Dive Brief:
- Tyson Foods reported third-quarter net income of $541 million, compared to $447 million in the year-ago period, according to a company release. The protein giant saw total sales rise 2% to $10.05 billion from $9.85 billion a year ago, missing Thompson Reuters estimates of $10.28 billion.
- The company's beef segment saw a record operating income of $318 million for the period. Tyson's prepared foods gained another strong quarter, with a volume increase of 2.7%.
- Tyson still expects sales to grow 6% to $41 billion in fiscal 2018. "Our diverse portfolio continues to be a key advantage for us," Tyson CEO Tom Hayes said in the release. "Our Beef and Prepared Foods segments had a strong quarter, helping to balance the results in our Chicken and Pork segments, which faced stiff headwinds."
Dive Insight:
Tyson's investments in prepared foods are continuing to pay off. The segment saw sales and volumes that outpaced its pork and chicken segments, which saw volumes rise 2.1% and 0.1%, respectively, in fiscal Q3. Tyson attributed this strong performance to cost savings and recent business acquisitions, but said these results were partially offset by higher input and freight costs.
The company's 2017 acquisition of AdvancePierre for $4.2 billion spurred meaningful growth for the company since bringing its product suite of RTE meals into its portfolio. The brand's products contributed about $655 million in the chicken and prepared food segments for the first six months of fiscal 2018. Tyson expects the deal to rake in close to $1.3 billion in AdvancePierre's first full fiscal year under the company.
The acquisition's growth and projected success have driven the company to hunt for more deals in this space, as well. The company has also trimmed its portfolio to better focus on its protein business. Last year, it sold off its Sara Lee, Kettle and Van's brands.
These moves appear to be paying off. The meat producer's beef division outperformed its prepared foods, with a sales volume uptick of 2.7%. The company tied the increase to improved cattle supply, stronger consumer demand for its beef products and increased exports.
Tyson's protein push also includes investments in growing consumer trends and future technologies. The company recently took a minority interest in Memphis Meats, a San Francisco Bay Area cell-cultured meat manufacturer. Its VC arm co-led a $2.2-million investment round for Israel-based bitotechnology firm Future Meat Technologies, which is developing a platform for a cost-efficient non-GMO lab-grown protein.
While these investments in cutting-edge innovations have vaulted Tyson to the front of the U.S. protein pack, the company's growing prepared foods division, which is less vulnerable to market fluctuations, give the manufacturer a solid life raft. Still, consumer demand for protein continues to climb, and the company's focus on innovative new sub-segments of this category could drive growth for years to come.