Tyson Foods execs discuss new strategy, logo and expectations

Tom Hayes has been CEO of Tyson Foods for just seven weeks and has already shaken up the company’s core structure, rolled out a new logo, will begin grinding up chicken, and promises to show everyone “how much good food can do.”

Hayes recently announced a new leadership structure for Springdale-based Tyson Foods with the new management team being COO Noel White and new divisional presidents Andy Callahan and Sally Grimes. Hayes and Grimes, the president of Retail for North America for Tyson Foods, laid out their game plan for the future during a presentation Tuesday morning at the 2017 Consumer Analyst Group of New York (CAGNY) Conference held in Boca Raton, Fla.

Hayes said the company is strong and will grow its portfolio of protein-packed brands and delivering sustainable food at scale.

“The purpose of our company is to raise the world’s expectations for how much good food can do, and we’re uniquely positioned to deliver just that,” Hayes told analysts.

Hayes said his passion for the food industry goes back to his New Hampshire roots where he began washing dishes at a local restaurant at age 15. Hayes, a food industry veteran, said his plans to grow Tyson Foods requires the company subscribe to financial fitness. He said there will be continued efforts to reduce waste throughout the system and better allocate financial and human capital towardsgrowth while also tapping technology that will facilitate the transformation. He said there will be a granular inspection of the entire company as it strives to be more sustainable and reduce waste.

Hayes told analysts Tyson should see valued-added retail and foodservice growth at 3% annually. (Value added refers to products that are enhanced in some way and carry a higher margin that raw commodities). Though Hayes spoke with passion to investors there were not many details in the plan. He said Tyson Foods is “strong today,” projecting consistent compounded annual growth rate of 20% over five years if Tyson Foods hits the midpoint of its fiscal 2017 earnings guidance of $4.90 to $5.05 per share. In fiscal 2012 Tyson had net earnings per share of $1.97. The company’s cash flow has also increased 23% from 2012 through 2016 to $2.716 billion.

Hayes outlined his “twin engines of growth” plan that requires Tyson expand its portfolio of protein packed brands while also delivering sustainable food at scale. He said the retail segment headed up by Grimes will seek to grow branded and value-added sales above the industry average by investing in brand, innovation and customer development. The foodservice segment run by Callahan will also seek to surpass industry growth averages and expand margins through customer partnerships, differentiation of products and competitive costs.

He said the commodity meat processing business – the core business of Tyson Foods for decades – will be leveraged for maximum efficiency and cash generation that will fuel investments and product innovation.

GROWING RETAIL
Grimes spoke to investors about opportunities Tyson sees for growth in the retail segment. She said the protein craze by consumers is a bonus for Tyson as 54% of customers are adding protein to their daily diets. She said packaged protein like canned nuts is a space in which Tyson can play — a market worth about $98 billion annually.

She said Tyson will work to win market share in the “fresh” category. She said fresh meat brands and private label is valued at $46 billion annually and there will be a concerted effort to boost market share. She said Tyson also has untapped potential in its Core 9, the nine most sought after brands in its portfolio. While eight of the nine brands already have top market share there is untapped potential. For instance, Ballpark franks rank No. 1 in that category, but only command 30% of the market, leaving 70% up for grabs. Jimmy Dean breakfast sausage at No. 1 has 26% market share, leaving nearly 70% up for grabs.

She said Tyson also will work to unlock new business with emerging brands such as Hillshire Snacking and Tyson Tastemakers which is a curated dinner sold direct to consumers. She said Tastemakers, which were sold on Amazon.com, sold out during the launch period with a 4-star average rating.

“We are launching our spring menu next month and extending it into retail starting in mid-March with a limited launch,” Grimes said.

Fresh ground poultry is another opportunity for Tyson Foods. The company doesn’t offer a product in the category, according to Grimes, who said the majority of ground poultry is from turkey. She said Tyson will in June launch “Tyson Ground Chicken” suitable for chicken tacos, chicken meatballs or chicken sliders. Grimes said fresh ground poultry garners about $1 billion in annual sales. Chicken comprises 86% of fresh poultry sales, but only 9% of ground poultry sales, which she sees as a missed opportunity. She said 64% of fresh ground poultry sales are generated by private label and brands share less than 10% of the market share which Tyson aims to increase.

Grimes also spoke about the all-day breakfast trend married with the “fresh breakfast” craze. She said refrigerated meals represent $6.5 billion in annual sales, but breakfast is under represented. She said while 33% eat breakfast or early morning snacks, less than 1% of them chose refrigerated products because there has not been enough innovation in this area. In May Tyson is launching Jimmy Dean Scrambles which contains two liquid eggs and sausage, bacon and cheese which can be heated in a soup-like container for a hot meal on the go.

She said the new product pipeline includes expanded items of Hillshire Snacking, also a refrigerated product that pairs meat and cheese coming this quarter. This summer Tyson will launch Hillshire Brands Slow Smoked Meats, such as beef brisket, that can be cooked in minutes instead of hours.

REMOVING ANTIBIOTICS, NEW LOGO
The company also announced that its breaded chicken have no antibiotics beginning in June, several months ahead of schedule. COO White said the company has worked toward eliminating human-use antibiotics and the costs associated with that have declined substantially. He said if birds get sick they will be treated with antibiotics, but it will not be used in Tyson breaded chicken. He said Tyson plans to eventually to have its entire private label chicken converted to no antibiotics status. He said Tyson stepped up its investment to cover the Tyson branded chicken.

Lastly, Hayes unveiled a new company logo that represents a branded T and weather vane which is a farmer’s compass and also shows Tyson pointed in the right direction.

“We will have our stumbles and our issues along the way … the second quarter is our most challenging and that’s true today … we will continue to get better every day,” Hayes concluded.

Wall Street appears to be taking a wait-and-see attitude with Tyson Foods and the new management structure. Industry insiders are unsure of the structural changes and lack of core business institutional memory in the executive circle, excluding Noel White who has spent considerable time running the red meat and the chicken processing businesses.

Tyson Foods (NYSE: TSN) shares closed Tuesday at $63.31, down $1.95. For the past 52 weeks Tyson shares have ranged from $55.72 to $77.05.