CEO Turns Tyson Back From Brink

Richard Bond is no vegetarian. His daily diet is 100 percent protein — beef, chicken and pork.
In his first year as CEO of the world’s No. 1 meat producer, Springdale-based Tyson Foods Inc., Bond has led the charge to turn it from portly to lean by trimming some $200 million in fat.
Now what once seemed to be spoiling looks like a juicy sirloin seared to perfection.
“The core, the center of the plate was there,” Bond said. “We knew we were still capable of doing what we needing to do, we probably just needed more focus than anything.”
Bond, who took over as CEO for John Tyson in May, clarified what he meant by “focus,” saying that the company “couldn’t do everything for everybody” and simply needed to hone in on the key things it knew how to do well. That meant creating more value-added products, improving operational expenses and expanding international business — the company’s three long-term strategies.
Precisely what led to the tough times isn’t certain, but Tyson blamed everything from Mad Cow disease scares in foreign markets to rising costs of raw material, such as corn. Bond said he wasn’t concerned about the future because the company’s basic fundamentals and balance sheet were still sound.
But the bottom line was unbalanced for the majority of fiscal 2006, which ended September 30. Tyson reported $25.55 billion in total sales in fiscal 2006, down from $26.01 billion in fiscal 2005. It also reported a $196 million loss in net income, an enormous plunge from 2004’s record of $403 million in income.
Chairman John Tyson, the grandson of founder John W. Tyson, tabbed 2006, “One of the toughest years we’ve ever had,” in the company’s annual report.
Before the end of fiscal 2006, cuts were made in staffing, recruiting, relocation, consulting fees, sales-related expenses, supplies and travel.
Initially, a total of 850 positions were eliminated, including 420 primarily held by management and management support employees. At least 140 employees were canned in Northwest Arkansas alone.
Thanks to plants being shut down in Idaho, Iowa and Nebraska and various consolidations the total number of “team members” has dropped from 114,000 last July to 107,000 in February, according to the company’s published stats.
But a Tyson representative said the company estimated the actual number at about 4,000 positions eliminated, not all related to the cost management initiative. Besides the closings and consolidations, there also was a fire at a plant in Heflin, Ala., which put 267 people out of work.
Tyson immediately led efforts to get those employees jobs at other Alabama plants, though.
What looks good on paper doesn’t always look good on Wall Street. In a Jan. 30 report on Tyson, analysts with Stifel Nicolaus said despite the cuts, “We are not ready to give the company full credit for the cost savings from an earnings power standpoint.”
Chopped Meat
Exactly where the $200 million in cuts were made remains blurry and the company declined to disclose specifics.
One area for sure came in bonuses and stock options. The company announced in July that its “senior management team” decided to delay annual merit increases from July 2006 to January 2007 and “temporarily suspended” the company match on its stock purchase plan for salaried management for the remainder of 2006.
Still, the $200 million in cuts almost doubles Bond’s initial goal of $110 million. It’s the chief reason Bond was excited to announce the company’s quick return to profitability during the annual shareholders’ meeting on Feb. 2. It reported $57 million in net earnings for the first quarter of fiscal 2007, the company’s first positive quarter in a year.
Proof cutbacks were across the board came at that meeting as only coffee and water were offered, opposed to the opulent spread of protein products that the company has offered attendees for years.
“I’m really grateful for it,” Bond said before the meeting. “Tyson team members have really impressed me in terms of how they pulled together and how they focused on returning the company to profitability.”
This is not the first time Tyson Foods has struggled since its founding in 1935. Peaks and valleys come with any long-term operation.
After Bond was hired last May, he sought outside support from someone familiar with the company. John Lea, a retired 25-year Tyson veteran, was contracted to oversee the cost management cuts.
Those services must still be needed often as Lea said he’s “literally on 24-hour call.”
“It was a very difficult time in agri-business in general, not just at Tyson,” Lea said. “We go through some cycling and there are times when belt tightening in our industry is required to get the ship righted.
“It’s painful when you go through those type of things, but it’s not unusual.”
