JBS cyberattack might put restaurant margins underneath stress, analysts say

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

Luke Sharrett | Bloomberg | Getty Images

The cyberattack on JBS, the world’s largest meat packer, could make restaurants painful if the situation is not resolved quickly, analysts say.

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

Meanwhile, beef prices have risen. The U.S. Department of Agriculture reported that select cuts of beef rose 1.1% to $ 334.56 per 100 pounds on Tuesday. According to the Steiner Consulting Group, JBS accounts for about 23% of the total cattle capacity in the USA.

Andrew Strelzik, an analyst with BMO Capital Markets, wrote in a statement Tuesday that he expects the price environment to normalize once the plants go fully into production. Most large restaurant chains have contracts with their main suppliers to protect them from short-term outages like the JBS attack, according to Strelzik.

“We don’t expect any significant margin impact for restaurants that adopt a relatively quick fix,” he said.

Longer impacts on JBS operations could have bigger ramifications for restaurants that serve beef, including shortages or prolonged inflation.

Truist analyst Jake Bartlett compared the situation to a fire at a Tyson Foods plant in 2019 that affected 5% to 6% of US supply and led to a surge in beef prices the following month.

“The shutdown of the JBS facility is affecting more of the supply, but the supply disruption is likely to be for a much shorter period of time (the Holcomb facility reopened in ~ 5 months),” wrote Bartlett. “This is a bad time to disrupt supply, however, as increasing demand is already straining the supply chain.”

The summer months are already a time of higher demand for beef as the barbecue season begins. Bartlett said he didn’t know which restaurant chains depend on JBS for their beef supplies, but pointed out that Texas Roadhouse, Shake Shack, Burger King franchisees Carrols Restaurant Group, Cracker Barrel and Darden Restaurants are the companies he’s working with covers the highest exposure to beef.

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