Dive Brief:
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Tyson Foods beat analyst expectations after reporting increased sales and lower profits during the third quarter 2017, according to Market Watch. Over the same period last year, net income fell 7.4% from $484 million to $447 million while sales rose 4.8% from $9.4 billion to $9.85 billion, according to its earnings release.
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Sales for all four of Tyson’s core categories grew: Beef increased by 0.4%, pork by 0.6%, chicken by 1.6% and prepared foods by 2.4%. Tyson has seen strong demand for beef, pork and chicken over the last nine months, while the company’s AdvancePierre acquisition drove growth in its prepared foods segment.
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“[E]very segment delivered volume growth behind a strong start to grilling season and new product innovation,” Tom Hayes, CEO of Tyson Foods, said in a statement. “The Beef and Pork segments were very strong performers in the third quarter, and continued generating cash to fuel investments in our value-added Chicken and Prepared Foods businesses.”
Dive Insight:
Tyson Foods, one of the world’s largest meat companies and the maker of Tyson, Jimmy Dean and Hillshire Farm products, has been repositioning its business for growth under new CEO Tom Hayes, who joined the company at the start of the calendar year.
After an up-and-down 2016, Hayes came in with a stated mission to grow Tyson’s core protein business, drive innovation and seek acquisitions. Despite fires at two plants that disrupted chicken production and hurt sales volumes in Q2, 2017 has otherwise been a strong year for Tyson. Sales for its core protein businesses have increased and the company has made bold moves to refocus its business.
The moves started as Tyson announced early in the year it would replace antibiotics with probiotics in its flagship poultry products, a move intended to propel the company to the top of the fast-growing antibiotic-free market. This is part of Tyson’s strategy to increasingly shift its business toward selling branded protein products in grocery stores, rather than supplying bulk meat to retailers and restaurants.
Global demand for protein has driven growth for Tyson as the company has been looking to shed three of its non-protein businesses — Sara Lee frozen bakery, Kettle frozen foods and Van's breakfast items — in order to better focus on proteins.
Tyson also acquired convenience and ready-to-eat foods company AdvancePierre in a deal valued at $4.2 billion earlier this year. Before the deal was made last year, former Tyson CEO Donnie Smith said the company was preparing for its next transformational acquisition with a focus on "protein-centric, branded, value-added" products and categories. The AdvancePierre deal gives Tyson more of a foothold in the growing convenience foods market.
“The addition of AdvancePierre will further our leadership position in prepared foods as we capitalize on the fast-growing convenience store channel and the fresh retail perimeter across all day parts,” Hayes said in a statement, adding that synergies from the integration could exceed $200 million within three years.
But it’s not all about meat — Tyson has been diversifying its portfolio by investing in meatless proteins. Last year, Tyson took a 5% stake in Beyond Meat, the first time a major meat company invested in a plant protein-based company. The company also has a $150 million venture capital fund that invests in companies developing meat substitutes. “I think the migration [toward meatless proteins] may continue in that direction,” Hayes told Fox Business News in March. “It’s hot everywhere, people want protein, so whether it’s animal-based protein or plant-based protein, they have an appetite for it.”
Looking ahead, Tyson expects growth to continue apace as strong demand for protein bolsters its beef and pork businesses, greater capacity and moves away from antibiotics and toward organic help grow its chicken business, and the integration of AdvancePierre and protein innovation boost its prepared foods segment.