Tyson Foods seeks growth with new retail products

The new senior leadership team at Tyson Foods is tasked to build on the momentum of three years of record growth. President and CEO Tom Hayes is betting big on growing retail sales while also expanding margins in the company’s expansive foodservice division.

It’s a big bet for a company still susceptible to any number of negative commodity contagions.

In two recent speeches to analysts in New York City (Feb. 21) and London (March 21), Hayes gave a 10,000-foot view of Tyson’s new game plan, saying “Tyson is strong today and leading for tomorrow.”

When asked by analysts how the company plans to keep strong margins in light of bird flu threats, trade speculation and a plethora of protein likely to dampen pricing power, Hayes said the company will invest in brands and work to boost margins to those typical of consumer packaged goods companies. He said Tyson is also building new products in the fresh space. Hayes said Tyson’s commodity beef and pork businesses are poised to have two good years in the present cycle and should generate cash fueling growth for the chicken and prepared foods businesses.

“The wall of protein as you say … it will definitely get consumed. The question is at what price. Exports are good, and we think the future looks good for us,” Hayes said during the recent investor conference in London.

Tyson Foods declined an interview with Talk Business & Politics-Northwest Arkansas Business Journal regarding more detail on its efforts to bring more retail products, but Sally Grimes, president of North American Retail for Tyson Foods, provided a few details during an investor conference in New York earlier this year.

Between 2012 and 2016, Grimes said 74% of the supermarket annual revenue growth occurred in fresh, unpackaged foods. She said 67% of shopping trips made since 2012 were in the store perimeter only, and 57% of consumers prefer less processed ingredients and chemicals in the foods they buy. Grimes said Tyson is poised to grow its fresh retail business taking advantage of two key consumer trends at play today — “snackification” and on-demand eating.

“Long gone are three square meals a day,” Grimes said.

She said 90% of adults snack multiple times each day and just 8% of adults did not snack in the past 24 hours. Grimes said Hillshire Snacks, an adult snack product, is exceeding expectations with more than 30% of the growth in the category being driven by this take on mini meals. Grimes said Tyson has an innovative pipeline of products fresh and frozen. She said between 2014 and 2016 the revenue growth from new products is up 21%.

“We are continuing the momentum on the Tyson Tastemakers platform,” Grimes said. “We launched this [meal kits] last fall through e-commerce. No one else has the capability to unite protein expertise, world class culinary capabilities and brand building to revolutionize the fresh meals categories.”

“This curated line of dinner experiences has had really strong results. We sold out during our launch period last fall. We are seeing an average online rating of 4 stars with really high repeat rates. We will refresh the menu every season, and we are launching our spring menu in March with items like carne asada street tacos and Thai lemongrass pork belly,” Grimes added.

The Tastemakers meal kits include uncooked ingredients with step-by-step cooking instructions, and are considered a fresher and healthier alternative to frozen meals. Tyson’s meal kits are sold a la carte on Amazon Fresh in limited markets such as New York City, Philadelphia and most of California.

Tyson Tastemakers contain two servings and average in price around $20, which is less expensive than Chef’D meal kits which retail for $39. While the average Amazon rating from last year’s products was 4 stars, other consumers said the products contained too much sodium and were priced too high for the amount of food they received.

The new e-commerce relaunch with Amazon will have some competition this year as Martha Stewart has teamed up with Marley Spoon to offer meal kits sold in two-person and family sizes. The price of the meal kits are discounted based on how much a consumer buys. For two meals per week the cost is $12 per serving. That price is reduced to $9.50 per serving if ordering four meals a week.

“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.”

The pilot last fall and the new relaunch in e-commerce is still small with respect to scale, according to consumer goods analyst Leo Sun who said, “Tastemakers won’t likely move the needle for the meat juggernaut.” He said the limited scope of AmazonFresh (a subsidiary of e-commerce company Amazon.com) isn’t going to be enough to make a large impact for a global company like Tyson Foods. But he did like the fact the company is tiptoeing into this new retail channel.

Based on the successful e-commerce launch of the brand, Grimes said Tyson Foods is now extending the platform into retail grocery stores in May.

“This is one way Tyson will continue to accelerate growth in the grocery store perimeter. The May launch will be limited in scale to start, with items like citrus rum glazed chicken, black peppercorn flatiron steaks and soy ginger pork chops,” Grimes said.

Insiders believe the retail launch in May will involve Walmart U.S. grocery, given that Walmart is Tyson’s largest customer, and the two companies have a long relationship. Neither Walmart nor Tyson confirmed where the new Tastemakers line will be launched. Tyson Foods has not said what price the new retail meal kits will cost consumers.