Tyson Foods bearer of branded business strategy
March 19, 2015
by Erica Shaffer
Andy Callahan (left) and Dennis Leatherby represented Tyson Foods, Inc. at the company's first presentation for the CAGE conference in London.
LONDON – Springdale, Ark.-based Tyson Foods Inc. debuted at the Consumer Analyst Group of Europe (CAGE) annual conference in London March 18 to detail the company's strategy for growth and to explain why — despite news of a bird-flu outbreak in Arkansas — the company is reaffirming its guidance for fiscal 2015. Representing the company at the conference were Dennis Leatherby, executive vice president and CFO, and Andy Callahan, president, retail packaged brands.
Leatherby said the company expects revenues of $42 billion, a 12 percent jump over 2014. Synergies for the fiscal year are forecast at about $225 million. Also, Tyson expects an improvement of $35 million in the company’s International segment as Tyson cuts losses in that segment. He reiterated the company’s guidance of $3.30 to $3.40 on an adjusted basis.
The company’s Prepared Foods segment also is poised for more growth through the Hillshire Brands acquisition, Leatherby said. Tyson expects the Hillshire Brands acquisition — in conjunction with the company’s prepared foods strategy — to be accretive.
“In Prepared Foods, which is our best opportunity for growth and why we acquired Hillshire, we expect over the longer term for that business to generate returns of 10 percent to 12 percent on sales,” he said. “In 2015 we expect that return on sales to be over 6 percent with accelerating performance in the back half of the year.”
Tyson has identified its prepared foods segment as a growth-driver for the company.
Tyson’s next priority will be acquisitions, especially in value-added chicken and value-added prepared foods, Leatherby said. “And finally and very importantly as well, is we plan to be back in a position, hopefully by 2016, with excess cash flow to return cash to shareholders through share repurchases and dividends,” he added.
So, while the financial stars are in alignment for Tyson Foods, the company’s portfolio of branded products will distinguish the company from its competitors and drive Tyson Foods’ growth in the future.
“We have a branded portfolio of products that separates us from the commodity players and our protein-centric foods are not only on trend but where consumers are going,” Leatherby said.
Andy Callahan took up the theme of branded business as a growth-driver for Tyson. “And what I am here to tell you is that we have an opportunity from that strong foundation to grow and we have a portfolio in our branded business that is built for growth,” he said.
Callahan explained that Tyson has a portfolio of brands that has a leading share in most of the categories in which the company competes.
“And that is an important starting point for really several reasons,” he said. “First of all, when we have scale with our customers we have an important dialogue with them because they rely on leading share players to be consultants and advisors within the categories.
“Also importantly, from a manufacturing perspective it gives us a lot of volume and scale and therefore efficiency as we run through our fixed asset base and drive efficiency over time. And then lastly, leading brands drive higher consumer loyalty. And with consumer loyalty and high equity it gives you a platform to be able to innovate and grow off of.”
The Jimmy Dean brand has been driving great growth in the frozen protein breakfast market.
Callahan noted the importance of nurturing those brands in conjunction with a strong platform for growth. Tyson Foods offers a portfolio of brand that spans different consumer dynamics. The lunchmeat category generates more than $5 billion in sales category within the US, Callahan said. But despite the company’s lead in quality equity within the US, Tyson’s share is only 11 percent.
“So we have a great opportunity…as we innovate to drive greater penetration in a highly penetrated category,” he added.
Callahan said Tyson also is in categories that are relatively low in penetration but are growing at a rapid pace. He cited frozen protein breakfast as a perfect example — the penetration today is only 38 percent, but over the past five years “Jimmy Dean, through innovation in advertising and core marketing, have been driving great growth” which is a trend the company expects to continue.
“So we have a portfolio that is positioned with consumers to grow,” Callahan said, “And we are in categories that are on trend.
“Our branded portfolio and our leading categories represent over 75 percent of our total portfolio. And across our entire portfolio over the last 52 weeks, if we look at Nielsen or IRI data, and IRI is our partner, we are growing at almost a full percentage point higher than total food and beverage growth.”