Tyson Foods, Inc.’s value-added chicken business combined with the acquisition of Hillshire Brands has created a prepared foods powerhouse. It has also given the company a diverse portfolio of businesses. On one side is the branded, value-added Chicken and Prepared Foods business units focused on innovation and brand building. On the other side is the more traditional commodity-oriented Beef and Pork businesses, which are committed to adding value to products, but also stocking the fresh meat cases of retailers with traditional cuts of beef and pork.
The diversity of the company’s portfolio prompted an analyst to ask during Tyson Foods’ May 17 presentation at the BMO Capital Markets Farm to Market Conference if management would ever consider divesting or spinning off its fresh beef and pork operations. Thomas P. Hayes, president and chief executive officer of Tyson Foods, said it is a question that is constantly asked of the company’s management team.
“What I would share is that, as we continue to drive the business and be the most efficient we possibly can, we have a great position to continue to generate a lot of cash from that business …,” Mr. Hayes said.
During fiscal 2016, ended Oct. 1, Tyson’s Beef and Pork business units generated 49% of the company’s total sales volume of approximately $37 billion. The company operates 12 beef plants and 9 pork plants and it averaged a slaughter rate of 125,000 cattle and 415,000 hogs per week during fiscal 2016. In comparison to its peers, Tyson Foods ranks as the No. 1 beef packer and the No. 3 pork packer in the United States.
Mr. Hayes added that as sales from the center of the supermarket have slowed, the perimeter is becoming more important. Tyson Foods’ fresh meat offerings give it a strong position on the perimeter. The company also is helping retailers reduce fresh meat costs through the development of more sophisticated case-ready programs. Case-ready products are manufactured and packaged at the plant, but look as if they were prepared in a supermarket’s back room by a butcher.
“Those items have been very, very, well, embraced by all retailers and it’s increasing as a percentage of the total volume,” Mr. Hayes said.
While he expects management will continue to get the question, because of the stark differences between the prepared foods and commodity businesses, Mr. Hayes said it makes sense to keep the fresh meat business in the portfolio.