KANSAS CITY – During an Aug. 5 conference call with analysts, and later with members of the media, Tyson Foods Inc. officials discussed the company’s strategy specific to capital expenditures, reaching alternative channels in the marketplace and the prospect for making more acquisitions in the coming fiscal year.
Having acquired Don Julio Foods this past February and Circle Foods LLC this past June, Donnie Smith, CEO and president said the company will continue to be on the lookout for acquisition targets that fit its strategy of giving the Tyson access to new channels. “Continue to expect us to look at ‘bolt-on’ acquisitions,” he said. “A sweet spot acquisition for us is probably sub-$100 million. That fits an important gap that we see in assuring that our consumers and customers have their needs met.”
Capital Expenditures for fiscal 2014 were raised to between $650 million to $700 million, up about $100 million over fiscal 2013, which included investing in expansions at four procession plants, including case-ready operations in Sherman, Texas, and Goodlettsville, Tenn.
Dennis Leatherby, CFO, told meatpoultry.com that expenditures planned for fiscal 2014 are “over and above our maintenance level,” which is approximately $250 million per year. He said the resources are earmarked to enhance growth and efficiencies, primarily in the production of value-added products in Tyson’s Prepared Foods segment. The company also plans to continue investing in integrating its chicken business in China, where Smith said Tyson will be operating using 50 percent of company-owned birds by the end of fiscal 2013. “And then our goal is to be nearing 100 percent in company-owned birds at the end of FY ’14,” he added. Progress in China has been hindered by the avian influenza outbreak there, but the losses Tyson suffered there were offset by strong results by Tyson de Mexico and Tyson do Brasil.
In the foodservice segment, Donnie Smith pointed out that restaurant traffic has, in recent months, rebounded somewhat after a sluggish start of the year. Independent operators, however continue to struggle as chain operations “are holding their own,” he said. Tyson forecast growth in the segment to be flat or very slightly up in 2014. Quick-service restaurants will likely carry the day in this segment, with growth in value-added products expected to grow as much as 8 percent yet this fiscal year.
Smith told meatpoultry.com that thanks to the company’s presence at some industry events that cater to operators of foodservice businesses specifically in convenience stores, Tyson has been able to progress toward one of its goals of exploiting some new channels in the marketplace. “We also view alternate channels, whether it be dollar stores, drug stores, whatever- to be a great opportunity for us.” Fortunately for Tyson, many of the products that are designed for c-store customers are very similar to those already being manufactured for traditional foodservice customers. “A lot of the products we will sell in c-stores are pack-size changes in our retail lines or it’s an R&D tweak on an item that is currently sold in a retail deli that could fit very well into a c-store. We’ve come a long way building customer confidence that we’re in the channel to stay,” Smith said. He added that Tyson has offered its insight to suggest to these operators how they can grow their foodservice business in a segment that was once relegated to sales of gas and cigarettes. He said the momentum in this segment will build through the fall of this year and continue into 2014 and well beyond.