Consumer predilection for protein-based foods and the revival of outdoor dining trends bode well for meat processing companies. Renowned player in meat products Tyson Foods, Inc. (TSN – Free Report) benefits from such trends. Above all, it benefits from strong growth in the retail sector thanks to solid brand offerings. The food service segment is also growing. The efforts to strengthen the portfolio and production are bearing fruit. Such factors work out well for the company as it continues to battle headwinds from the pandemic. Let’s dive deeper.
Heavy demand is an advantage
Tyson Foods wins due to increased demand in the retail channel. In the third quarter of fiscal 2021, the company achieved growth in the retail channel across all segments. Management highlighted on its last conference call that retail sales contributed more than $ 1 billion year-to-date and more than $ 300 million in the third quarter of total sales. The third fiscal quarter marked the 12th consecutive quarterly profit in retail in the core business areas due to solid brands. In fact, strong retail sales were a plus for the company’s overall third quarter results. The company also benefited from the rebound in its foodservice category when the restaurant industry reopened. Consumers are resuming their outdoor eating habits due to the indulgence of pandemic restrictions. The improved food services business mainly benefited the Ready Meals and Chicken segment in the third quarter.
Efforts to increase portfolio strength
Tyson Foods continues to focus on increasing production to meet the growing demand for protein foods. It has a rich portfolio of protein-packaged brands that are growing rapidly around the world. Acquisitions have played a critical role in strengthening the company’s brand portfolio. The company’s notable acquisitions include the European and Thai operations of BRF SA, Keystone Foods and GrupoVibra. The company has brought well-chalked innovations to market. The company recently SNACKED Hillshire Farm! launched, which is likely to strengthen its snacking portfolio.
Due to the increasing consumer demand for natural fresh meat without the addition of hormones or antibiotics, Tyson Foods has steadily expanded its range of freshly prepared foods. In this respect, the Tecumseh acquisition is quite remarkable. The company has ventured into alternative sources of meat and protein products, as evidenced by its investment in Memphis Meats and the launch of the Raised & Rooted brand. In June 2021, Tyson Foods announced that it was launching a range of herbal products under the First Pride brand in select retail markets and digital platforms in the Asia-Pacific region.
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Other growth measures
Tyson Foods has drawn on a number of operational and supply chain efforts to better position itself over the long term. In this context, the company is investing in capacity expansion and investments in automation technology. The company is expanding production in its beef business to meet solid US and international demand for higher quality products. In addition, the company is constantly looking for ways to improve its cost structure, operations and customer service. Another focus of Tyson Foods’ focus has been on e-commerce as consumers switch to online shopping, especially amid the pandemic.
Tyson Foods, which operates amid the pandemic, has seen additional expenses related to transportation, disinfection of manufacturing facilities, underutilization and facility reconfiguration. Difficult labor market conditions, massive inflationary pressures from raw material costs and other global supply chain problems have proven to be a drag.
Despite such hurdles, Tyson Foods has managed to hold its own. Solid brands, robust geographic reach, and the ability to leverage its manufacturing capabilities help the company meet evolving global demand. Such aspects are likely to aid the performance of this Zacks Rank # 3 (Hold) company in the times to come.
The company’s shares are up 3.6% over the past three months while the industry is down 6.4%.
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