Tyson adapts to economy, sees progress in poultry
SPRINGDALE, Ark. (AP)--Now that people really are cooking at home, probably more than they'd like, the world's largest meat producer is downplaying the just-like-home aspect of prepared food and shifting to items designed to seem a little more fancy.
"Instead of something that looks like mom made it, this looks like something you might get at a casual restaurant," Hal Carper, Tyson group vice president for research and development, said as he showed off the packaging for the new Beef Tips with Burgundy Sauce.
Carper spoke with reporters at a company test kitchen after Tyson Foods Inc.'s annual shareholders meeting Feb. 6. The strategy Carper mentioned is part Tyson's effort to adapt to consumers who are trading down to cope with the recession--eating at home more often and, when eating out, visiting less expensive restaurants.
Interim Chief Executive Officer Leland Tollett clarified at the meeting that Tyson's 5 percent production cut in December was meant to clear excess inventory from the market, and not an indication plans to cut its output for the long term.
Tollett, who served as CEO from 1995 until 1998 and returned to Tyson last month after the abrupt resignation of CEO Dick Bond, said the company's beef and pork divisions are doing well.
"My great concern as I speak this morning is our chicken business," Tollett said. He said the company will sell the "whole chicken"--and not more raw, bagged chicken. "We're going to sell all the parts of it for all the money we can get for it."
Donnie Smith, senior group vice president for poultry and prepared foods, discussed how the company is approaching consumers who are eating at home more, including by lowering the weight of products to help keep prices down.
"The retail market gives us a great opportunity to capitalize on (new consumer) behavior," Smith said.
Carper said Tyson is involving its restaurant and retailer customers in brainstorming and developing new products.
"I don't want to say they are desperate, but they are very, very concerned and anxious about the viability and profitability of their business," Carper said. "They are so concerned and worried about their business that they are more willing to try more things. There's no fear of failure."
Tyson's new refrigerator case offerings include pork loin and beef brisket choices, and the company's international division offers a new chicken burger with a texture like a traditional hamburger.
The company's long-term focus is its international business and building its presence in markets with a growing middle class. Rick Grubel, group vice president and international president for Tyson, noted that 95 percent of consumers in India who eat chicken get their birds live. He said Tyson expects significant growth in India as consumers buy more chilled chicken, for instance.
Tyson is expanding in Mexico, where it has been for more than 20 years, and in China, where it hopes to tap the growing middle class. Brazil is also part of Tyson's long-term plan.
Tollett said Tyson intends to gain market share in the time ahead, though he said Tyson is not in the market to buy other poultry companies.
"We have adequate capacity to ramp up our production if we need to," Tollett said.
Tollett said the permanent new CEO likely will come from within Tyson's ranks, though outside candidates are being considered. He would not give a timeframe, other than to say that if he leaves fast that means Tyson has deemed its chicken division is in good health. His retirement in 1998 topped a career of nearly 40 years with the company.
At the Feb. 6 shareholders meeting, at a local hotel ballroom, was short, and fewer than half the 160 chairs were filled.
Across the industry, producers have been cutting production in recent months to bolster pricing and recoup high input costs, though the cuts haven't yet restored profits.
At Pittsburg, Texas-based Pilgrim's Pride, the nation's largest chicken producer, revenue dropped 8.3 percent from the same period last year to $1.88 billion, while U.S. chicken sales volume fell 10.5 percent in the three-month period ending in December. Pilgrim's Pride filed for Chapter 11 bankruptcy protection in December, weighed down by large debt.