Tyson Turns to Automation

Dec. 14, 2021

It's their path to better margins on their signature chicken.

Tyson Foods has been showing pretty good results lately: a 48% jump in net income from fiscal 2020, steadily increasing sales, stock climbing more or less reliably for the last 18 months or so.

And yet, there’s a fox in the henhouse.

Most people associate Tyson with chicken, but for at least the last three years, its beef sales have slightly outpaced its chicken sales. More to the point, Tyson’s operating margin on chicken has been getting squeezed like a nugget in a former. It went from 4.7% in 2019, to 0.9% in 2020, to minus 4.6% in fiscal 2021 (reflective of a $625 million loss on chicken).

The basic problem isn’t hard to understand: labor. Chicken is far more labor-intensive to process than beef or pork, Tyson’s other proteins. Given the labor problems that the pandemic has handed the food industry – especially Tyson – it’s understandable that its margins on chicken would be getting choked.

I’m more interested in what Tyson plans to do about it. In a word: invest.

The company plans to open 12 new plants over the next two years and possibly more beyond that. These new plants will be supported by the latest automation available, developed and tested in Tyson’s own Manufacturing Automation Center. Tyson plans to spend $500 million on automation next year, more than seven times what it spent this year.

What’s especially heartening to me is the approach of CEO Donnie King, as he told investors recently: “to take away the more difficult, higher turnover jobs.” There are plenty of those in any poultry plant. I wouldn’t wish a stint on a deboning line on my worst enemy.

By making its chicken plants more decent (and efficient) places to work, Tyson will decrease turnover and increase productivity. That way, being the No. 1 chicken company in America will turn out to be an advantage, not a liability. Good luck to Tyson.

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