Tyson's new leaders talk strategy

by Bryan Salvage
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SPRINGDALE, ARK. — Tyson Foods’ new company leadership — including Donnie Smith, president and chief executive officer, Jim Lochner, chief operating officer, as well as other top company executives — discussed the progress Tyson is making during a press conference held Feb. 5.

“In my brief tenure as c.e.o., the most-frequent question I’ve received is ‘What are you going to do different as c.e.o’? My answer is: We have got a good, sound strategy and my focus is going to be executing our strategy flawlessly. That’s what it’s going to take to win — and that’s what we’re setting out to do.”

As part of its strategy Tyson will focus on four broad goals, which include developing food solutions; optimizing its commodity businesses; build its international presence; and increase the value of Tyson by-products, he said.

“Consumers are still worried about the economy and unemployment, although our research indicates they’re starting to feel a little bit better about their economic situation and aren’t hardly as concerned about limiting their restaurant visits,” Mr. Smith said. “Foodservice demand, however, is forecast to be down versus last year, but at a smaller decline than it was in the previous year.”

Tyson’s Discovery Center has seen a lot of activity in product development. “Our distribution customers drive traffic through value and innovation, which is a part of our strategy,” Mr. Smith said. “Retail demand remains very good. Consumer concerns about their grocery (purchases) are waning and we see volume growth in fresh chicken, beef and pork.”

In closing his remarks, Mr. Smith said, “I’m very fortunate to have a great team around me. That’s how we win at Tyson, through teamwork. I’m very excited about what this team is going to accomplish.”

In addressing Tyson’s first-quarter performance, Mr. Lochner said Tyson is successfully optimizing performance in beef, pork, prepared foods and its executives were pleased with improvements being made in the chicken segment.

“In all segments, we’re extremely team-focused and driven by the basics,” he said. “Those basics include improved execution, starting with quality for our customers, and then yield, pricing, mix, watching our control spend and watching our labor efficiency. In the chicken segment, we’ve seen tremendous improvement in live-production costs.”

A host of things add up to improved execution and improved results, Mr. Lochner said. “It takes hard work and great team focus.”

In covering domestic availability of protein, Mr. Lochner said most people focus on what the production numbers are going to be. “So, they look at the units of livestock production,” he added. “You add to that the carcass weights, then you factor in imports and subtract exports.....that gives you domestic availability. That’s a big difference than just focusing on production numbers because a good portion of the chicken, pork and beef are exported — up to 19%, 18%...depending on the year."

Domestic availability is a key number, he continued. “I checked research and it hasn’t happened in 40 years where we had a two-year successive decline in all aggregated proteins for domestic availability,” Mr. Lochner said. “Production is down, exports are up and we’re looking at a decline in protein supplies. So per capita consumption of proteins is going to drop compared to the peak of ‘07 and ‘08 — by some estimates as much as 7%.”

Even though domestic foodservice demand is down, Mr. Lochner said Tyson sees increasing retail consumption in the disappearance of protein and it sees an increased interest in exports because other countries have also reduced their available protein supplies.

“Those things generally line up to a more favorable pricing increase,” Mr. Lochner said. “We’ll have to see. I think the demand situation has corrected a lot from the demand we saw from ‘08 to ‘09 — and 2010 will be a different year. We’re poised to take advantage of the market opportunities. We’re better positioned to deal with the changing market conditions and our team members and teams are focused on factors within their control...and we saw this in our first quarter results,” he said.
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