Tyson Foods eyes ‘significant’ e-commerce growth, still pushing to diversify revenue

Tyson Foods’ transformation from a commodity manufacturer into a consumer food company continues and the meat giant says it is “making significant progress” with key global e-commerce players such as Ali Baba and Amazon Fresh.

Tyson Foods CEO Donnie Smith said the majority of retail growth over the next five years will come from nontraditional e-commerce channels. The company is focused on partnering with retailers now testing online shopping models to capture more early share as Tyson positions itself to take advantage of this growth, Smith said during a March 22 presentation at the Consumer Analyst Europe conference in London.

“We are expanding our Amazon Fresh relationship to sell fresh protein products online with Ali Baba and Amazon. We are also working with our U.S. retail partners to test new innovation in the future,” he said.

He said Tyson’s supply chain and demand capabilities positions it to innovate in the fresh packaged product area which led to a new product launch of Tyson Tastemakers, a curated line of dinner “experiences” that can be prepared at home. This product pilot launch in the e-commerce space will happen later this year.

“Tyson Tastemakers will combine the know-how of our chicken, beef and pork businesses, the power of the food service culinary expertise, and our (consumer packaged goods) brand-building capabilities,” he said.

This Tyson Tastemakers product seeks to inform consumers about how to better prepare meals at home. The program focuses on food knowledge, preparation and exploration.

“We’ll teach them about the cuts of meat and where they come from. We’ll help pre-cut, trim, dry age, smoke, marinate, and do the prep so all they have to do is cook it. And then we’ll inspire them to explore and cook with ingredients that they may have never used before,” Smith said. “We have an opportunity to margin up our portfolio by adding value to chicken, beef and pork by creating a platform that’s branded, that’s value-added, and that’s fresh.”

Smith also said 88% of the company’s operating income is derived from its chicken and prepared foods segment. He said very little (15% or less) of the company’s foodservice business is done with fixed pricing. That and the company’s buy-versus-grow strategy are helping to drive chicken operating margins higher (11%) this year despite low chicken commodity prices and export bans related to Avian Influenza, Smith said.

Shares of Tyson Foods (NYSE: TSN) closed Wednesday (March 23) at $67.44 per share, up 75 cents. For the past 52-weeks the share price has ranged from a $67.73 high to a $37.24 low. Tyson Foods will report its second quarter earnings on May 9. Analysts expect earnings growth of 20%, with revenue expected to fall 8.7% from a year ago.