Tyson Foods, Inc.

views updated May 17 2018

Tyson Foods, Inc.

2210 West Oaklawn Drive
Springdale, Arkansas 72762-6999
U.S.A.
Telephone: (479) 290-4000
Toll Free: 1-800-4-CHICKEN (1-800-424-4253)
Fax: (479) 290-4061
Web site: http://www.tysonfoodsinc.com

Public Company
Incorporated: 1947 as Tyson Feed & Hatchery, Incorporated
Employees: 120,000 (2002 est.)
Sales: $10,751 billion (2001)
Stock Exchanges: New York
Ticker Symbol: TSN
NAIC: 311615 Poultry Processing; 311999 All Other Miscellaneous Food Manufacturing; 311412 Frozen Specialty Food Manufacturing; 311611 Animal (except Poultry) Slaughtering; 311612 Meat Processed from Carcasses

Founded in 1935, Arkansas-based Tyson Foods, Inc. is the world’s largest processor and marketer of chicken, beef, and pork. The company produces a wide variety of brand name, processed food products—including fresh meats, processed and precooked meats, refrigerated and frozen prepared foods, and animal feeds—and is the recognized market leader in almost every retail and foodservice market it serves. A $24-billion operation, Tyson supplies about 25 billion pounds of chicken, beef, and pork per year to McDonald’s, Wal-Mart, and most major supermarket and restaurant chains in the United States. The company employs about 120,000 people and operates in 32 states and 22 countries. The Tyson family controls 80 percent of the company’s voting power.

1935 to Early 1960s: The Early Years

During the Depression, John Tyson moved to Springdale, Arkansas, with his wife and one-year-old son Don. In 1935, he bought 50 “springer” chickens and hauled them to Chicago to sell at a profit. Two years later, he named his business Tyson Feed & Hatchery. Over the next 13 years the company prospered by buying and selling chickens, aided by the postwar boom, which brought improved kitchen appliances and the first supermarkets. Gradually, however, Tyson became involved in raising chickens, which allowed him better control over the quality of what he sold. In 1947, the company was incorporated.

Five years later, Don Tyson graduated from college and joined the company as head of operations. Father and son were said to have made a dynamic team, the older Tyson more cautious and the younger one pushing forward. For example, Don convinced his father to raise rock cornish game hens, a market that Tyson would one day dominate.

For the next six years, Tyson focused on expanding production facilities, and, in 1957, the company opened a processing plant in Springdale, Arkansas, the site of the company headquarters. Tyson also introduced its first ice-pack processing line, which brought the company into a more competitive industry bracket. By achieving more complete vertical integration, its dependence on other suppliers lessened.

During the early 1960s, many amateur chicken producers were lured into the market by the drop in feed-grain prices and the easy availability of credit. As a result, broiler production rose about 13 percent between 1965 and 1967. The glut that followed caused big price cuts and accounted for about $50 million in losses in the industry. Several small companies were forced out of business, but the demand for low-priced chicken soared. People were eating four times as much chicken as they did in 1950.

Mid-1960s through 1970s: A Growing Company in a New Industry

In 1963, Tyson went public and changed its name to Tyson’s Foods, Incorporated. It also made its first acquisition, the Garrett Poultry Company, based in Rogers, Arkansas. In 1966, John Tyson and his wife died in an automobile accident, and Don Tyson took over the business as president.

Technological improvements in the 1960s fundamentally changed the poultry industry. Broiler production had become one of the most industrialized, automated parts of U.S. agriculture. Through the development of better feeds and better disease control methods, chickens were maturing more quickly. These improvements, combined with increased competition, meant lower prices for consumers, but, for processors, it meant lower earnings. In 1967, despite a 37 percent gain in sales, Tyson lost more than a dollar per share in earnings. Nonetheless, the company took advantage of a situation in which several smaller companies were floundering, and, with its acquisition of Franz Foods, Inc., continued its pattern of buying out smaller poultry concerns. It also began to give its corporate name more visibility, printing “Tyson Country Fresh Chicken” on its wrappers instead of the name of the supermarket to which the chickens were sold.

In 1968, Tyson went to court with two other processors when an Agriculture Department officer alleged that the processors had discriminated against Arkansas chicken farmers who were members of an association of poultry farmers. At that time, processors customarily hired farmers to raise their chickens; Tyson and the others had been accused of “boycotting and blacklisting” association members in 1962. In 1969, a federal appeals court ruled that the Agriculture Department had “erred” in treating the chicken processors like meatpackers and, therefore, did not have the authority under existing laws to take any action against them.

Also in 1969, Tyson acquired Prospect Farms, Inc., the company that became its precooked chicken division. That year Tyson produced more than 2 percent of the nation’s chickens, 70 percent for retail sale and 30 percent for institutions. The company had grown from 15 to 3,000 employees and operated five chicken-processing plants and four protein-processing plants in northwest Arkansas and southwest Missouri.

During the 1970s, Tyson continued to grow and diversify. In 1970, a new egg facility was built, and, in 1971, a computerized feed mill and a plant in Nashville, Arkansas, were completed. Also in 1971 the company’s name was changed from Tyson’s Foods to Tyson Foods. In 1972, Tyson acquired the Ocoma Foods Division of Consolidated Foods Corporation, including three new plants, as well as Krispy Kitchens, Inc., and the poultry division of Wilson Foods. That year Tyson began selling the Ozark Fry, the first breaded chicken breast patty, and also bought a hog operation in Creswell, North Carolina, from First Colony Farms.

1972 was a shakeout year in the poultry business, and several large processors sold out to those with better prospects of survival, easing competition. Because of the rising prices of beef and pork, chicken consumption was increasing at a rapid rate, and new products and technological developments seemed to promise improved profits for the industry. Tyson was already a leader in introducing new products like its chicken patty, chicken hotdog, and chicken bologna; by 1979, it had 24 specialty products. Tyson also operated three plants that used the new deep chill (rather than ice-pack) process, in which the moisture of the bird was frozen at 28 degrees—one degree warmer than the temperature at which chicken meat freezes, leaving the meat still tender and doubling shelf life to about 25 days.

In the early 1970s Tyson closed its unprofitable plant in Shelbyville, Tennessee, but reopened it in 1974 to produce more popular processed and precooked chicken products. In 1973, Tyson bought Cassady Broiler Company, another small poultry concern, and in the next year acquired Vantress Pedigree, Inc. A civil antitrust lawsuit brought against Tyson and other broiler processors in 1974 for conspiring to fix, maintain, and stabilize broiler prices was settled in 1977. Tyson agreed to pay a $975,663 fine to about 30 chicken purchasers. In 1978, Tyson acquired the rest of Wilson Foods Corporation. A year later the company sold its two North Carolina chicken processing plants.

1980s to Early 1990s: Bigger Gains and Growing Pains

By the early 1980s, consumers’ nutritional concerns and the continuously high prices of beef and pork had caused the nation’s poultry consumption to increase 30 percent since 1970. This increase was also partly due to innovative, easy-to-prepare products from companies like Tyson and the industry’s ability to improve breeding and feed techniques. Some of Tyson’s experiments had produced six-pound chickens in just six weeks.

In 1980, Tyson introduced its Chick ‘n Quick line of products, which included a variety of chicken portions that were easy to prepare. By then Tyson was the largest grower of Rock Cornish game hens and one of the nation’s largest hog producers. As it perfected its precooked chicken patty for restaurants, its institutional sales grew. In 1983, Tyson implemented its new advertising slogan, “Doing our best … just for you” with television commercials on all three major networks in the United States. The company also acquired Mexican Original Products, Inc., a manufacturer of tortillas, taco shells, tostados, and tortilla chips.

In 1984, Cobb, Inc., and Tyson began a joint venture called Arkansas Breeders to breed and develop the Cobb 500, a female with fast growth, low fat, and high meat content. Later that same year, Tyson acquired 90 percent of another poultry firm, Valmac Industries. By then, Tyson had expanded its operations into six states—Georgia, North Carolina, Missouri, Tennessee, Louisiana, and Arkansas—and many of its products were being distributed internationally. In 1986, The Wall Street Transcript named Don Tyson the gold award winner in the meat and poultry industry. The company acquired Lane Processing Inc., a closely held poultry-processing firm that had been bankrupt since 1984.

Company Perspectives:

Our vision at Tyson is to be the world’s first choice for protein while maximizing shareholder value. We are dedicated to producing and marketing trusted quality food products that fit today’s changing lifestyles and to attracting, rewarding and retaining the best people in the food industry.

In October 1988, Tyson made a takeover bid for Memphis-based Holly Farms Corporation, the national leader in brand name chicken sales. Holly Farms had begun more than a century before as a cotton compressor. Over the years it had evolved into a chicken and foodservice firm with vast holdings and a 19 percent share of the brand name chicken market. It had been the first processor to use its own name rather than the retail seller’s on its packaging, which gave the company a longstanding credibility with consumers and made it a very attractive purchase. Holly Farms rejected the bid, nodding to Tennessee takeover laws, and agreed to merge with ConAgra, Inc., one of the nation’s largest food companies and a leading poultry producer based in Omaha, Nebraska. Holly Farms also agreed to sell its poultry assets to ConAgra should the merger not come to fruition. In mid-November, Tyson sued Holly Farms and ConAgra to stop the merger. A few days later, a federal judge ruled that Tennessee’s anti-takeover laws were unconstitutional and could not be used to halt Tyson’s bid, opening an eight-month fight between Tyson and ConAgra for control of Holly Farms.

