Tyson Foods has plenty to gain and very little to lose with its new Amazon Fresh partnership to offer “Tastemaker” fresh protein meal kits online in test markets in the coming weeks.
Details around the Tastemaker launch have yet to be released, but Tyson Foods CEO Donnie Smith announced the plan in March at the Consumer Analysts Group of Europe event. The company recently created a new e-commerce position and hired Tim Madigan to lead development and execution of the company’s strategy and the direct relationships with all pure-play, online retailers such as Amazon and Alibaba.
Smith said a majority of retail growth will come from nontraditional e-commerce channels and the company is aligning with companies like Alibaba and Amazon Fresh.
He said Tyson would sell more fresh proteins via Amazon.com including the new Tyson Tastemakers, a curated line of dinner protein kits that can be cooked at home. Smith said Tastemaker hopes to help the at-home chef by answering three questions they have around 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.
He said the consumer is driving demand in fresh foods and Tyson has the supply chain, food service culinary experience, and brand building capabilities to meet the demand with the help of Amazon.
‘EARLY MOVER ADVANTAGE’
Clint Lazenby, founder of SyncdUp and former executive of ConAgra’s Lamb Weston division, said the move is a no-brainer for Tyson Foods.
“There’s a huge advantage for food companies that delve into customer insights for e-commerce. You can’t overstate the importance of being able to learn and gain a depth of knowledge that working with e-commerce giants can provide,” Lazenby told Talk Business & Politics. “If you are Tyson, you know it’s really early in grocery delivery, but building experience and customers along with supply chain expertise for e-commerce would give them an early mover advantage when the trend evolves more mainstream.”
He said the partnership with Amazon and reportedly Alibaba appear to be low risk operations and still allow Tyson to keep its options open.
Lazenby, whose background in the meat industry includes supply chain management for the consumer packaged goods and food service industries, doesn’t really see the possibility for Tyson to launch online meat sales direct to consumers on its own platform because he said it makes more sense to partner with a shopping venue that consumers are already using like Amazon.
THE ACQUISITION OPTION
Lazenby said the meat is the most expensive ingredient in the meal box and Tyson’s expertise and access to meat paired with the customer execution and supply chain know-how of a Blue Apron, Plated or Chef’D make a lot of sense for Tyson Foods if the company rwanted to position itself for the e-commerce future.
Tyson also has relationships with famous chefs and other culinary experts that could pair up with a startup already operating in the space. Tyson Foods has not publicly said it is looking at such an acquisition, but when asked recently by analysts about the acquisition landscape, Tyson executives said the company has the ability to make another Hillshire purchase ($8.5 billion). Smith also said the company continues to see growth opportunity in the businesses it already owns, adding that any acquisition would be a strategic play and must also be a cultural fit.
Blue Apron had a $2 billion valuation after just four years in business. The New York-based startup ships eight million meals a month through its subscription service and is the market leader with an estimated nearly $1 billion in annual sales.
“This would be a low cost way for Tyson Foods to get into the business,” he said. “You only need to look at the Unilever acquisition of Dollar Shave Club to see a proxy for such a Tyson deal. Unilever didn’t sell razors but they sold shaving cream and other shaving products so the deal was a strategic way to get into the razor business,” Lazenby added.
He admits it is early for grocery delivery, but meal subscriptions are growing at a healthy clip and that’s a good way for Tyson Foods and other food companies to expand their retail reach into e-commerce.
LAUNCH & LEARN
The Amazon partnership for the Tyson Tastemaker Meal kits include uncooked ingredients with step-by-step cooking instructions, and are considered a fresher and healthier alternative to frozen meals, according to Sally Grimes, chief growth officer for Tyson Foods.
The test cities have not been disclosed by Amazon or Tyson Foods. Amazonfresh is available in the following U.S. areas: Seattle area, most of California, New Jersey and New York City along with Philadelphia. Boston is expected to come online this year as well. Other Tyson Foods products are already being sold on Amazon Fresh in all of the test markets.
Tyson has not said if the Tastemaker product will be a subscription-based or a la carte item like the others it sells online. Because Tyson has compared it to Blue Apron analysts believe it will be a subscription-based product, but no retail price has been disclosed. Marley Spoon and Blue Apron sell weekly subscriptions for meat delivery kits at a cost of about $139 (four kits). Chef’D doesn’t use subscription but sells meal kits for two for about $39.
Grimes referred to the Tastemaker line as a pilot project with Amazon earlier this year.It was something she called “launch and learn,” saying Tastemakers would bear some resemblance to Blue Apron and Hello Fresh.
“Consumer demand is driving growth in fresh foods, where we have core capabilities and a big business today,” Grimes said. “And we have an opportunity to margin up our portfolio by adding value to our poultry, pork and beef businesses.
Tyson said initially the culinary entrees available in the Tastemaker launch will include a garlic and herb boneless pork loin; ancho pasilla carne asada; Thai basil boneless chicken breast; tandoori chicken thighs; beef sirloin roast; pork carnitas tacos; and Korean steak tacos. Tyson said the product lineup will give consumers a fresh meat with unique culinary flavors ready for them to apply the finishing touches.
“The Tyson recipe is pretty simple,” Grimes said. “It’s three ingredients: generating deep and real insight, applying that insight in new and remarkable ways, and executing with excellence at the speed of the market.”
The Tastemaker pilot is testing new sales channels and perhaps reaching a client base not familiar withTyson Foods and Hillshire products, but the Tastemaker launch won’t likely move the sales needle too much for Springdale-based meat juggernaut, according to consumer goods analyst Leo Sun, a contributor to Motley Fool.
Sun said the limited scope of the Amazon Fresh market reach (10 areas or so) isn’t going to make large impact on sales for a global company like Tyson Foods. But it does allow Tyson to tiptoe into new territory with little risk which could pay off down the line should online food sales and curated meat kit deliveries become more mainstream.