2005 Processor of the Year: Tyson Foods

Despite the pitfalls of the animal protein market, North America’s biggest food processor for years has been adding value to meats, tightly running its plants and staying close to its Arkansas values.

By Dave Fusaro, Editor in Chief

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Chairman and CEO John Tyson (center) is flanked by Richard Bond (left), president and chief operating officer, and Greg Lee, chief administrative officer and international president.

Animal protein is just about the riskiest niche of the food business. Between animal diseases and in-plant contamination, international trade disputes and livestock price fluctuations, it's tough to make a buck in this business.

Yet Tyson Foods Inc. makes millions of them. While it has been climbing the charts for some time, Tyson's 8 percent growth in its fiscal 2004 to $26.4 billion made it the biggest food processor in the U.S. and Canada, according to the Top 100 list we unveiled this past August (Tyson sales were $24.8 billion, according to our criteria). For the first time in the 30 years of our annual ranking, Kraft Foods or a predecessor company is not No. 1 on our list.

Tyson, still based in Springdale, Ark., did it the old-fashioned way, by launching 420 new products and recording double-digit increases in its chicken and pork segments. And, uncharacteristically, all that without an acquisition. While the numbers are impressive, there are numerous intangibles that make Tyson an industry-leading company: A set of core values that everyone seems to carry in their wallets. Manufacturing technology that leads the industry. A $52 million product development center nearing completion. A "chaplaincy program" that involves chaplains - from Baptists ministers to a Muslim imam - to provide care and counseling to workers. And a response to victims of Hurricane Katrina that put government agencies to shame.

For these and a host of other reasons that should become apparent in the next few pages and across three different stories, Food Processing is proud to name Tyson Foods our very first Processor of the Year.

An acquisitive history

While Tyson can trace its history back to 1935 and an earlier John Tyson, who sold truckloads of Arkansas chickens in Kansas City, St. Louis and Chicago, its industry-leading story starts just in 2001. The current John Tyson, grandson of the founder, engineered the most audacious acquisition in a company history dotted with buying and selling. IBP Inc., the country's largest processor of beef and No. 2 in pork, was bought for $4.7 billion, instantly doubling Tyson's size and catapulting it into the top ranks of American food processors.

"We had a vision to combine these companies and create the world's leading protein provider," says John Tyson, chairman and CEO. "Thanks to the hard work of our people, that vision is now a reality.

"Actually, the companies came together very well," he continues. "There were lots of similarities and synergies. Both companies knew how to run their plants well. They're willing to invest in technology, even to experiment. Then there are the individuals. They had some very good people, and we were able to put together the best of the best, really."

As he spoke, at his side was Richard Bond, the former chief operating officer of IBP, who now is president and chief operating officer of Tyson. "We did end up with a lot more products than we realized," Bond interjected. "One of the key things the combined company had to do was take beef and pork up the value chain as Tyson was doing with poultry. In the past four years, we've added $2 billion of value to our product portfolio. But that remains the goal: to increase the value of all our animal proteins that once were commodities."

What Tyson hasn't done is add to its debt. While the IBP purchase left Tyson $4.9 billion in debt, or 58 percent of capital, the company is ahead of its self-imposed schedule of reducing debt, and should come in below 40 percent when the 2005 fiscal year figures are released this month (Tyson's fiscal year ended Sept. 30). Note: To access infographics on Tyson's sales and overall financial picture, click the Download Now button at the end of this article.

One unusual philosophy is that Tyson has added value and increased penetration through primarily one brand: Tyson. Some regional brands have been retained - Weaver, Russer, Wilson, Corn King, Jordan's, Wright and Thorn Apple Valley among them - and others have been eliminated, but the strategy is to put the Tyson name on the newest products and the ones with national distribution, and that goes for all three animal proteins.

Drilling down within those three animal protein segments, Tyson has leading positions in retail and foodservice beef, chicken and pork, as well as prepared foods such as bacon, ham, pizza toppings and deli meats.

A growing international force

It's been a difficult couple of years to move animal protein around the globe. Although Tyson has begun investing in overseas companies and countries, most of its assets are U.S.-based. Still, international sales account for nearly 12 percent of company revenues. Tyson generates $3 billion in international sales. Approximately 30 percent of the company's international chicken sales come from overseas operations.

International sales clearly are a key component of the company's future. The goal is for 20-25 percent of corporate revenues to come from international sales, perhaps within 10 years, according to Greg Lee, chief administrative officer and international president. Lee shares an "office of the CEO" with Bond and John Tyson. That is, when he's in this country, which is becoming increasingly rare.

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