Tyson’s rapid growth in the fast-food chicken business had put a strain on its production facilities, and Tyson needed Holly Farms’s chicken supply. More than half of Tyson’s business now was with institutions and restaurants, and Tyson’s name was not as popular as Holly Farms’s in grocery stores. Finally in June 1989, Don Tyson agreed to pay $1.29 billion for Holly Farms, and the company was fully merged into Tyson later that year. In 1990, its first full year with Holly Farms under its wing, Tyson’s sales increased 50.7 percent. The purchase of Holly Farms made Tyson the undisputed king of the chicken industry. It also gained a stronger position in beef and pork through Holly Farms’s further-processing operations. Tyson’s Beef and Pork Division grew substantially over the next several years and claimed 11 percent of the company’s revenue by 1995.

In 1991, Leland E. Tollett, a college classmate of Don Tyson whom Tyson had brought into the firm in the late 1950s, was named president and chief executive officer; Tyson remained chairman of the board, but was slowly reducing his responsibilities.

Tyson next turned its attention to seafood in an effort to further diversify its operations. In 1992 Tyson acquired Arctic Alaska Fisheries Corporation, a vertically integrated seafood products company, and Louis Kemp Seafood Company, which was purchased from Oscar Mayer Foods Corporation. Tyson’s resulting Seafood Division experienced some rocky initial years, and the firm was forced to take a write-down of $205 million on its seafood assets in 1994, the first major write-down in Tyson’s history. The Seafood Division was subsequently revamped and then bolstered by the 1995 acquisition of the seafood division of International Multifoods Corp., which had $65 million in sales in 1994 and produced simulated crabmeat, lobster, shrimp, and scallops.

Arkansas Governor Bill Clinton’s presidential election campaign and his subsequent term in office brought unwanted attention to the condition of Tyson’s chicken processing plants and eventually embroiled the company in controversies. As governor of Arkansas, Clinton had strongly supported the chicken industry, and Don Tyson was a major contributor to Clinton’s presidential bid. During the campaign several journalistic investigations of the chicken industry in Arkansas, such as one published in Time, revealed that many of the plants were unsanitary and dangerous and staffed by low-paid workers often subject to such difficult conditions as line speed-ups. Environmentalists had also charged that Clinton, while he was governor, had allowed the Arkansas poultry industry to dump tons of chicken waste in Arkansas streams.

After Clinton took office, the close ties between Tyson and the president aroused controversy first when reports stated that James Blair, Tyson’s general counsel and a close friend of Bill Clinton and Hillary Rodham Clinton, had helped Hillary Rodham Clinton make a killing in the commodity markets. Then came reports in 1994 that Mike Espy, agriculture secretary under Clinton, had accepted a trip on a Tyson jet and football tickets from Tyson in exchange for favorable treatment from poultry inspectors. Espy subsequently resigned over this matter. Tyson denied any wrongdoing.

Tyson had traditionally expanded its chicken processing capacity through the purchase of existing facilities, but when it decided it needed to expand in 1994, no suitable plants could be found that were for sale. The company then decided to build—at a cost of about $400 million—four new poultry plants over a four-year period, each of which would be able to process 1.3 million chickens a week. That year Tyson also bought a controlling interest in Trasgo, S.A. de C.V., a Mexican joint venture started in 1988. Trasgo held the number three position in the growing chicken market in Mexico.

Key Dates:

1935:: Company founder, John Tyson, begins selling chickens in Springdale, Arkansas.
1947:: Tyson Feed & Hatchery is incorporated.
1957:: The company’s first processing plant opens on the north side of Springdale.
1963:: The company goes public and changes its name to Tyson’s Foods, Incorporated.
1966:: The founder’s son, Don, becomes president of the company.
1970:: Tyson’s debuts on the Fortune 1000.
1971:: The company name changes to Tyson Foods.
1977:: Tyson becomes the nation’s largest hog producer.
1982:: Tyson debuts on the Fortune 500.
1986:: Tyson becomes number one in poultry processing.
1989:: Tyson acquires Holly Farms and nearly doubles its national market share.
1992:: Tyson goes into the seafood business with the purchase of Arctic Alaska Fisheries, Inc., and Louis Kemp Seafood.
1998:: Tyson merges with longtime competitor Hudson Foods. The founder’s grandson, John Tyson, becomes chairman of the board.
2000:: Tyson celebrates its 65th anniversary. John Tyson becomes CEO.
2001:: Tyson acquires IBP and becomes the world’s largest processor and marketer of chicken, beef, and pork.

Also in 1994, Tyson acquired Culinary Foods, Inc., a maker of specialty frozen foods mostly for the foodservice market, and Gorges Foodservice, Inc., a further processor of beef for the foodservice market. Tyson failed, however, to acquire a much larger prize, WLR Foods Inc., a $700 million Virginia-based producer of high-quality turkey and chicken products sold primarily under the Wampler-Longacre brand. Similar to Tyson’s experience with Holly Farms, WLR management fought Tyson’s $330 million attempt to take over the company in early 1994, an attempt that then turned hostile. WLR instituted a takeover defense, which Tyson fought in federal district court as unconstitutional. This time, unlike the Holly Farms case, the judge ruled against Tyson in a decision that summer. Early in 1995, Tyson announced it would appeal the decision to the U.S. Circuit Court of Appeals.

The Seafood Division write-down had soured Tyson’s 1994 results and it posted a $2 million loss, its first in years. Not to be deterred, the company continued its aggressive expansion in 1995 with the purchase of the chicken plants of Cargill, which had decided it could no longer compete with Tyson’s chicken empire. This purchase added more than 2.5 million chickens per week to Tyson’s processing capacity. Another 2.4 million chickens per week were added later in the year with the acquisition of McCarty Farms Inc., a Mississippi-based closely held firm.

An important era for Tyson ended in April 1995 when Don Tyson retired as chairman, denying that the firm’s recent controversies had prompted the move. Tyson remained involved in the firm as senior chairman, but day-to-day operations were handed over to Tollett, who became chairman in addition to his previous position as CEO, and Donald “Buddy” Wray, who became president in addition to his previous position as chief operating officer. Like Tollett, Wray was another college classmate of Tyson’s and had joined the firm in 1961. John Tyson, Don’s then-41-year-old son, was reportedly being groomed to eventually run the company and held the position of president of the Beef and Pork Division.

Mid-1990s and Beyond: Tyson’s Plate Gets Crowded

By 1995, Tyson Foods enjoyed a strong position as the leading chicken firm in the United States and looked forward to continuing tremendous growth. Sales had more than doubled from the pre-Holly Farms level of $2.54 billion in 1989 to $5.11 billion in 1994. Tyson was diversifying its operations to become more than just a poultry company, aiming to be a leader in all “center-of-the-plate” proteins. In 1994, poultry accounted for only 75 percent of Tyson’s revenues. From this strong position, Tyson appeared ready to more aggressively pursue overseas opportunities, evidenced by the formation of a joint venture in the People’s Republic of China in 1994, the opening of an office in Moscow in 1995, and the formation in 1995 of a subsidiary, World Resource, Inc., designed to help Tyson’s customers throughout the world source products. About 10 percent of the firm’s revenues (about $500 million) derived from international sales.

Tyson’s past investment in seafood continued to be problematic. In February 1996, the company agreed to pay Alaska up to $5.85 million over ten years to settle allegations of illegal fishing off the Alaska Peninsula in the early 1990s, a legal problem Tyson assumed when it purchased Arctic Alaska Fisheries Corp. in 1992. Later in 1996, the Securities and Exchange Commission accused Donald Tyson of tipping off a friend who then made a quick profit in the stock of Arctic Alaska Fisheries while the sale of the seafood company to Tyson was pending. Tyson quickly agreed to pay a civil penalty of $46,125.

In the fall of 1997, Tyson announced that it planned to acquire the fourth-largest U.S. poultry processor, Hudson Foods Inc., for $642.4 million. The move meant that Tyson would gain control of 30 percent of the U.S. poultry market. However impressive the move, the year ended on an embarrassing note for Tyson, with the company pleading guilty to giving former agriculture secretary Mike Espy $12,000 in illegal gratuities. According to Susan Schmidt writing for The Washington Post, “Tyson Foods admitted to lavishing gifts on Espy—including football tickets, airline trips, meals and scholarship money for his girlfriend—at a time when his department was considering action on several matters affecting the company’s business, including safe handling instructions on poultry packaging.” Tyson consented to pay $6 million in fines and costs.

As the poultry industry was faced with an oversupply and low prices, Tyson took a number of measures designed to reduce production, improve its product mix, and focus on higher added-value products. Consequently, 1998 and 1999 for Tyson were years marked by restructuring and streamlining, including some divesting of nonchicken businesses. In 1998, Tyson closed a laying-hen-processing plant in Bloomer, Arkansas, and sold off a turkey processing plant in Minnesota. That same year, the company created a new division, the Tyson Prepared Foods Group, under which many of Tyson’s businesses realigned. In 1999, Tyson sold its seafood and pork groups.

