Tyson Foods, the US meat giant, has not been immune to the strains facing the sector across the Atlantic. Nevertheless, president and CEO Dick Bond is placing his faith in international markets to help Tyson weather the storm. Dean Best reports.
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In the current economic climate, with commodity prices soaring and consumer anxiety heightening, those in charge of food manufacturers really have to earn their corn.
Nowhere is that more true than in the meat sector. Farmers and processors are feeling the pinch from rising grain costs and the reluctance of some retailers to push through price increases.
In the US, the meat industry is undergoing a period of change. Factories are being closed, production scaled back and the first waves of consolidation are being witnessed. Some, including poultry group Pilgrim’s Pride, are suffering, as Washington’s biofuels policy drives up feed costs.
Others, like meat giant Tyson Foods, seem to be more able to weather the storm. Sure, the company, like Pilgrim’s, has been forced to cut and revamp its manufacturing base. Just this week, Tyson said it was cutting jobs at a plant in Virginia; the loss of these jobs came hot on the heels of cuts in Nebraska and North Carolina, while in January, Tyson said at least 1,500 workers in Kansas would lose their jobs following cutbacks at a beef plant. Tyson has found the going tough domestically.
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By GlobalDataNevertheless, this week, president and CEO Dick Bond (pictured) was upbeat about his company’s prospects. Addressing a group of analysts in New York, Bond said Tyson – a processor of beef, pork and chicken – had the credentials to grow in a challenging sector. “Tyson Foods is in a solid position,” Bond insisted. “Our multi-protein business model makes us a formidable competitor.”
Bond admitted that commodity costs were weighing on the business. Grain, he said, would cost the company US$600m more during its current fiscal year than a year ago. The beef industry, he warned, would need to see higher prices on supermarket shelves in order to offset soaring costs.
However, Tyson has a two-pronged strategy for growth. In the US, the company is investing in product innovation and marketing, believing new products and sustained advertising can drive consumer demand. Tyson is test-launching a range of products aimed at the Hispanic market, while in the next few months, the company will embark on a TV campaign to try and boost sales during the summer grilling season.
It is international markets, though, where Tyson believes it can prosper to help ride out challenges at home. Bond was bullish about Tyson’s international business, not least due to the growing prosperity of consumers in emerging markets. “We see more of a developing middle class and more people being able to afford and utilise protein more in their diet,” he said. “That is a factor that sits really well with our position and diversity of protein.”
Industry watchers see international markets as a key growth area for US meat processors and Tyson is wasting no time in expanding overseas. The company has already set a target of boosting its overseas sales by two-thirds by 2010 and, following the announcement in February of its poultry venture in China, Bond said more deals in the country – as well as acquisitions in Brazil – are in the offing.
Of course, investing overseas always carries risk, so an improvement in the trading climate at home is of paramount importance to Tyson. The cost of grain will be the central domestic obstacle for Tyson and Bond was quick to point the finger at the “crisis” caused by Washington and its policy on biofuels.
“Eventually, Congress will correct this mistake and support an alternative fuel programme that doesn’t jeopardise the world’s food supply,” Bond argued. “Every company in our industry must keep this issue in the public consciousness to ensure change will occur as quickly as possible.”
In the meantime, it seems, Tyson and a bullish Bond are betting big on growth overseas.