Lea said he remembers long-time directors saying it was the third time the company’s belt needed to be adjusted a notch or two. He credited the board of directors and Bond for recognizing there was a problem and acting on it quickly, one reason he believes the effects were realized sooner.
“They knew we weren’t going to be able to weather the storm unless we took a much more hard stance on cost cutting and start making some difficult decisions,” Lea said.
Fresh Meat
Like most companies at the top of their industry’s food chain, Tyson has its share of issues.
Litter and other lawsuits often make the front page. Bond understands public perception can be affected by negative news, but also that it comes with the territory.
“You know you’re always going to have lawsuits — this country loves lawsuits,” Bond said. “But we just have to make sure we are doing everything we can to abide by the law and make sure we deal with it effectively.”
The news has been mostly upbeat lately, ranging from John Tyson’s appointment to the University of Arkansas’ Board of Trustees to the opening of a shiny new $45 million Discovery Center in Springdale this year.
Tyson has been No. 1 in new products introduced by a food industry company for the past four years according to a nation-wide study.
The Discovery Center will only aid in the innovation of value-added products by bringing together technology with culinary skills in what the company called “Culinology.”
From a cost standpoint, the 100,000-SF center will pay for itself as on-site pilot plants eliminate the need for travel for research and development, which has taken place all over the country in the past.
The building also incorporates many “green” aspects to promote sustainability and lower operating costs such as in the natural lighting throughout and in the heating, ventilation and air conditioning systems.
“The investment has a very, very long business life,” said Greg W. Lee, Tyson’s chief administrative office and international president. “We’ll be able to continue to evolve as technology evolves and it will save and make us a lot of money in the long run.”
Improving Tyson’s international footing is now at the top of the agenda. That means growing poultry in Mexico and also a look at adding more beef and pork there as part of an expansion strategy.
Tyson also has its sights set on China and South America.
It already has one facility in China and wants to build more, mirroring the vertically-integrated poultry production that’s worked so well in the U.S.
South America is “intriguing” to Bond. The company recently completed a small joint-venture in Argentina for a vertically-integrated beef company where the cattle are raised, processed and distributed through surrounding markets.
“South America is a very, very good area in terms of land, availability of crops and labor force,” Bond said. “So there’s the possibility of all three proteins having success for us moving forward.”
Bond said the company also hopes to build markets back up and get some reopened in Japan and South Korea as restrictions in those countries on importing meat continue to loosen.
Bond Background
Bond became only the second non-Tyson family member to be named CEO of the company. He still meets with former president and CEO John Tyson, the company’s chairman, each Monday morning.
The former CEO of IBP Inc. before Tyson bought it 2001, Bond’s entire career has been in the meat business. So being named CEO of another major meat company (IBP was the world’s largest supplier of premium beef and pork products) came second nature.
He isn’t even sure where he was when alerted of the promotion.
When he’s not in the office, Bond loves to spend time with his six children and six grandchildren, eight of which live in and “love” Northwest Arkansas.
The New Jersey native said he loves it here, too, and regularly has family over to his house for Sunday dinner.
“We eat a lot of chicken, beef and pork,” Bond said.
Bond has a degree in business administration from Elizabethtown College of Pennsylvania. He worked for several other food companies, including Pet Inc., before joining the former IBP Inc.
Bond joined IBP in 1980 as an administrative assistant and quickly worked his way up into management positions, including president of IBP’s fresh meats division. When the acquisition of IBP occurred, he became co-operating officer of Tyson Foods. In 2003, he was named president and chief operating officer.
When he’s not driving home a point in the boardroom, Bond enjoys driving golf balls.
He tries to get in at least one round of golf per week during the summer months as his hectic schedule allows.
He prefers two area courses: Pinnacle Golf & Country Club in Rogers, which is where he lives, and Blessings Golf Club, a private club a few miles west of Tyson’s headquarters that was developed by John Tyson.
Unlike the individual game of golf, Bond said it took a team effort to turn the company around.
He doesn’t give himself, or any one person for that matter, credit for the quick results from the cost management initiative.
“It’s the team,” Bond said. “And it’s not just the senior management team, it’s the whole team pulling together.”