After about twenty years of double-digit profit growth, Tyson shares peaked in late 1998, and then dropped sharply over the next two years. Despite its efforts to address a chicken oversupply and low prices, Tyson saw a dramatic 45 percent drop in its second quarter profits for 2000. Still, Tyson had its 65th anniversary to celebrate. As part of the celebration, the company launched a major campaign to fight hunger. Partnering with Share Our Strength (SOS), Tyson committed to providing $10 million in product and support to local communities over three years. The company also announced that it would donate 650,000 pounds of chicken to local hunger organizations. Total sales for 2000 fell just short of the previous year’s, at $7,158 billion, compared to 1999’s $7,363 billion. Year 2000 net income fell to $151 million, from the previous year’s $230 million. In 2001, Tyson began test marketing an organically grown chicken product, Nature’s Farm Organic Chicken, in an effort to find a way to compete in the growing organic and natural foods markets.

Even though Tyson’s past was checkered with failed attempts to diversify into beef, pork and seafood, the company still sought a way to go beyond chicken. In mid-2001, Tyson made its boldest move to diversify, and this time, the company seemed to get it right. Tyson acquired IBP, the world’s largest beef processor, for $4.4 billion, transforming the company from a giant chicken-only operation into the largest diversified meat company in the world. The acquisition made Tyson a $23-billion enterprise, responsible for processing nearly one-quarter of all meat sold in the United States, and earned the company a third-place U.S. ranking as a packaged food company, behind Philip Morris’s Kraft Foods division and ConAgra. Profits and sales surged after the acquisition: profits tripled in the most recent quarter after the sale; chicken prices rose during the summer as glut-busting production cuts took effect and demand for wings and legs improved; and pork sales grew by more than tenfold to $508.7 million.

The year for Tyson ended on a negative note, however, as the company faced serious allegations of illegal hiring practices, brought on by a two-and-a-half-year investigation by the Department of Justice. Tyson and several employees were indicted for conspiring to smuggle illegal immigrants across the United States-Mexico border and put them to work with false documentation. Tyson was investigated for financial gains derived from the alleged offense, which was estimated to be in excess of $100 million.

IBP’s businesses continued to benefit Tyson’s bottom line into 2002. Tyson’s mid-year profits jumped to a sixfold increase, raising net income to $107 million, compared to 2001. Also, in that same time frame, revenue tripled to $5.9 billion from $1.92 billion. International sales, however, were less successful. Russia, the world’s leading poultry importer, halted purchases from the United States, citing concerns over sanitation and handling practices. China also imposed import restrictions, further hurting Tyson’s foreign sales.

Principal Operating Units

Foodservice and International Unit; Retail and Consumer Products Unit; Fresh Meats.

Principal Competitors

Cagle’s; Cargill; ConAgra; ContiGroup; Farmland Industries; Foster Farms; Gold Kist; Hormel; Keystone Foods; Perdue; Pilgrim’s Pride; Sanderson Farms; Sara Lee Foods; Smithfield Foods.

Tyson Foods, Incorporated

views updated May 14 2018

Tyson Foods, Incorporated

2210 West Oaklawn Drive
Springdale, Arkansas 72764
U.S.A.
(501) 756–4000

Public Company
Incorporated: 1947 as Tyson Feed & Hatchery, Incorporated
Employees: 26,000
Sales: $1.94 billion
Stock Index: NASDAQ

During the Depression, John Tyson, an Arkansas farmer, began selling chickens while his son Don was still a toddler. Don Tyson grew up along with the company, and eventually transformed it into a giant in the poultry industry.

In 1935, John Tyson bought 50 “springer” chickens and hauled them to Chicago to sell at a profit. Two years later, he named his business Tyson Feed & Hatchery. Over the next thirteen years the company prospered by buying and selling chickens, especially with the postwar boom that brought, among other things, improved kitchen appliances and the first supermarkets.

Gradually, however, Tyson became involved in raising chickens, which allowed him better control over the quality of what he sold. In 1947, the company was incorporated.,

Five years later, Don Tyson graduated from college and joined the company as head of operations. Father and son were said to have made a dynamic team, the older Tyson more cautious and the younger one pushing forward. For example, Don convinced his father to raise rock cornish game hens, a market that Tyson would one day dominate.

For the next six years, Tyson focused on expanding production facilities, and in 1958, the company opened a processing plant in Springdale, Arkansas, the site of company headquarters. Tyson also introduced its first ice-pack processing line, which brought the company into a more competitive industry bracket. By achieving more complete vertical integration, its dependence on other suppliers lessened.

During the early 1960s, many amateur chicken producers were lured into the market by the drop in feed-grain prices and the easy availability of credit. As a result, broiler production rose about 13% between 1965 and 1967. The glut that followed caused big price cuts and accounted for about $50 million in losses in the industry. Several small companies were forced out of business, but the demand for low-priced chicken soared. People were eating four times as much chicken as they did in 1950.

In 1963, Tyson went public and changed its name to Tyson’s Foods, Incorporated. It also made its first acquisition, of the Garrett Poultry Company, based in Rogers, Arkansas.

In 1966, John Tyson and his wife died in an automobile accident, and Don Tyson took over the business as president. The growth of the poultry industry in the 1960s was largely due to technological improvements. Broiler production had become one of the most industrialized, automated parts of American agriculture. Through the development of better feeds and better disease control methods, chickens were maturing more quickly. All of this was good for consumers, but for processors, it meant lower earnings. In 1967, despite a 37% gain in sales, Tyson lost more than a dollar per share in earnings. Nonetheless, the company took advantage of a situation in which several smaller companies were floundering, and with its acquisition of Franz Foods, Inc. continued its pattern of buying out smaller poultry concerns. It also began to give its corporate name more visibility, printing “Tyson Country Fresh Chicken” on its wrappers instead of the name of the supermarket the chickens were sold to.

In 1968, Tyson went to court with two other processors when an Agriculture Department officer alleged that the processors had discriminated against Arkansas chicken farmers who were members of an association of poultry farmers. At that time, it was customary for processors to hire farmers to raise their chickens; Tyson and the others had been accused of “boycotting and blacklisting” association members in 1962. In 1969, a federal appeals court ruled that the Agriculture Department had “erred” in treating the chicken processors like meat packers and therefore did not have the authority under existing laws to take any action against them.

Also in 1969, Tyson acquired Prospect Farms, Inc., the company that became its pre-cooked chicken division. That year Tyson produced more than 2% of the nation’s chickens, 70% for retail sale and 30% for institutions. The company had grown from 15 to 3,000 employees and operated five chicken-processing plants and four protein-processing plants in northwest Arkansas and southwest Missouri.

During the 1970s, Tyson continued to grow and diversify. In 1970, a new egg facility was built, and in 1971, a computerized feed mill and a plant in Nashville, Arkansas were completed. Also in 1971 the company’s name was changed from Tyson’s Foods to Tyson Foods. In 1972, Tyson acquired the Ocoma Foods Division of Consolidated Foods Corporation, including three new plants, as well as Krispy Kitchens, Inc. and the poultry division of Wilson Foods. That year Tyson began selling the Ozark Fry, the first breaded chicken breast pattie, and also bought a hog operation in Creswell, North Carolina from First Colony Farms.

1972 was a shakeout year in the poultry business, and several large processors sold out to those with better prospects of survival, easing competition. Because of the rising prices of beef and pork, chicken consumption was increasing at a rapid rate, and new products and technological developments seemed to promise improved profits for the industry. Tyson was already a leader in introducing new products like its chicken pattie, chicken hotdogs, and chicken bologna—by 1979, it had 24 specialty products. Tyson also operated three plants that used the new deep chill (rather than ice-pack) process, in which the moisture of the bird was frozen at 28°—one degree warmer than the temperature at which chicken meat freezes, leaving the meat still tender and doubling shelf life to about 25 days. In 1973, Tyson bought Cassady Broiler Company, another small poultry concern.

In the early 1970s Tyson closed its money-losing plant in Shelbyville, Tennessee, but reopened it in 1974 to produce more popular processed and pre-cooked chicken products. Tyson also acquired Vantress Pedigree, Inc. in 1974.

A civil antitrust lawsuit brought against Tyson and other broiler processors in 1974 for conspiring to fix, maintain, and stabilize broiler prices was settled in 1977. Tyson agreed to pay a $975,663 fine to about 30 chicken purchasers.

In 1978, Tyson acquired the rest of Wilson Foods Corporation. A year later the company sold its two North Carolina chicken-processing plants.

In 1980, Tyson introduced its Chick’n Quick line of products, which included a variety of chicken portions that were easy to prepare. By then Tyson was the largest grower of rock cornish game hens and one of the nation’s largest hog producers. As it perfected its pre-cooked chicken pattie for restaurants, its institutional sales also grew.

In 1983, Tyson implemented its new advertising slogan, “Doing our best... just for you” with television commercials on all three major networks. The company also acquired Mexican Original Products, Inc., a manufacturer of tortillas, taco shells, tostados, and tortilla chips.

By the early 1980s, consumers’ nutritional concerns and the continually high prices of beef and pork had caused the nation’s poultry consumption to increase 30% since 1970. This increase was also partly due to innovative, easy-to-prepare products from companies like Tyson and the industry’s ability to improve breeding and feed techniques. Some of Tyson’s experiments had produced six-pound chickens in just six weeks. In 1984, Cobb, Inc. and Tyson began a joint venture called Arkansas Breeders, to breed and develop the Cobb 500, a female with fast growth, low fat, and high meat content.

