29, 2015


Blueshift’s initial research shows POST’s Michael Foods directly affected by the Avian Influenza. However, its largest flock of hens was released from quarantine in early June, lessening the impact of its egg shortage, and egg prices have since fallen off their highs. Viewpoints vary widely on a realistic timeframe for Michael Foods’ recovery and whether the impact to its bottom line will only be $20 million in fiscal year 2015 as stated by the company.



  1. In late May, Michael Foods announced that three of its internally-owned egg facilities had tested positive for Avian Influenza. POST later estimated that 25% of its egg supply would be affected. By mid-June, egg prices rose 60% to 120%, but have since pulled back off their highs.
  2. As POST’s pullet and internal egg supply begins to recover, the company will source more eggs from third party suppliers whose pricing is driven by the market instead of feed prices. POST may lean on third parties to supply more of its eggs longer than anticipated: One estimate shows that by November, POST will have recovered only 42% of internal egg production capacityas it replenishes its pullet population.
  3. POST initially reported that 14% of its egg supply was affected and that profitability would be impacted by $20 million throughout 2015. Later, POST reported that 25% of its egg supplywas affected, but made no change to the $20 million estimate. Michael Foods’ egg business accounts for 74% of its entire revenue and 39% of POST’s overall revenue.
  4. POST hopes to minimize the impact to its bottom line, and there is the possibility of using force majeure,which will allow it to renegotiate some of its contracts, increase pricing and discontinue products. The company’s attempts may cause it to lose some customers. Several school cafeterias have already been notifiedby POST that their egg supply will be short for the upcoming school year. Some of POST’s un-negotiable contracts tie its egg pricing to market feed prices. Since POST will be sourcing more costly eggs near market rate from third parties and selling eggs for less than market rate in these contracts, its margins may be squeezed significantly.


Will the shortage of POST’s egg supply only impact its profitability by $20 million through fiscal 2015? What about the effect on full year 2016 performance? How long will it really take for POST to replenish its more profitable internal egg supply? To gain insight into POST and the egg market, Blueshift will gather data and issue a market research report from independent sources in the following areas: Food producers using egg product, QSRs, Government agencies, Farmers, Competitors, and Industry specialists.

Companies: Post Holdings (POST), Sysco (SYY), ConAgra Foods (CAG), Unilever (UN), Kraft Foods Group (KRFT), Cal-Maine Foods (CALM), McDonalds (MCD)


To see other ideas Blueshift Research is currently working on, please click here.