Tyson Foods continues investments in international markets

Tyson Foods has struggled in recent quarters with its U.S. business and likely will struggle in future quarters. Still, the company is not backing away from investments and growth plans with its international segment.

The Springdale-based meat giant has invested in seven new international plants, six of which are in Asia. The new plants include fully-cooked chicken plants in Europe, Malaysia, Thailand and four in China. Tyson’s intent with the international expansion is to capture a bigger share of the growing protein consumption expected to increase to 94.8 billion pounds by 2030– 64% of which will come from Asia.

In December 2021, Tyson said the annual compounded target growth rate for the international segment was between 18% and 20% over the next three years, with an operating margin of around 5%. Through three quarters of fiscal 2023, Tyson’s international business posted sales of $1.879 billion, up 9.43% from the same period last year. About half of that growth came from increased volume and the other half from higher prices. The international business accounted for 4.75% of Tyson’s overall sales revenue through the first three quarters of this year.

The segment’s operating income for the nine months of this fiscal year totaled $15 million and is expected to grow to a full-year total of $32.2 million as several of the new plants ramp up production. The segment’s operating margin for the nine months was 2.5%, slightly better than a year ago but still a long way from the 5% target.

Tyson Foods CEO Donnie King told Talk Business & Politics that international business is a key growth area for the company. He said the segment is running behind projections, given how long it has taken Asia to come out of the COVID-19 pandemic. He said Avian flu has also been an issue hindering production starts in some plants. King said the new plants help Tyson better align with large global customers who continue to support the Tyson brand.

King said Tyson was pleased with the $340 million acquisition it made in 2019 for the Thai and European operations of BRF S.A. He said the $2.16 billion acquisition of Keystone and Marfrig assets in 2018 also gave Tyson a scalable production platform in the Asian poultry market and entry into Europe.

“It’s estimated that approximately 90% of global protein consumption growth will occur outside the United States, with 60% of the volume growth coming from Asia over the next 5 years,” King said. “Increasing our international footprint with in-country operations and export capabilities will help Tyson Foods strategically access new markets and better serve the growing global demand for our value-added protein.”

TYSON ASIA PACIFIC
Through acquisitions, Tyson Foods expanded its Asia Pacific footprint, where protein demand outpaces that in the U.S. Tyson’s Asia Pacific region includes operations in Malaysia, Thailand and Australia, all of which were part of the Keystone/Marfrig deal as well as BRF.

Tyson has been in Malaysia since 2018. Located southwest of Kuala Lumpur, Tyson Malaysia operates three facilities and employs more than 1,500 people. Tyson’s brand “First Pride” can be found in supermarkets and is also exported. One of the new plants Tyson has built since 2020 is in Malaysia. Tyson said the Malaysia business also maintains a Halal commitment and certification from the Department of Islamic Development Malaysia (JAKIM).

Another new fully-cooked facility built in Thailand produces more-processed and higher-margin chicken products in retail and food service. King said Thailand’s production is key in helping better serve export markets. Tyson’s business in Thailand was established in 1991 with Tyson Poultry Thailand Ltd., one of the country’s largest fully-integrated chicken processors. Tyson’s assets include a feed mill, hatchery, breeder farms and contract grower operations that support fully-cooked chicken plants. McKey Food Services in Thailand was acquired in 2018 and is a division of Tyson Foods that produces processed meats for the quick-service restaurant industry.

Tyson acquired a food processing facility in the Brisbane Valley in Australia as part of the Keystone deal. The plant was established in 1997 as a specialty, purpose-built beef patty manufacturer that served large quick-service restaurants in Australia. Tyson said the plant also produces beef products for the local and export markets.

CHINA EXPANSION
The majority of the new plants Tyson is building outside the U.S. are in China. Three new plants to produce value-added meat and poultry products in China. King expects all of those to be in operation by the end of the year. He said the plants in China were originally scheduled to be online during the fourth quarter of 2022. Still, because of supply chain interruptions and complications brought on by the COVID-19 pandemic, King said the projected opening dates had to be pushed back.

King said having boots on the ground in Asia is key to helping Tyson grow its customer base well beyond foodservice and begin to leverage the brand affection Tyson has generated with Chinese consumers in recent years. Tyson Foods has been in China since 2001, with its first processing center needed to support customers like Walmart and Kentucky Fried Chicken. Tyson now has a regional headquarters in Shanghai, three research and development centers, seven processing plants and dozens of breeding farms that supply meat production for a fully-integrated business. Chicken is the majority of the business in China, but Tyson also has smaller beef and pork operations there.

As of June, Tyson had opened three smart factories planned for China this year. The Tyson Nantong smart factory is part of an integrated business located in East China. The plant is equipped to cook chicken and beef. It followed the openings of Tyson Rizhao Smart Factory and Tyson Xiaogan Smart Factory. The new facilities have digital testing labs for food safety and full traceability automating processing technology.

EUROPE
Tyson Foods has about 300 employees in Europe who work in five offices and two innovation centers. Tyson entered Europe in 2019 with the BRF acquisition and the inherited production centers in the Netherlands and in the United Kingdom. In late 2020, Tyson announced plans to enlarge the processing center in the Netherlands and add 150 jobs.

Tyson Europe operates a poultry, prepared foods and plant protein business with processing centers in the Netherlands and the United Kingdom to provide products to different countries and markets across Europe.

MIDDLE EAST
Tyson Foods announced in July 2022 its strategic partnership with Tanmiah Food Company, a leading Middle Eastern provider of fresh and processed poultry, other processed meat products, animal feed and health products. The deal allowed Tyson Foods to access poultry supplies in Saudi Arabia to cater to the rising protein demand in the region.

Through the agreement, Tyson Foods acquired a 15% equity stake in Tanmiah subsidiary Agriculture Development Company (ADC) and a 60% equity stake in Supreme Foods Processing Company. The business operates three facilities in the United Arab Emirates and Saudi Arabia.

ADC is a fully integrated poultry company that produces broiler chickens and operates hatcheries and feed mills. It sells fresh poultry under the Tanmiah brand to retailers and food service customers. Supreme Foods produces value-added and cooked chicken and beef products with a distribution network that includes Saudi Arabia, Kuwait, Bahrain, UAE, Oman, Lebanon, and Jordan.

TYSON INDIA
Tyson, in 2008, purchased 51% ownership of Mumbai-based Godrej Foods, Ltd. Godrej Foods is a subsidiary of Godrej Agrovet, Ltd., one of India’s largest agribusinesses. The joint venture between Godrej Agrovet and Tyson is called Godrej Tyson Foods. Annual sales for the venture were initially expected to be in the range of $50 million and are anticipated to grow as operations are expanded.

Tyson has not reported on the venture in many years. Godrej Tyson reported in December 2022 that its ready-to-cook frozen chicken sales are expected to reach $24.146 million by the end of fiscal 2023, a gain of 30%.

TYSON MEXICO 
Tyson Foods sold its manufacturing facilities in Mexico to Pilgrim’s Pride in 2014 for $575 million to help pay for the Hillshire Brands acquisition. That Mexican business included three plants and 5,400 employees. Tyson also sold its Brazilian business to JBS Foods in that same deal. Tyson had three plants in Brazil and 5,000 employees. Tyson has since opened sales offices in Mexico City and Turret to sell into the Mexican market via exports.