In September of 1984, Tyson acquired 90% of another poultry firm, Valmac Industries. By then, Tyson had expanded its operations into six states—Georgia, North Carolina, Missouri, Tennessee, Louisiana, and Arkansas—and many of its products were being distributed internationally.

In 1986, The Wall Street Transcript named Don Tyson the gold award winner in the meat and poultry industry. The company acquired Lane Processing Inc. a closely held poultry processing firm that had been bankrupt since 1984.

In October, 1988, Tyson made a takeover bid for Holly Farms Corporation, the national leader in brand-name chicken sales based in Memphis, Tennessee. Holly Farms had begun more than a century before as a cotton compressor. Over the years it had evolved into a chicken and food service firm with vast holdings and a 19% share of the brand-name chicken market. It had been the first processor to use its own name rather than the retail seller’s on its packaging, which gave the company a long-standing credibility with consumers and made it a very attractive purchase. Holly Farms rejected the bid, nodding to Tennessee takeover laws, and agreed to merge with ConAgra, Inc., one of the nation’s largest food companies and a leading poultry producer based in Omaha, Nebraska. Holly Farms also agreed to sell its poultry assets to ConAgra should the merger not come to fruition. In mid-November, Tyson sued Holly Farms and ConAgra to stop the merger. A few days later, a federal judge ruled that Tennessee’s anti-takeover laws were unconstitutional and could not be used to halt Tyson’s bid, opening an eight-month fight between Tyson and ConAgra for control of Holly Farms.

Tyson’s rapid growth in the fast-food chicken business had put a strain on its production facilities, and Tyson needed Holly Farms’s chicken supply. More than half of Tyson’s business now was with institutions and restaurants, and Tyson’s name was not as popular as Holly Farms’s in the grocery stores. Finally in June, 1989, Don Tyson agreed to pay $1.3 billion for Holly Farms, and the company was fully merged into Tyson later that year.

Between 1984 and 1989 Tyson’s profits more than quadrupled while its revenues nearly tripled. With the acquisition of Holly Farms, Tyson is the new king of the chicken industry—an industry that has seen explosive growth, but can look forward to more if projections that chicken will pass beef as the number-one meat in the early 1990s are true. In an interview with Forbes in 1988, Tyson explained that executives at Tyson were required to wear khakis: “If we all wore suits we’d sit here in the office, and we don’t make money in here. We make it out in the field.” As long as this kind of hard-working lack of pretension characterizes the way Don Tyson does business, and as long as chicken prices stay high enough to keep Tyson’s debt load from its Holly Farms acquisition manageable, Tyson’s future looks promising.

Principal Subsidiaries

Tyson Carolina, Inc.; Tyson Express, Inc.; Coastals Rentals and Rigging Corp.; Tyson Export Sales, Inc.; Dixie Home Farms, Inc.; Tyson’s Pride of Oklahoma, Inc.; Poultry Growers, Inc.

International Directory of Company Histories

Tyson Foods, Inc.

views updated Jun 08 2018

Tyson Foods, Inc.

2210 West Oaklawn Drive
Springdale, Arkansas 72762-6999
U.S.A.
(501) 290-4000
Fax: (501) 290-4061

Public Company
Incorporated: 1947 as Tyson Feed & Hatchery, Incorporated
Employees: 62,880
Sales: $5.11 billion
Stock Exchanges: NASDAQ
SICs: 2015 Poultry Slaughtering & Processing; 2038 Frozen
Specialties Not Elsewhere Classified; 0254 Poultry
Hatcheries

During the Depression, when his son Don was still a toddler, John Tyson, an Arkansas farmer, began selling chickens. Don Tyson grew up along with the company and eventually transformed it into a giant in the poultry industry. The 1990s have seen Tyson Foods, Inc., become a significant player in the beef, pork, and seafood markets as well.

In 1935, John Tyson bought 50 “springer” chickens and hauled them to Chicago to sell at a profit. Two years later, he named his business Tyson Feed & Hatchery. Over the next 13 years the company prospered by buying and selling chickens, aided by the postwar boom which brought improved kitchen appliances and the first supermarkets. Gradually, however, Tyson became involved in raising chickens, which allowed him better control over the quality of what he sold. In 1947, the company was incorporated.

Five years later, Don Tyson graduated from college and joined the company as head of operations. Father and son were said to have made a dynamic team, the older Tyson more cautious and the younger one pushing forward. For example, Don convinced his father to raise rock cornish game hens, a market that Tyson would one day dominate.

For the next six years, Tyson focused on expanding production facilities, and, in 1958, the company opened a processing plant in Springdale, Arkansas, the site of the company headquarters. Tyson also introduced its first ice-pack processing line, which brought the company into a more competitive industry bracket. By achieving more complete vertical integration, its dependence on other suppliers lessened.

During the early 1960s, many amateur chicken producers were lured into the market by the drop in feed-grain prices and the easy availability of credit. As a result, broiler production rose about 13 percent between 1965 and 1967. The glut that followed caused big price cuts and accounted for about $50 million in losses in the industry. Several small companies were forced out of business, but the demand for low-priced chicken soared. People were eating four times as much chicken as they did in 1950.

In 1963, Tyson went public and changed its name to Tyson’s Foods, Incorporated. It also made its first acquisition, of the Garrett Poultry Company, based in Rogers, Arkansas. In 1966, John Tyson and his wife died in an automobile accident, and Don Tyson took over the business as president.

Technological improvements in the 1960s fundamentally changed the poultry industry. Broiler production had become one of the most industrialized, automated parts of American agriculture. Through the development of better feeds and better disease control methods, chickens were maturing more quickly. These improvements, combined with increased competition, meant lower prices for consumers, but, for processors, it meant lower earnings. In 1967, despite a 37 percent gain in sales, Tyson lost more than a dollar per share in earnings. Nonetheless, the company took advantage of a situation in which several smaller companies were floundering, and with its acquisition of Franz Foods, Inc., continued its pattern of buying out smaller poultry concerns. It also began to give its corporate name more visibility, printing “Tyson Country Fresh Chicken” on its wrappers instead of the name of the supermarket the chickens were sold to.

In 1968, Tyson went to court with two other processors when an Agriculture Department officer alleged that the processors had discriminated against Arkansas chicken farmers who were members of an association of poultry farmers. At that time, processors customarily hired farmers to raise their chickens; Tyson and the others had been accused of “boycotting and blacklisting” association members in 1962. In 1969, a federal appeals court ruled that the Agriculture Department had “erred” in treating the chicken processors like meatpackers and therefore did not have the authority under existing laws to take any action against them.

Also in 1969, Tyson acquired Prospect Farms, Inc., the company that became its precooked chicken division. That year Tyson produced more than 2 percent of the nation’s chickens, 70 percent for retail sale and 30 percent for institutions. The company had grown from 15 to 3,000 employees and operated five chicken-processing plants and four protein-processing plants in northwest Arkansas and southwest Missouri.

During the 1970s, Tyson continued to grow and diversify. In 1970, a new egg facility was built, and, in 1971, a computerized feed mill and a plant in Nashville, Arkansas, were completed. Also in 1971 the company’s name was changed from Tyson’s Foods to Tyson Foods. In 1972, Tyson acquired the Ocoma Foods Division of Consolidated Foods Corporation, including three new plants, as well as Krispy Kitchens, Inc., and the poultry division of Wilson Foods. That year Tyson began selling the Ozark Fry, the first breaded chicken breast patty, and also bought a hog operation in Creswell, North Carolina, from First Colony Farms.

1972 was a shakeout year in the poultry business, and several large processors sold out to those with better prospects of survival, easing competition. Because of the rising prices of beef and pork, chicken consumption was increasing at a rapid rate, and new products and technological developments seemed to promise improved profits for the industry. Tyson was already a leader in introducing new products like its chicken patty, chicken hotdog, and chicken bologna—by 1979, it had 24 specialty products. Tyson also operated three plants that used the new deep chill (rather than ice-pack) process, in which the moisture of the bird was frozen at 28 degrees—one degree warmer than the temperature at which chicken meat freezes, leaving the meat still tender and doubling shelf life to about 25 days.

In the early 1970s Tyson closed its money-losing plant in Shelby ville, Tennessee, but reopened it in 1974 to produce more popular processed and precooked chicken products. In 1973, Tyson bought Cassady Broiler Company, another small poultry concern, and in the next year acquired Vantress Pedigree, Inc.

A civil antitrust lawsuit brought against Tyson and other broiler processors in 1974 for conspiring to fix, maintain, and stabilize broiler prices was settled in 1977. Tyson agreed to pay a $975,663 fine to about 30 chicken purchasers.

In 1978, Tyson acquired the rest of Wilson Foods Corporation. A year later the company sold its two North Carolina chicken-processing plants. In 1980, Tyson introduced its Chick’n Quick line of products, which included a variety of chicken portions that were easy to prepare. By then Tyson was the largest grower of rock cornish game hens and one of the nation’s largest hog producers. As it perfected its precooked chicken patty for restaurants, its institutional sales grew.

In 1983, Tyson implemented its new advertising slogan, “Doing our best…just for you” with television commercials on all three major networks in the United States. The company also acquired Mexican Original Products, Inc., a manufacturer of tortillas, taco shells, tostados, and tortilla chips.

