News Feature | October 23, 2013

Tyson Isn't "Chicken" About Taking On Hormel

Source: Food Online
Sam Lewis

By Sam Lewis

The poultry and beef company wants a piece of the ready-to-eat, convenience store food market

Tyson, famously known as the nation’s largest supplier of chicken and beef, has been putting in a lot of extra work as of late. Though this doesn’t necessarily mean that the food manufacturer is planning to increase productivity in its slaughterhouse — whose staff butchers 41.4 million chickens and 132,000 bovine each week. Instead, Tyson’s food scientists are busy in the lab creating new, pre-packaged, reheat-able food items in an effort to reach, and perhaps dominate, the market in convenience stores.

The new strategy of targeting the value-added, or convenience store market, is due to the evolution of consumers’ shopping habits. Sales at traditional grocery stores have fallen 0.4 percent annually since 2008, while in the same time frame, convenience stores, which make up 35 percent of US retail locations, have seen sales grow 5.2 percent annually, according to IBISWorld market research.

The company, which had $33.3 billion in sales for 2012, is hoping this endeavor will help it achieve its goal of raising annual earnings per share by 10 percent. In addition, Tyson is striving to increase sales by 3 to 4 percent per year, with value-added food, or prepared foods — giving customers what they want, when and where they want it, like many Hormel products — growing at twice that rate. Hormel has used this market as a growth vehicle, which helped provide it with $8.2 billion in revenue in last year. Value-added prepared foods will give Tyson more sustainable margins accompanied by a strategy to take away some of the market from competing food companies.

Tyson is creating these value-added meals in its Discovery Center, a 100,000-square foot facility in Springdale, AR. Here, food technologists are experimenting with different combinations of ingredients — flatbread sandwiches and breakfast burritos are a few being tinkered with — to make packaged, reheat-able meals to be sold at the nation’s convenience stores. Believe it or not, Tyson produces around 13,000 individual food items, and is the second largest producer of tortillas in the US. “Some people are shocked we do tortillas,” says Eric Le Blanc, VP of marketing for deli and convenience-store foods at Tyson. The company has evolved, and will continue to morph into what American consumers want.

Zeroing In On The Ideal Customer

The target for these value-added meals is the on-the-go American mother. “Young men might not think twice about buying a hot dog with a bag of chips and a mega-sized cola. Women often veto the idea, wondering how long the meat has been spinning on the roller,” says LeBlanc. He continues, “The number-one thing that’s important to her is, ‘Will I be proud to serve this to my family?’ We have to convince her.”

Convincing concerned mothers that convenience store food is OK will be challenging for Tyson. If the company is able to do it, it will not only benefit Tyson, it will also benefit the convenience stores. “Convenience stores want to upgrade their food and image,” Greg Luchak, a principal food scientist at Tyson says. “They want to become a food destination.” Currently Tyson prepared foods only include Buffalo chicken bites, frozen Cajun tortellini, charbroiled burgers, and a few others. Expanding this line of food all depends on what Tyson’s prime target thinks about the products.

By entering the realm of prepared foods, Tyson puts itself in an excellent position to take away a portion of the market from competitors like Hormel and Hillshire. If marketed properly, the well-known and respected company shouldn’t have much of a problem expanding into, and being successful in this new market, which will ultimately allow it to achieve its annual growth goals.