Bad Boys or Bad Luck?

Jack Neff, Contributing Editor

Tyson Foods' rap sheet hasn't tarnished its industry reputation, but can that last?

Not many food companies face the courts once on criminal charges. Then there's Tyson Foods, which has recently been singled out for its second set of criminal charges in recent years.

           

Tyson's guilty plea in 1998 to charges of giving illegal gratuities to former Agriculture Secretary Mike Espy cost the company $6 million in fines. That was a mere slap on the wrist compared to what Tyson faced this year, a potential $100 million in forfeitures if it had been found guilty of conspiring to smuggle illegal aliens into the U.S. But a federal jury in late March, after little deliberation, found Tyson and its managers not guilty of all charges in the case.

 

Still, criminal charges are only part of Tyson's woes in the legal and public relations arenas of late. The Springdale, Ark.-based company also faces a host of environmental, wage and hour and securities litigation in the wake of its messy 2001 acquisition of meat processor IBP, a deal that Tyson unsuccessfully attempted to nullify. On the health and safety front, Tyson's reputation wasn't helped when a January 2003 Consumer Reports study of microbial contamination in supermarket poultry brands ranked its poultry products below those of other brands.

 

Reputation intact

           

In spite of these problems, Tyson's reputation still rides high in many of the quarters where it counts most. Fortune magazine recently ranked Tyson among its "Most Admired Companies," as well as the most admired in the food industry, based on the views of business executives and industry analysts.

 

Within weeks of the Fortune honor, Wilton, Conn.-based consultant Cannondale Associates and foodservice researcher Cognitio LLC, Carmel, Ind., ranked Tyson as the most respected foodservice manufacturer. The race wasn't even close, with Tyson beating its nearest rival, Coca-Cola Co., 23.7 percent to 16.9 percent -- by far the biggest spread among the Top 10 players.

 

Tyson's reputation with key customers and opinion leaders is as seemingly good as its reputation with prosecutors, regulators and plaintiffs' attorneys is bad.

 

For now, Tyson's standing among foodservice operators is outstanding, says Sven Risom, a consultant with Cannondale. But players such as Kraft and General Mills are gaining fast, he says, as a result of the marketing savvy and foodservice breadth they have achieved through recent acquisitions. Still, Tyson's strong standing with such far-flung segments as colleges, hospitals, restaurants and quick-service operations continues to separate the company from the rest of the pack. "For Tyson to be number one in so many channels is very impressive," Risom says.

 

But he believes the risks would be substantial if Tyson's troubles in the legal and political realms somehow crossed into the business realm. "As long as they're fair to foodservice operators and help them to deliver quality, consistency and the right price, the other issues don't affect them [with that segment]," Risom says. "The day that other issues impact Tyson's ability to deliver is the day a lot of other problems start."

 

Immigration case a vindication

 

Tyson got a major vindication, however, when a jury found the company and four of its managers not guilty of conspiracy in connection with illegal immigrant smuggling. The verdict followed U.S. District Court Judge R. Allan Edgar dismissal of 15 charges of illegal immigrant smuggling against the company after the prosecution closed its case.