By the early 1980s, consumers’ nutritional concerns and the continuously high prices of beef and pork had caused the nation’s poultry consumption to increase 30 percent since 1970. This increase was also partly due to innovative, easy-to-prepare products from companies like Tyson and the industry’s ability to improve breeding and feed techniques. Some of Tyson’s experiments had produced six-pound chickens in just six weeks. In 1984, Cobb, Inc., and Tyson began a joint venture called Arkansas Breeders, to breed and develop the Cobb 500, a female with fast growth, low fat, and high meat content.

In September 1984, Tyson acquired 90 percent of another poultry firm, Valmac Industries. By then, Tyson had expanded its operations into six states—Georgia, North Carolina, Missouri, Tennessee, Louisiana, and Arkansas—and many of its products were being distributed internationally. In 1986, The Wall Street Transcript named Don Tyson the gold award winner in the meat and poultry industry. The company acquired Lane Processing Inc., a closely held poultry processing firm that had been bankrupt since 1984.

In October 1988, Tyson made a takeover bid for Memphis-based Holly Farms Corporation, the national leader in brand-name chicken sales. Holly Farms had begun more than a century before as a cotton compressor. Over the years it had evolved into a chicken and food service firm with vast holdings and a 19 percent share of the brand-name chicken market. It had been the first processor to use its own name rather than the retail seller’s on its packaging, which gave the company a longstanding credibility with consumers and made it a very attractive purchase. Holly Farms rejected the bid, nodding to Tennessee takeover laws, and agreed to merge with ConAgra, Inc., one of the nation’s largest food companies and a leading poultry producer based in Omaha, Nebraska. Holly Farms also agreed to sell its poultry assets to ConAgra should the merger not come to fruition. In mid-November, Tyson sued Holly Farms and ConAgra to stop the merger. A few days later, a federal judge ruled that Tennessee’s antitakeover laws were unconstitutional and could not be used to halt Tyson’s bid, opening an eight-month fight between Tyson and ConAgra for control of Holly Farms.

Tyson’s rapid growth in the fast-food chicken business had put a strain on its production facilities, and Tyson needed Holly Farms’s chicken supply. More than half of Tyson’s business now was with institutions and restaurants, and Tyson’s name was not as popular as Holly Farms’s in grocery stores. Finally in June 1989, Don Tyson agreed to pay $1.29 billion for Holly Farms, and the company was fully merged into Tyson later that year. In 1990, its first full year with Holly Farms under its wing, Tyson’s sales increased 50.7 percent. The purchase of Holly Farms made Tyson the undisputed king of the chicken industry. It also gained a stronger position in beef and pork through Holly Farms’s further-processing operations. Tyson’s Beef and Pork Division grew substantially over the next several years and claimed 11 percent of the company’s revenue by 1995.

In 1991, Leland E. Tollett, a college classmate of Don Tyson whom Tyson had brought into the firm in the late 1950s, was named president and chief executive officer; Tyson remained chairman of the board, but was slowly reducing his responsibilities.

Tyson next turned its attention to seafood in an effort to further diversify its operations. In 1992 Tyson acquired Arctic Alaska Fisheries Corporation, a vertically integrated seafood products company, and Louis Kemp Seafood Company, which was purchased from Oscar Mayer Foods Corporation. Tyson’s resulting Seafood Division experienced some rocky initial years, and the firm was forced to take a write-down of $205 million on its seafood assets in 1994, the first major write-down in Tyson’s history. The Seafood Division was subsequently revamped and then bolstered by the 1995 acquisition of the seafood division of International Multifoods Corp., which had $65 million in sales in 1994 and produced simulated crabmeat, lobster, shrimp, and scallops.

Arkansas Governor Bill Clinton’s presidential election campaign and his subsequent term in office brought unwanted attention to the condition of Tyson’s chicken processing plants and eventually embroiled the company in controversies. As governor of Arkansas, Clinton had strongly supported the chicken industry, and Don Tyson was a major contributor to Clinton’s presidential bid. During the campaign several journalistic investigations of the chicken industry in Arkansas, such as one published in Time, revealed that many of the plants were unsanitary and dangerous and staffed by low-paid workers often subject to such difficult conditions as line speed-ups. Environmentalists had also charged that Clinton, while he was governor, had allowed the Arkansas poultry industry to dump tons of chicken waste in Arkansas streams.

After Clinton took office, the close ties between Tyson and the president aroused controversy first when reports stated that James Blair, Tyson’s general counsel and a close friend of Bill Clinton and Hillary Rodham Clinton, had helped Hillary Clinton make a killing in the commodity markets. Then came reports in 1994 that Mike Espy, agriculture secretary under Clinton, had accepted a trip on a Tyson jet and football tickets from Tyson in exchange for favorable treatment from poultry inspectors. Espy subsequently resigned over this matter. Tyson denied any wrongdoing.

Tyson had traditionally expanded its chicken processing capacity through the purchase of existing facilities, but when it decided it needed to expand in 1994, no suitable plants could be found that were for sale. The company then decided to build— at a cost of about $400 million—four new poultry plants over a four-year period, each of which would be able to process 1.3 million chickens a week. That year Tyson also bought a controlling interest in Trasgo, S.A. de C.V., a Mexican joint venture started in 1988. Trasgo held the number three position in the growing chicken market in Mexico.

Also in 1994, Tyson acquired Culinary Foods, Inc., a maker of specialty frozen foods mostly for the food service market, and Gorges Foodservice, Inc., a further processor of beef for the food service market. Tyson failed, however, to acquire a much larger prize, WLR Foods Inc., a $700 million Virginia-based producer of high-quality turkey and chicken products sold primarily under the Wampler-Longacre brand. Similar to Tyson’s experience with Holly Farms, WLR management fought Tyson’s $330 million attempt to take over the company in early 1994, an attempt that then turned hostile. WLR instituted a takeover defense, which Tyson fought in federal district court as unconstitutional. This time, unlike the Holly Farms case, the judge ruled against Tyson in a decision that summer. Early in 1995, Tyson announced it would appeal the decision to the U.S. Circuit Court of Appeals.

The Seafood Division write-down had soured Tyson’s 1994 results and it posted a $2 million loss, its first in years. Not to be deterred, the company continued its aggressive expansion in 1995 with the purchase of the chicken plants of Cargill, which had decided it could no longer compete with Tyson’s chicken empire. This purchase added more than 2.5 million chickens per week to Tyson’s processing capacity. Another 2.4 million chickens per week were added later in the year with the acquisition of McCarty Farms Inc., a Mississippi-based closely held firm.

An important era for Tyson ended in April 1995 when Don Tyson retired as chairman, denying that the firm’s recent controversies had prompted the move. Tyson remained involved in the firm as senior chairman, but day-to-day operations were handed over to Tollett, who became chairman in addition to his previous position as CEO, and Donald “Buddy” Wray, who became president in addition to his previous position as chief operating officer. Like Tollett, Wray was another college classmate of Tyson’s and had joined the firm in 1961. John Tyson, Don’s then-41-year-old son, was reportedly being groomed to eventually run the company and held the position of president of the Beef and Pork Division.

Its recent difficulties notwithstanding, Tyson Foods enjoyed a strong position in the mid-1990s as the leading chicken firm in the United States and a company enjoying tremendous growth. Sales had more than doubled from the pre-Holly Farms level of $2.54 billion of 1989 to $5.11 billion in 1994. Tyson was diversifying its operations to become more than just a poultry company, aiming to be a leader in all “center-of-the-plate” proteins. In 1994, poultry accounted for only 75 percent of Tyson’s revenues. From this strong position, Tyson appeared ready to more aggressively pursue overseas opportunities, evidenced by the formation of a joint venture in the People’s Republic of China in 1994, the opening of an office in Moscow in 1995, and the formation in 1995 of a subsidiary, World Resource, Inc., designed to help Tyson’s customers throughout the world source products.

Principal Subsidiaries

Arctic Alaska Fisheries Corporation; Brandy wine Foods, Inc.; Cobb-Vantress, Inc.; Culinary Foods, Inc.; Gorges Foodservice, Inc.; Louis Kemp Seafood Company; Tyson Export Sales, Inc.; World Resource, Inc.; Trasgo, S.A. de C.V. (Mexico; 50.1%).

Tyson Foods, Inc.

views updated May 21 2018

Tyson Foods, Inc.

founded: 1947 as tyson feed & hatchery

Contact Information:

headquarters: 2210 w. oaklawn dr.
springdale, ar 72762-6999phone: (501)290-4000 fax: (501)290-4061 url: http://www.tyson.com

OVERVIEW

Tyson Foods Inc. is most known for its chicken products, which accounted for 82 percent of its sales mix in 1997. Tyson, the world's largest poultry producer, processor, and marketer, holds a full quarter of the U.S. chicken market. Tyson also raises cattle and hogs, although these activities have been diminishing due to the trend away from red meat in Americans' diets. Tyson also sells seafood, prepared foods, and a line of Mexican foods. It supplies food service to 94 of the top 100 restaurant chains, including McDonald's, Burger King, Wendy's, Denny's, and Marriott; it also supplies the U.S. military. In 1996, it processed 1.8 billion chickens and 2 million hogs. Tyson Foods' 1996 sales were $6.4 billion.

Tyson is very clear on where its markets are and what yields the most profit. The majority of its chicken sales in 1997 (61 percent) were to food service establishments and chains, and more than a quarter (28 percent) of sales were to retail. Wholesale club stores, such as Sam's Club and Costco, accounted for 11 percent of Tyson's chicken sales.

