by Erica Shaffer
KANSAS CITY – Tyson Foods, Inc. made acquisitions late in the 2013 fiscal year that will lay the foundation for future growth in the company's Prepared Foods segment.
“I view prepared foods a lot like where we were in chicken four or five years ago where we just had to get in the basics and build a strong foundation under that business. You can see kind of the results, two, three or four years later after doing all of that work. We are working on our footprint,” said Donnie Smith, president and CEO of the Springdale, Ark.-based food company, said during a January media conference call.
Tyson acquired Don Julio Foods in February and Circle Foods LLC in June. Bosco’s Pizza Co. was added to the prepared foods mix in January and marked Tyson’s third prepared foods acquisition in less than a year. Smith said Bosco's fits with Tyson’s pizza toppings and crusts, and aligns with the company’s K-12 school foodservice business. Warren, Mich.-based Bosco’s customer base spans a five-state region.
“A large portion of their business today goes to the School Lunch Program in that five-state region and their products are very well known and very well accepted among their customers base,” he said. “We certainly have a great opportunity to learn from their bread expertise,” which will help Tyson’s tortilla business, he added.
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First quarter operating income in the Prepared Foods was $16 million with a 1.8 percent return on sales, according to Jim Lochner, COO of Tyson. This represented a decline in operating income despite an increase in sales volume. Sales volume increased 3.5 percent compared to the comparable year-ago quarter due to improved demand and the additional volume associated with the Don Julio and Circle Foods acquisitions. Higher raw material and other input costs of approximately $40 million and additional costs incurred through investments in Tyson’s lunchmeat business and growth platforms dragged on the segment’s results. But Smith described the segment as a broad mix of businesses at different stages of maturity and that the company’s continues to build the less-mature businesses.
“If you just look forward into our vision in prepared foods, continue to think about a broad portfolio of items that meet changing consumer requirements,” he said. “We've got very broad capabilities. We've got access to raw materials. Obviously, we've got a great sound capital structure and the ability to invest in those businesses and we will continue to do that.
“And you should expect to see strong growth in prepared foods,” Smith added.
The consumer comes first
Smith said the company’s strategy for growth beyond foodservice goes back to being nimble and responsive to consumers’ changing needs. Offering a broad portfolio of products spread over multiple distribution channels enables Tyson to give consumers what they want, where they want it.
“Consumers today are expanding their food purchases beyond the traditional foodservice and retail channels creating opportunities for us in dollar, convenience, drugstores, and even online,” Smith said.