Tyson Foods' CEO Tom Hayes said that despite recent acquisitions, investments and expansions, the country's biggest meat packer is still looking to acquire other companies. According to Bloomberg, Hayes said the company is looking for deals with the potential to add "more capacity in a growing category," but that recent valuations have been high enough to prompt caution.
Hayes attended the World Economic Forum last week in Davos, Switzerland, where he noted in an interview that Tyson Foods also is interested in potential opportunities abroad that could enhance exports.
Labor shortages in the industry have been a problem, and increasing production and consumption of meat and poultry are exacerbating the situation, Hayes said. The company has increased wages and is considering how to take advantage of automated and robotic functions at its facilities. "The labor market will get tighter," Hayes told Bloomberg. "That's exactly the reason we need to be spending more money on innovation. Technology is going to play a critical role."
Hayes has spent his time as CEO expanding the company's operations beyond its core chicken, beef and pork operations into snacks and other proteins in demand with consumers. So far, that seems to mean diversification and innovation into prepared foods, plant-based products and cell-cultured meat production, which eliminates both slaughter and the environmental impact of traditional animal agriculture.
The CEO, who has overseen Tyson for about a year, has already orchestrated a slew of M&A deals to diversify the company. Last April, Hayes oversaw the $4.2-billion purchase of AdvancePierre, a maker of ready-to-eat hamburgers, stuffed chicken breasts and other sandwiches supplied to restaurants, hospitals, schools as well as convenience stores and vending machines. The purchase advanced Tyson’s goal of expanding into branded and prepared foods that generate larger and more predictable profits than its often volatile meatpacking operations.
Later in 2017, Tyson acquired Original Philly Holdings, one of the nation’s leading producers of raw and fully-cooked Philly-style sandwich steak and cheesesteak appetizer products. Both deals give the meat giant a foothold in the growing convenience food space, which could prove to be a lucrative new path to growth in the coming years.
We need to “continue to be in growth mode because so many companies are not growing. Food companies are really starved for growth, so they have had to cut costs to the point that that is the only way to make money,” Hayes told Food Dive last October. “We want to certainly be able to have the right cost structure but the future will be really focusing on growing our brands, our customer brands, and being that company that people look to and say, 'They are an ongoing, growing food company.'”
Just this week, Tyson Ventures, the company's venture capital arm, purchased a minority interest in Memphis Meats, a cell-cultured meat startup based in San Francisco. The company said in a release that the move represented Tyson's "commitment to explore innovative, new ways of meeting growing global demand for protein."
Hayes said investing in lab-grown meat in no way competes with his company's core businesses. "This isn't an 'either or' scenario; it’s a 'yes and' scenario," he said in a statement. "If you think about it, a protein strategy inclusive of alternative forms is intuitive for Tyson Foods. It's another step toward giving today’s consumers what they want and feeding tomorrow's consumers sustainably for years to come."
The move into the up-and-coming animal-free "meat" space isn't surprising, given Tyson Food's past investments in other emerging protein categories. In 2016, the company took a 5% stake in Beyond Meat, the first time a major meat company invested in a plant protein-based company. Tyson Ventures subsequently hiked that initial 5% stake by participating in another capital financing round. The plant-based foods industry is projected to hit $5.2 billion by 2020, likely putting Tyson Food's financial involvement in a much clearer and more profitable perspective.
It will be interesting to see where Hayes takes the company next. Perhaps he will explore additional value-added poultry or beef exports, innovate with meat snacks through the AdvancePierre brand, or perhaps make a bid to acquire Beyond Meat. With the new tax law — and its lower corporate tax rate — in place, Tyson could have $300 million in savings to play with, Hayes told Bloomberg. That — along with continuing increases in demand for protein, sales and income — should be more than enough to keep the M&A ball rolling at Tyson Foods.