COMPANY FINANCES

Tyson's financial performance in 1997 showed a moderate improvement over the previous year. Net sales in 1997 were $6.4 billion, compared with $6.5 billion in 1996, a decline of 1.5 percent. Focusing only on Tyson's core product of chicken, however, sales from 1997 actually increased 4.5 percent.

Net income for 1997 rose 113.8 percent, to $185.8 million, for an earning per share of $.85. This was quite a jump from 1996, which saw net income of $86.9 million, for earnings of $.40 per share. All told, Tyson realized a net profit of $1 billion, a 9.5 percent increase over the profit of $948.0 million in 1996.

Early results from 1998 showed increased sales but reduced earnings per share. Sales for the first six months of 1998 were $3.39 billion, compared to $3.10 billion in the same period in 1997, an increase of 9.3 percent. The increase in sales was largely attributed to the acquisition of Hudson Foods, Inc.

In early 1998 Tyson indicated that its earnings were suffering and that it would not meet analysts' expectations. In the three-month period ending March 28, 1998, Tyson recorded net sales of $1.9 billion, an increase over the $1.6 billion recorded a year earlier. The company's net income fell to $23 million though, down from $48 million a year before. The trend remained the same when a six-month period was examined. For the six months ending March 28, 1998, net income fell to $68 million from $92 million the year before. The company attributed the declines to excess supplies of meats and economic problems in Asia.

ANALYSTS' OPINIONS

As of September 1995 the trade journal International Distribution had given Tyson its "Foodservice Poultry Supplier" award for 19 years in a row, and it received "Top Overall Supplier of the Year" (to the food-service industry) for eight consecutive years. However, in October 1996, Fortune ran a lengthy profile of Tyson Foods' senior chairman, John Tyson's son, Don, called "Tough Times For the Chicken King." The article discussed allegations that Don Tyson had been involved in illegal insider trading. Allegedly he told a good friend that Tyson Foods planned to buy Arctic Alaska Fisheries prior to the purchase, and the friend was able to make more than $46,000 by purchasing 9,000 shares of Arctic Alaska stock. Tyson, without admitting or denying any wrongdoing, consented to the payment of a civil money penalty of $46,125.

Even in the face of declining income in 1998, analysts remained optimistic about Tyson's financial future. Early in 1998 at least one brokerage firm upgraded Tyson's share position based upon its annual results. While opinions expressed caution on the release of Tyson's first quarter results, by May 1998 the brokerage firm CS First Boston had upgraded its opinion of Tyson and recommended that it was a "Buy." Analysts also noted that the integration of a large purchase like Tyson's purchase of Hudson Foods takes time and money, but that the eventual rewards could be great.

HISTORY

Tyson Foods, Inc. began during the Great Depression when John Tyson, an Arkansas farmer, began selling poultry in 1935. From the beginning John Tyson made innovations in the transport of live poultry, as well as the storage of processed birds, and his company was soon successful.

Tyson Feed & Hatchery, as it was named following its 1947 incorporation, became Tyson Foods, Inc. in 1963, the year it went public. The company introduced its retail uncooked chicken brand, Tyson Country Fresh Chicken, in 1967 and soon became a leader in the retail and wholesale poultry markets.

Over the next few decades Tyson Foods grew, helped in part by the acquisition of other food companies, as well as the national eating trend that favored poultry over red meats. In spite of this, in the 1970s Tyson Foods had acquired several pork and beef processing facilities. One of Tyson Foods' biggest acquisitions came in 1989, when it purchased Holly Farms, another poultry company, for $1.5 billion.

In the early 1990s, as the company grew at a phenomenal rate, it continued its acquisitions, such as the 1994 purchase of Mexican poultry processor, Trasgo. In 1992 Tyson Foods entered the seafood business when it acquired a number of companies in that line, and by 1995 it was starting to reduce its pork and beef operations. The company tried and failed to purchase competitor WLR in 1994.

Tyson Foods' acquisitions continued in 1997. Mallard's Food Products, Inc., a California company, was purchased. The most significant purchase of 1997, however, was the acquisition of Hudson Foods, Inc. Hudson was the fifth-largest chicken producer in the United States; its sales for 1997 were $1.7 billion.

During the mid-1990s Tyson Foods made headlines for more than just chicken. As one of Arkansas' largest companies, it had been a major and long-standing contributor to the campaigns of President (and former Arkansas governor) Bill Clinton. Many suspected that Tyson Foods was buying influence in Washington by giving payoffs to members of the Clinton Administration such as Agriculture secretary Mike Espy. In January 1998 the company entered into a settlement with the Office of Independent Counsel investigating the charges. The settlement required Tyson to pay $6 million in penalties and costs.

STRATEGY

Tyson's principal focus is to maintain a low-cost position in every major product line that it serves, while pursuing a customer-oriented marketing strategy. Therefore, it is very strong on marketing research—that is, on finding out what customers like and don't like—and altering its activities accordingly.

Tyson's activities are focused on "center-of-the-plate" foods: protein-based entrees, whether they be plain chicken or prepared meals. Its company philosophy is "segment, concentrate, and dominate." Segmenting means finding new marketing niches, such as Mexican food. Once Tyson Foods finds an opening in the market, it concentrates its efforts on dominating it. Domination, in the words of Tyson's handbook, "means to be either number one or two (preferably one) in the marketplace."

In the latter decades of the twentieth century, Tyson has focused more on value-enhanced products such as prepared meals, rather than "commodity-priced" products such as plain, raw chicken. The reason is that the former yields higher and more predictable profits.

Primary goals for Tyson in 1998 included integrating the massive Hudson Foods into Tyson's operations. In addition, Tyson's strategy has been to give autonomy to the operations of its non-poultry businesses. This allowed Tyson to focus on its core business of chicken, while allowing independence in its divisions.

FAST FACTS: About Tyson Foods, Inc.

Ownership: Tyson Foods, Inc. is a publicly owned corporation, with stock traded on the New York Stock Exchange.

Ticker symbol: TSN

Officers: Don Tyson, Sr. Chmn., 67, 1997 base salary $700,000; Leland E. Tollett, Chmn. & CEO, 60, 1997 base salary $630,000; Donald E. Wray, Pres. & COO, 60, 1997 base salary $419,018

Employees: 59,472

Chief Competitors: Tyson Foods primarily produces and markets chicken and poultry-based foodproducts. Diversification has led the company into markets such as seafood and pork. Some competitors include: ConAgra; Gold Kist; Heinz; Hormel; Perdue; Plantation Foods; Thorn Apple Valley; and WLR Foods.

Surprisingly important to what would appear to be a simple producer of chickens is an intense focus on research and development. Hoping to capitalize on various market niches and on Americans' desire to eat prepared food at home, Tyson developed its Strategic Project Development team, which creates new products. Also important is Tyson's focus on cross-merchandising with well-known brands, such as Shake-and-Bake, Green Giant, and Stove Top.

INFLUENCES

Tyson Foods founder John Tyson helped to influence his company's growth with early innovations. At the beginning, in 1935, he developed a new way to safely transport live poultry over long distances. When he opened a chicken processing plant in 1958, he created a system for keeping chickens frozen longer, thus allowing them to be transported over greater distances.

Tyson Foods was also favorably influenced by the trend toward greater health consciousness among American eaters. This trend was in evidence as early as the mid-1970s when fast-food restaurants began to balance their typical fattening fare with salad bars. Tyson Foods was in a good position, due to its steady growth over preceding years, to take advantage of this trend, which favored chicken over beef or pork. The trend continued into the 1990s, with no signs of abatement, and Tyson managed to once again ride the wave by expanding its operations into seafood.

As a massive producer of chicken, Tyson has developed numerous methods of production that are industry leaders. In addition, Tyson developed a computer tracking system to track its product through its various processes.

CURRENT TRENDS

One trend that had already begun to develop prior to the 1990s, a trend that Tyson expected to continue for many years to come, was the shift away from red meat in Americans' diets. Thus Tyson turned its energies away from its beef and pork divisions toward its seafood lines, such as Arctic Alaska Fisheries, which was acquired in 1992.

One of the leading food items in this line has a name seldom heard by Americans, though many have eaten it without knowing it: surimi. Surimi is produced by filleting, mincing, and water-washing North Pacific pollock and other types of fish. Once a product known chiefly in Japan and other Asian markets, it gained the interest of U.S. producers in the 1960s, when they realized that this "fish paste" could be stored for as long as a year. In the 1970s, surimi was developed as a "crabmeat analog," something that looks and tastes like crabmeat, but costs less to produce. Since then, it has been used to create imitations of lobster, shrimp, scallops, and other tasty (but usually expensive) seafood items. The 1992 acquisition of Louis Kemp Seafood Co. made Tyson the leading manufacturer and marketer of analog seafood. The market for analog seafood is expected to grow because it meets both nutritional and economic needs.

Acquisitions such as Arctic Alaska and Louis Kemp are not isolated events. In 1995, for instance, Tyson acquired Star of Kodiak, an Alaskan fish processor; International Multifoods, a Minnesota manufacturer of analog seafoods; and McCarty Farms Inc. and Cargill U.S., both growers and processors of chickens. As Tyson itself announced in its 1996 Corporate Factbook, "Acquisitions will continue to be an important part of the Tyson story."

CHRONOLOGY: Key Dates for Tyson Foods, Inc.

