How Does Tyson Foods Plan to Drive Future Growth?



Tyson Foods’ innovation initiative

In order to drive growth, Tyson Foods (TSN) plans to leverage its portfolio of leading brands. The company expects that consumer behavior will drive continued growth in protein, which includes all of the major meat categories. The company is already driving growth in advantaged protein segments and shifting its mix to value-added segments. The company’s emerging brands, such as NatureRaised Farms, Nudges, Van’s Natural Foods, Golden Island, and Hillshire Snacking, are driving incremental sales in high-growth categories. The company is well positioned to lead growth and value creation over time.

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Core 9 plan

For the rest of fiscal 2016, Tyson Foods anticipates savings on raw materials along with continued synergy realization. The plan is to use these savings in pricing for innovation and brand building. Tyson’s Core 9 product lines are the main drivers of sales and profitability within its packaged retail offering. These include brands like Tyson, Hillshire Farm, Jimmy Dean, Ball Park, Wright, and Aidells.

Management mentioned in the 2Q16 earnings call that the IRI data revealed that the company’s efforts to drive volume momentum are having the anticipated effect. Core 9 volumes rose 4% for the most recent four-week period. This came on the back of significant share gains aided mainly by Ball Park hot dogs, Hillshire Farms smoked sausage, Jimmy Dean breakfast sausage, and lunch meat.

Improvements in the Chicken segment

In the Chicken segment, Tyson Foods has grown its branded products, reduced its commodity sales, and implemented a buy versus grow strategy. These initiatives have helped the company to transform its Chicken business to create a higher, more stable margin structure. Thus, Tyson Foods increased its Chicken segment’s normalized margin range to 9%–11%. This reflects the impact of the sustainable fundamental business improvements in the Chicken segment.

Tyson Foods’ peers in the food industry include Pilgrim’s Pride (PPC), Hormel Foods (HRL), and Sanderson Farms (SAFM). They reported net profit margins of 6.0%, 10.2%, and 1.7% in their last respective quarters.

To gain exposure to these stocks, you can invest in the First Trust Consumer Staples AlphaDEX Fund (FXG). FXG invests 15% of its portfolio in Hormel Foods, Tyson Foods, and Pilgrim’s Pride. Sanderson Farms’ stock accounts for 1.3% of the AdvisorShares TrimTabs Float Shrink ETF (TTFS).

In the next part of this series, we’ll look at Tyson Foods’ updated projections for fiscal 2016.


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