Vital Farms (VITL) CEO Russell Diez-Canseco says the recent spike in egg prices, up more nearly 60% year-over-year, is "a head scratcher."
"Over the course of 2022, we certainly saw inflationary impacts to our key inputs like the grains we feed our girls [hens] and the diesel fuel that the truckers use to fuel their trucks as they deliver the eggs to the grocery stores," Diez-Canseco told Yahoo Finance. "Our approach to price increases has been to take them reluctantly in small amounts."
A Vital Farms spokesperson told Yahoo Finance the company increased prices on eggs last year. "As an example, the core 12-count black carton retail price increased from $5.99 to $6.99 and was generally reflected at most retailers by the end of 2022."
The national average for a dozen large, Grade A, eggs is $4.25 as of December 2022, up from $1.79 last year.
Diez-Canseco told Yahoo Finance he waited to take pricing with Vital Farm's long-term mission in mind.
"The reality is, we're building a brand for the long haul, and we've grown our supply year in and year out for 15 years straight. We don't see a short-term supply and demand shock as an opportunity to just goose our profits and that's not how we're operating."
Senator Reed accuses mega egg producers of price gouging
Vital Farms works with roughly 300 family farms across eight states in the South to produce its pasture-raised Grade A large eggs.
"We buy eggs exclusively from those farms, and they sell their eggs exclusively to us in multi-year contracts. The price we pay them is predictable for them, and we increase prices when grain costs go up so that they aren't upside down and stuck kind of paying the bill for inflation that we're seeing, the net result of which is we have a pretty reliable supply of eggs for our business," Diez-Canseco explained.
That business model varies from Cal-Maine Foods (CALM), the top egg producer and distributor in the U.S., that was recently accused of price gouging by Senator Jack Reed (D-RI) in a letter he wrote to the Federal Trade Commission (FTC).
Reed told Yahoo Finance, "I think what's happening is that major egg producers— not the local folks, because they're still harvesting their eggs in their backyard or the small plots and then selling them at a reasonable price— but some of these big companies are basically exploiting the potential to increase prices. It's gone up, as you say, 138%. Inflation is far, far less than that, so it's not inflation."
Cal-Maine Foods did not respond to Yahoo Finance for comment, but it did post a statement on its website.
"Many factors play a role in increased egg prices, most notably the recent impact of the highly pathogenic avian influenza (HPAI), which has significantly reduced the national hen supply, while consumer demand for shell eggs remains good," the statement read in part.
Reed, however, claims the avian flu outbreak is not the issue at hand for these producers. "What they're doing is, essentially, keeping their production level and just raising the price because it's an essential. Families need eggs. It's just a part of everyone's daily life."
In response to Reed's comments, Vital Farms CEO said, "I don't see anything in my cost structure that would have led me to raise our prices by as much as you're reporting. We've taken just enough price to keep ourselves whole and continue to pay our farmers an appropriate profit for the work they do. I'm not suggesting anybody's price gouging ... I can't explain why prices have gone as high as they have."
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Brooke DiPalma is a reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.
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