1935:: John Tyson buys 50 chickens and takes them to Chicago to sell for a profit
1947:: Tyson incorporates and names the company Tyson Feed & Hatchery
1963:: Tyson Feed becomes Tyson's Foods, Inc. and goes public
1966:: John Tyson dies and his son Don takes over the company
1972:: Tyson acquires Ocoma Foods Division of Consolidated Foods and the poultry division of Wilson Foods; introduces the first breaded chicken breast patty
1977:: An antitrust lawsuit against Tyson and other broiler processors for conspiring to fix and stabilize prices is settled
1989:: Purchases Holly Farms
1992:: Enters the seafood industry by acquiring Arctic Alaska Fisheries and Louis Kemp Seafood Company
1997:: Acquires Hudson Foods, Inc.
1998:: Tyson pays a $6 million fine for buying influence by paying off government officials

A trend noted by the company is that in 1996, for the first time, takeout meals outnumbered meals eaten in restaurants, but 51 percent of consumers also indicated that they do not want to eat in restaurants or cook at home. Tyson claimed that chicken is used more often for takeout meals than any other meat entree; only pizza had higher dollar takeout sales. As a result, Tyson has focused on restaurant-quality, easy-to-prepare products.

PRODUCTS

Tyson's principal consumer products are: Tyson Chicken, including plain, marinated, and breaded portions, as well as fajita meat and chicken wings; Tyson Seafood, a line of surimi-based products; Holly Farms ready-to-cook chicken; Tyson and Weaver ready-to-eat chicken; prepared meals including a line of 20 premium chicken meals, five chicken pies, and five complete meal kits; and prepackaged seafood under the Louis Kemp, Captain Jac, SeaFest, and Pacific Mate brands.

In 1997, in response to the public's taste for restaurant-quality takeout meals, Tyson introduced Restaurant Favorites, a line of frozen meals that could be prepared in 15 minutes. A second line was Gourmet Selections, fully-cooked, refrigerated, single-serve meals.

CORPORATE CITIZENSHIP

As a processor of chicken, an industry that produces a large amount of waste, Tyson has focused its citizenship efforts on the environment. This is partly a necessity in order to abide by government regulations, partly a profit-making venture, and partly pure citizenship. In particular, Tyson has put its attention into organic farming (the use of chicken litter as fertilizer), residual product recycling (turning dead chickens into animal feed), and water purification. In the latter area, Tyson spent $200 million in the five years between 1991 and 1996, and many of its 52 treatment plants were established long before most local governments began to require the establishment of such facilities.

The chicken processing industry also traditionally stands out as having a high number of workplace accidents and difficult working conditions. To aid its often immigrant workforce, Tyson Foods sponsored multicultural centers and forums to provide services ranging from English-as-a-Second-Language classes to life skills training to citizenship reparation classes.

GLOBAL PRESENCE

Internationally, Tyson exports its products to 43 countries and enjoys a 53 and 80 percent share, respectively, of the U.S. chickens sold to China and Japan. In the mid-1990s the company expected international growth, particularly in the Chinese, Japanese, Korean, Russian, and Mexican markets.

Tyson Foods has a surimi paste plant and a seafood analog plant in Canada, the former in British Columbia and the latter in Toronto. It also has a large facility in central Mexico, thanks to the 1994 purchase of Mexican food producer Trasgo. Finally, Tyson has a fish processing plant in Shanghai, China.

DID YOU KNOW THAT . . .

Tyson exports over 1.5 billion pounds of chicken per year?
Tyson supplies 175 million pounds of chicken feet to China each year?
Japanese chicken eaters are fond of boneless leg portions?
82 percent of consumers prepare chicken at home at least once a week?
studies have shown that by 4:00 in the afternoon, 40 percent of consumers don't know what they will have for dinner, which means they will look for convenience?
while known principally for their chicken, Tyson also operates one of the largest fishing fleets in the United States?
nearly 52 percent of every food dollar is spent on food that is prepared outside the home?
chicken consumption is expected to grow more than 28 percent by the year 2005?

Tyson's export chicken market encountered numerous interruptions in 1996 and 1997. Rising grain prices internationally and Russia's 1996 decision to ban U.S. chicken imports led to a backlog of chicken in the United States and the decision to reduce production.

SOURCES OF INFORMATION

Bibliography

clark, kim. "tough times for the chicken king." fortune, 28 october 1996.

"the law and don tyson." fortune, 28 october 1996.

tyson foods inc. corporate factbook, springdale, ar: tyson foods, 1996.

"tyson foods inc. posts 2q eps of $0.10 vs. $0.22." standard & poor's, 27 april 1998. available at http://biz.yahoo.com/snp/980427/tsn_fod_in_1.html.

tyson foods inc. "tyson foods updates earnings information," 26 march 1998. available at http://biz.yahoo.com/prnews/980326/ar_tyson_f_1.html.

For an annual report:

on the internet at: http://www.tyson.com/investorrel/1996_annual/default.htmor write: director of investor relations, tyson foods, inc., po box 2020, springdale, ar 72765-2020

For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. tyson foods, inc.'s primary sics are:

0254 poultry hatcheries

2015 poultry slaughtering & processing

2038 frozen specialties, nec

2048 prepared foods, nec

Company Profiles for Students

Tyson Foods, Inc.

views updated Jun 08 2018

Tyson Foods, Inc.

2210 W. Oaklawn Drive
Springdale, Arkansas 72762-6999
USA
Telephone: (479) 290-4000
Web site: www.TysonFoodsInc.com

POWERED BY TYSON CAMPAIGN

OVERVIEW

After the Arkansas poultry farmer John Tyson developed a method of transporting live chickens during the Great Depression, he sparked a legacy that would be passed down for three generations. When John Tyson's grandson, who shared his grandfather's first name, became CEO in 2000, Tyson Foods, Inc., was the largest chicken producer in the United States. The new CEO soon expanded the company's role in the packaged foods and meats market. One year after assuming leadership John Tyson agreed to buy IBP, Inc., America's largest beef processor and second-largest pork processor. The acquisition transformed Tyson into the world's largest meat producer. Subsequently executives needed to rebrand Tyson to include beef and pork. After 18 months of research Tyson discovered that the public considered protein to be the main quality that beef, pork, and chicken shared. To herald Tyson as a leading provider of protein, the corporation released "Powered by Tyson," the largest advertising campaign in Tyson's history.

The Boston ad agency Arnold Worldwide released the $75 million campaign on August 30, 2004. The campaign's television spots humorously featured individuals performing amazing feats simply because they were "Powered by Tyson." In one commercial a parasailing man was lifted into the air by a Tyson-fueled woman rowing a boat. The campaign's high-protein message was embraced by those following the popular Atkins Diet, a weight-loss program that involved eating high-protein foods. In addition to television spots the campaign included radio spots, print advertising, and outside promotions. Tyson products were also strategically placed on network programs, including the popular Monday night CBS sitcom Still Standing, which starred Mark Addy and Jami Gertz.

According to a 2004 Ad Age / IAG Quarterly Ad Performance Report (an ongoing study conducted by research firm IAG and published in Advertising Age), one "Powered by Tyson" commercial, which featured a mother running up a wall to catch her child's balloons, was rated the quarter's "best-liked spot." Tyson's fourth-quarter sales for 2004 were $500 million above those of the same quarter of 2003.

HISTORICAL CONTEXT

Arkansas farmer John Tyson, who supported his family during the Great Depression by selling produce and chicken, devised in 1935 an unprecedented method to transport chickens from Arkansas to Chicago. He attached food-and-water troughs inside a trailer that kept the birds alive long enough to be sold in Chicago. The business of transporting and selling chickens proved to be a lucrative trade for the Tyson family. John's son Don became manager in 1960 and took the corporation public in 1963. Although packaged chicken was Tyson's mainstay, the company expanded into other meat products. In 1992 Tyson purchased Arctic Alaska Fisheries and Louis Kemp Seafood, and two years later it acquired the frozen-foods company Culinary Foods. Its foray into the seafood business was short-lived, however; the company sold the division in 1999. The ad agency DDB Chicago had been creating advertising for Tyson since 1995. According to the Associated Press news service, Tyson chief marketing officer Bob Corscadden described the company's marketing during this period as "warm and fuzzy." In 2001 DDB introduced a $20 million print campaign for Tyson titled "It's What Your Family Deserves."

Tyson's best-selling food line, Tyson Country Fresh Chicken, reinforced Tyson's position as America's leading chicken producer. The titan was 60 percent larger than its closest competitor, Pilgrim's Pride. After the third-generation CEO, John Tyson, took control in 2000, he instigated the purchase of IBP, America's largest beef producer and second-largest pork producer. After the IBP acquisition the Tyson brand was hard-pressed to reposition itself as something other than a producer of chicken. Many Tyson investors, worried about the company's newly acquired debt of approximately $1.5 billion (which it had taken on from IBP as part of the deal), considered John Tyson too inexperienced and doubted his ability to salvage the corporation. John Tyson responded by recruiting apt executives for Tyson, including the former president of IBP, Richard L. Bond. John Tyson also oversaw 18 months of comprehensive research, which included holding 90 focus groups to determine how the Tyson brand should move forward. The research determined that consumers identified one shared quality between all meat products: high protein content. In addition, the strategic brand consultant Faith Popcorn's BrainReserve helped Tyson conduct an ad-agency review that resulted in the selection of Arnold Worldwide, an agency headquartered in Boston.

