Poultry companies in the U.S. have all struggled over the last year, as rising costs for fuel and feed have coincided with falling demand, as consumers reign in spending in the wake of the economic downturn. In addition, ample supply has meant that firms have struggled to raise prices to offset these additional costs. However, Pilgrim's Pride entered the current downturn in a particularly weak position as it is highly leveraged following the $1.1 billion purchase of smaller rival Gold Kist in January 2007.
Pilgrim's Pride is the largest chicken producer in the U.S. and accounts for around a quarter of the entire chicken market. The firm derives the majority of its sales from the foodservice sector and generated revenues of $7.6bn in 2007. This focus on the foodservice sector can perhaps be held partly accountable for Pilgrim's difficulties, as the sector has been hit very hard by consumers dining out less and offers very low margins when there is an oversupply of chicken due to the lack of product differentiation.