The Tyson Foods Prepared Food Segment



Tyson Foods Prepared Food segment

The Tyson Foods, Inc. (TSN) Prepared Food segment markets frozen and refrigerated products. It generated $3.9 billion, the company’s fourth-largest share of revenues in fiscal 2014, or ~10% of the total.

This segment includes items such as pizza crusts, pepperoni, pizza toppings, bacon, soups, and tortilla products, prepared meals, appetizers, processed meats, sauces, and side dishes, etcetera.

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Organic growth segment

It’s natural that Tyson has forayed into the prepared foods business. The raw materials such as beef, chicken, and pork required by this segment are provided by the company’s other three segments. Inputs such as corn, vegetables, and flour, etcetera are purchased from other manufacturers and suppliers.

Adding value to a commodity usually helps a company generate higher margins. But as we can see in the chart above, Tyson has yet to achieve this. The company’s Prepared Food operating margins were negative in fiscal 2014. This is odd considering the segment has low volatility in its operating margins relative to other business segments.

Peers have similar offerings

Pilgrim’s Pride Corporation (PPC), Sanderson Farms, Inc. (SAFM), and Hormel Foods Corp. (HRL) all produce value-added products as natural extensions of a core business. Some of these companies are also part of the Consumer Staples Select Sector SPDR Fund (XLP).

Tyson Foods supplies its prepared food products to restaurants, hotels, schools, the military, healthcare facilities, and international export markets. We’ll discuss Tyson’s customers in more detail later in this series.

International market

The company also earns revenues from international markets such as Brazil, China, Mexico, and India. Tyson’s International segment generated $1.3 million or 3.6% of revenues in 2014.

Next, we’ll look at the production facilities Tyson Foods uses to process live cattle, hogs, and poultry.


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