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March 18, 2015

CAGE 2015: Tyson confident on prospects in US frozen

Tyson Foods has expressed confidence it can grow its business in the US frozen food sector, a category in the spotlight amid Nestle's continued challenges in the market.

By Dean Best

Tyson Foods has expressed confidence it can grow its business in the US frozen food sector, a category in the spotlight amid Nestle's continued challenges in the market.

Nestle, the largest frozen food supplier in the US by sales, has seen its business suffer in a category under pressure. The world's largest food maker is working on a series of ways to revive sales but this week admitted the division only has a finite amount of time to improve its performance.

Tyson is the second-largest frozen food business in the US. The division generated US$3.6bn of sales, according to IRI data for the 52 weeks ending 25 January, compared to Nestle's $7bn. Tyson generated group revenue of $37.6bn in its fiscal 2014 year.

The company's US frozen business is centred on two segments – poultry and protein-based breakfast items. Speaking at the Consumer Analyst Group of Europe investment conference today (18 March), Andy Callahan, the president of Tyson's retail packaged brands division, said growth from the businesses had fallen below the group's longer-term forecasts. However, he insisted Tyson saw "great potential to grow" in the sector.

"We're in categories within frozen that, over the last several quarters, have been performing below the longer-term projections [and] that has been more due to acute issues. We have reset our chicken manufacturing base and one our breakfast portfolio we did a significant amount of pricing, which has flowed through," Callahan said.

According to IRI data for the 52 weeks to 22 February provided by Tyson at the conference, the company's frozen protein breakfast business was outpacing the category. However, Tyson has seen its frozen prepared poultry arm fall faster than a category in a decline. Nevertheless, announcing Tyson's first-quarter results last month, president and CEO Donnie Smith did say the company had regained some market share in frozen cooked chicken.

Speaking at CAGE, Callahan said: "We have over a 50 share within our two largest categories in frozen and we believe they have great pot to grow. They've got potential to grow due to the strengths of the brands but also due to the strong innovation pipeline to help support that."

Industry watchers have suggested frozen food has suffered as US consumer habits evolve. Many of the attributes formerly associated with frozen foods – freshness, quality, health – are now linked to fresh alternatives.

Callahan argued there was no "consumer issue" with the frozen category in the US. "For example, within our breakfast category, millennials are some of the highest-indexed consumers in some of the categories in which we compete," he told investors and analysts at CAGE. "I believe the categories in which we compete and we've been able to grow are where we work with innovation, bring consumer-relevant solutions and invest in. We have demonstrated the ability to be able to grow."

He added: "We start with the consumer. We bring benefits to them and we bring it to them in the form and in the section of the store that we think can solve that problem the best. We've demonstrated that within frozen protein breakfast, which, over the last five years, is one of the leading categories within the total grocery store despite being in the frozen section."

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