Since being named Tyson Foods Inc.'s CEO in November 2009, Donnie Smith has steered the Springdale, Ark., company through one of its most tumultuous periods. Worldwide sales that year had dropped (not an unusual thing for Tyson) and the company reported a huge net loss of $551 million. Dick Bond, leader since the 2001 IBP acquisition (where he came from), left suddenly at the start of 2009, and Tyson temporarily was being headed by its 71-year-old former CEO from the 1990s, Leland Tollett.
While he can't take full credit for the turnaround, Smith, then just 50, certainly was a part of it as senior group vice president of Tyson's key poultry and prepared foods business. Sales in fiscal 2010 jumped 6.5 percent, to $28.4 billion, and more important was the $765 million net profit. It's all good news for the 115,000 team members employed at more than 400 facilities and offices in the U.S. and 100 countries around the world.
Smith joined Tyson in 1980 right out of college; he graduated from the University of Tennessee with a degree in animal science. He's a classic case of learning all the ropes. In his 30 years at Tyson, he worked in purchasing, environmental, health and safety, food safety and quality assurance, manufacturing services, information systems and logistics.
"Looking forward into 2011, we obviously have some turbulence to deal with," Smith says. "Inputs, especially corn, are going to be a challenge, but we're doing everything we can to offset those inputs through pricing, operational efficiencies and managing our product mix."
The 2009 stall in capital investment is over. "We began in late 2009 and we'll continue through 2011 investing capital in the vast majority of our domestic chicken plants. In our fresh plants, the primary focus of our capital spend is to increase yield, labor and line efficiencies while concurrently improving our flexibility to produce a more market-relevant product mix," he said. "We're also investing in our further-processing plants to improve line efficiencies to keep pace with customer demand for our value added products. The investment and size of the profit improvement projects differ from plant to plant, but many of them will produce a return of between 25 percent and 40 percent. We still have work to do, but we feel very good about our ability to mitigate at least some of the increased inputs with lower conversion costs."
On the demand side, Smith doesn't see any decline in U.S. protein consumption in 2011, but it looks like growth will be limited.
"In foodservice, if current trends hold, we predict sales to be about unchanged to maybe up 1 percent," he said. "Several foodservice operators are reporting positive comps, but there are still plenty signs of weakness. We think chicken volume at foodservice may be up around 1 percent in 2011 [driven by lower supplies and higher prices of competing animal proteins]. Intuitively, you would think chicken demand would improve as beef and pork prices increase, but there doesn't appear to be protein substitution on the menus at this point."
"Consumers are still cautious about the economy," he sums. "With that said, based on everything we can see now, 2011 will be a good year for us because of our multi-protein, multi-channel business model."