Tyson Foods' innovative state of mind

by Keith Nunes
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The impetus for Tyson Foods' evolving strategy is the 2014 acquisition of Hillshire Brands.
The impetus for Tyson Foods' evolving strategy is the 2014 acquisition of Hillshire Brands.

BOSTON — In its 2.0 version, Tyson Foods is going to be the global innovative leader in food experiences, said Tom Hayes, chief commercial officer. To do so, the company is making a transition away from a former commodity mindset to one focused on innovation and brand development.

“Innovation is a huge thing that is going to be in the forefront and the lifeblood of Tyson Foods going forward,” Hayes said Sept. 9 during a presentation at the Barclays Global Consumer Staples Conference in Boston.

The impetus for Tyson Foods’ evolving strategy is the 2014 acquisition of Hillshire Brands. The company is now in the process of linking its supply chain and incorporating many of the raw materials produced through Tyson’s Chicken, Beef and Pork business units and adding value to them by incorporating them into Hillshire products. 

Tom Hayes, chief commercial officer, Tyson Foods
Tom Hayes, chief commercial officer of Tyson Foods

“Hillshire Brands as a company is a catalyst for a transformation that’s happening at Tyson Foods,” Hayes said. “We’re moving from a commodity portfolio to one that is a portfolio of high-value brands.”

But brands are only a part of the story. It doesn’t hurt that Tyson Foods is a leading provider of animal-based protein at a time when consumer interest in the nutrient may be at an all-time high. To put the situation in context, Hayes said retail categories in protein are growing 3.3 percent overall compared to total food and beverage grocery store sales that are growing at 1.4 percent.

“So, you can see that protein is driving the bus in terms of growth,” he said.

To capitalize on consumer interest in protein and other trends, Hayes said Tyson Foods has created an internal “trends council” that is charged with analyzing and evaluating trends in demographic shifts and changing consumer shopping patterns.

“Our innovators listen to our insights council,” Hayes said. “And then we build our pipeline for future innovation off of all those keen insights, naturally.”

A challenge facing the Tyson Foods management team following the Hillshire acquisition has been focus. Before the merger Tyson Foods was a leading global supplier of beef, pork and chicken to the retail and food service marketplaces. Post-merger, one may argue Tyson has added prepared foods powerhouse to the mix.

As a way to manage the transition, Hayes said through fiscal 2016 to 2018 Tyson Foods would devote 72 percent of its resources toward its highest-value brands with the highest potential, including Tyson, Wright, Jimmy Dean, Hillshire Farm, Ball Park and Aidells.

Tyson Foods plans to devote 72% of its resources toward its highest-value brands.
Tyson Foods plans to devote 72 percent of its resources toward its highest-value brands with the highest potential, including Tyson, Wright, Jimmy Dean, Hillshire Farm, Ball Park and Aidells.

“We’re going to always do line extensions and other sort of sustaining innovation,” Hayes said. “But, the platform innovation that we’re building and driving, 72 percent of that is against these brands and against growing areas where we know we have a shot to build a great business.”

Dennis Leatherby, CFO, said Tyson Foods will achieve $41 billion in sales by the end of fiscal 2015 (the company is currently in the midst of its fourth quarter) and expects to hit the same sales number in fiscal 2016 due to some businesses the company has exited.

“We had EBITDA of approximately $1.9 billion in 2014 and in the last 12 months, through third quarter 2015, that EBITDA was just under $2.6 billion,” he said. “And we expect it to be well north of that at the end of the fiscal year.”

He added that the company’s “synergy story” following the acquisition of Hillshire Brands is strong. He estimated the company will achieve $300 million by the end of fiscal 2015.

“We’re expecting more than $400 million next year and more than $600 million in 2017,” he said. “These synergies, I want to remark, is companywide. I’d say about 85 percent to 90 percent are currently in the Prepared Foods segment. Over time, that will probably move to more 80 percent to 85 percent as some of those synergies are spread across beef, pork, and chicken as well.”

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