According to advertising analysts, building a brand for packaged meat was somewhat unprecedented. Beginning in the 1970s the poultry company Perdue Farms had branded its product around its founder Frank Perdue, but most consumers continued to consider meat a commodity. Pork and beef especially were selected because of how it looked behind its plastic wrapping. Price, according to one Tyson survey, was not the deciding factor. "This is virgin territory for branded manufacturers," John M. McMillin, a food analyst at the Prudential Equity Group, said to the New York Times. "Beef and pork have largely been commodity areas, and what Perdue and Tyson did to chicken 10 to 20 years ago is what Tyson is now trying to do to beef and pork."

TARGET MARKET

The campaign targeted several demographics, including consumers who enjoyed cooking meals from scratch and busy consumers who preferred cooking food that was already prepared. Advertising critics believed that the campaign successfully targeted dieters subscribing to the Atkins Diet, a low-carbohydrate weight-loss plan that had become highly popular by 2004. The marketing agency Lopez-Negrete Communications in Houston created TV spots for the campaign that targeted Latino consumers. In one TV commercial with a Spanish voice-over, two "powered" dancers outlasted the competition in a salsa dance contest as a result of eating Tyson meat.

"Powered by Tyson" also sought to reach the African-American market. A Tyson press release that appeared in Market News Publishing stated, "The foundation of African-American food preferences is soulfood … A major part of soulfood is protein, which gives families strength and energy to accomplish the many challenges of their busy days. Nobody brings quality, branded chicken, beef and pork protein to this consumer in more ways than Tyson Foods." Tyson hired the Chicago marketing agency E. Morris Communications to create television and print advertising that targeted African-American consumers.

During the campaign Tyson provided scholarships through the Tom Joyner Foundation, an organization dedicated to helping African-Americans afford higher learning. Recipe books titled Powered by Tyson were issued at football games and other events hosted by Historically Black Colleges and Universities (a category of institutions that were recognized as being founded for the education of African-Americans).

COMPETITION

With its beginnings dating to 1945, Pilgrim's Pride became America's second-largest poultry producer under the longtime leadership of Lonnie (Bo) Pilgrim. The company was also credited with treating chicken as more than just a commodity. In 1983 the Texas-based company first offered boneless and low-fat chicken products. In 1997 it targeted health-conscious baby boomers with Eggs Plus, a line of eggs enriched with fatty acids that aided in human cell growth and fat metabolism.

In mid-2004 Pilgrim's Pride released a commercial that featured the company's founder, Bo Pilgrim, dressed as a cook for a group of roughneck cowboys. According to Dan Emery, Pilgrim's Pride vice president of marketing, using the founder and chairman as an actor in the spot was a natural choice. "Bo's health, vitality and sense of fun testify to the kind of diet he espouses and enjoys—low in fat, cholesterol, carbohydrates, and triglycerides. He remains ahead of his time. Today, millions agree that chicken is the best choice for any healthy diet," Emery was quoted by the PR Newswire news service.

When Bo Pilgrim's character offered herb-roasted chicken and cooked vegetables in the 2004 commercial, the beef-loving cowboys became visibly peeved. The chicken was appreciated, however, when the cowhands remembered that they all had high cholesterol. The spot was created by the Wolf Agency. Initial spots were aired in states with the largest Pilgrim's Pride presence, such as Texas, Oklahoma, Louisiana, New Mexico, and Michigan. Later the commercial was extended to other U.S. regions.

MARKETING STRATEGY

Arnold and several other contributing agencies released the $75 million campaign on August 30, 2004. The campaign's original seven 30-second commercials all featured individuals "powered" by Tyson meats. Their shaky filming suggested that the content had been captured with a camcorder and was unintended for professional use. One spot showed a small child kicking a football across the street and over the power lines. Another spot featured a fun-loving family "Powered by Tyson" and sledding their way past a high-altitude base camp on what appeared to be Mount Everest. The spot "Parasailing" began with shaky camera footage of a man parasailing. It was then revealed that he was being pulled by his wife, who was merely rowing a boat. Each spot ended with the question "Have you had your protein today?"

HURRICANE RELIEF

In the aftermath of America's devastating 2005 hurricane season, Tyson Foods, the world's largest producer of meat, offered victims displaced by Hurricane Katrina jobs through its Houston and Dallas employment offices, During the previous year's hurricane season Tyson had donated more than 110,000 pounds of precooked chicken to feed those affected by hurricanes.

When the campaign began in 2004, many consumers were eating meat for its high-protein, low-carbohydrate sustenance. This dietary craze was pioneered by the popular Atkins Diet, which advised the consumption of meat. Tyson, however, wanted "Powered by Tyson" to brand meat as an excellent energy source, not a weight-loss product. Corscadden explained to Nation's Restaurant News that Arnold Worldwide's strategy stressed the sustenance of Tyson products by using the formula "protein = energy = power," which suggested that pork, chicken, and beef provided consumers with more power. The strategy worked in Tyson's favor. In 2005 many American who had previously subscribed to the Atkins Diet were beginning to consider it an incomplete regimen.

Print ads for "Powered by Tyson" appeared in popular consumer magazines such as People and Redbook. One ad featured a child performing world-class gymnastics on her school playground. The ad's copy asked, "Have you had your protein today?" In addition to appearing in print ads and television spots, the "Powered by" message was used at Tyson-sponsored USA Gymnastics and Crew Chief Club (an association of NASCAR head mechanics) competitions. To reach African-American communities Tyson sponsored events for Alpha Kappa Alpha Sorority (AKA), America's first Greek-letter organization founded by and for African-American women. Tyson also contributed to Historically Black Colleges and Universities. In return for Tyson's scholarships, recipe books titled Powered by Tyson were distributed at college and university events.

Tyson paid the media conglomerate Viacom to place Tyson products on network and cable programming. Tyson foods appeared on CBS's popular sitcom Still Standing and on the soap opera As the World Turns. Short vignettes for Tyson were also filmed with actresses from the soap opera. The PR Newswire quoted Corscadden commenting about Tyson's product placement, "We're very excited about being part of this innovative effort … One of the primary components of our new 'Powered by Tyson' communications strategy states that we'll be seen in expected and unexpected places. This is new. It's unexpected. It dovetails nicely with our new strategy."

OUTCOME

According to advertising critics, "Powered by Tyson" helped Tyson expand beyond its chicken-only stigma and move forward as America's largest meat producer. An Ad Age / IAG Quarterly Ad Performance Report determined that the "best-liked spot" of the final quarter of 2004 was the Tyson commercial in which a mother ran up a wall to catch her child's helium balloons. One month after the campaign debuted, Fortune magazine ranked Tyson 44th out of the "100 Fastest-Growing Companies." During the 2004 quarter that the campaign was released, Tyson's sales were $500 million above the same quarter of 2003.

In February 2005 Fortune's "Most Admired" list rated Tyson as America's "most admired company in food production." The PR Newswire quoted John Tyson's response to the accolade. "It's an honor to be recognized for the progress we've been making since our acquisition of IBP three years ago," the chairman and CEO said. "We're continuing our aggressive campaign to increase our value-added product sales over the next three to five years and believe our recently unveiled 'Powered by Tyson' marketing campaign will boost our efforts." In late 2005 Tyson was added to the S&P 500, an influential index of America's most prestigious blue-chip stocks.

CORPORATE RELIGION

John Tyson, the third-generation president and CEO of the world's largest meat producer, Tyson Foods, had taken control of Tyson in 2000. He soon integrated his religious beliefs into the corporate structure. One addition to Tyson's core values stated, "We strive to be a faith-friendly company." Another explained, "We strive to honor God and be respectful of each other, our customers, and other stakeholders." To provide support for employees John Tyson oversaw the hiring of 87 chaplains who would offer counseling in the business's 58 processing plants.

Tyson Foods, Inc.

Tyson Foods, Inc.

1935 to Early 1960s: The Early Years

Mid-1960s through 1970s: A Growing Company in a New Industry

1980s to Early 1990s: Bigger Gains and Growing Pains

Company Perspectives:

Key Dates:

Mid-1990s and Beyond: Tyson’s Plate Gets Crowded

Principal Operating Units

Principal Competitors

Further Reading

Tyson Foods, Incorporated

Tyson Foods, Incorporated

Principal Subsidiaries

Tyson Foods, Inc.

Tyson Foods, Inc.

Principal Subsidiaries

Further Reading

Tyson Foods, Inc.

Tyson Foods, Inc.

Contact Information:

OVERVIEW

COMPANY FINANCES

ANALYSTS' OPINIONS

HISTORY

STRATEGY

FAST FACTS: About Tyson Foods, Inc.

INFLUENCES

CURRENT TRENDS

CHRONOLOGY: Key Dates for Tyson Foods, Inc.

PRODUCTS

CORPORATE CITIZENSHIP

GLOBAL PRESENCE

DID YOU KNOW THAT . . .

SOURCES OF INFORMATION

Bibliography

For an annual report:

For additional industry research:

Tyson Foods, Inc.

Tyson Foods, Inc.

POWERED BY TYSON CAMPAIGN

OVERVIEW

HISTORICAL CONTEXT

TARGET MARKET

COMPETITION

MARKETING STRATEGY

HURRICANE RELIEF

OUTCOME

CORPORATE RELIGION

FURTHER READING

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