Meat + Poultry - April 2006 - 38

John Tyson

products. In some cases, efficiency
means closing old plants and renovating others.
"In the second quarter we closed
two of our older prepared food plants.
We did consolidate some of our beef
plants to be more cost effective," Tyson said. "We started new production
in Dakota City. It's probably the most
efficient plant in the industry, which
will take on the capacity of one of the
plants we closed."
Earlier this year, the company announced plans to spend more than $30
million to add bacon production at its
Cherokee, Iowa, plant. Bacon operations at the facility are slated to begin
later this summer and will complement
production at the company's existing
bacon plants in Omaha, Neb., and Vernon, Texas.
Tyson says the company is also improving its information technology
systems, enhancing its supply chains
and automating processes in its plants,
which fits the mandate of managing
those parts of the
business that are
controllable.
"Our challenge,
however, is to
continue improving operational
efficiencies" he
says. "It is something you don't
check off of your list and say, 'We're
done.' We have to keep after it every
day and that's what we're doing. As we
say around our company, 'You can't
out market a bad cost structure.'"
Another way of offsetting market
hurdles is growing the company's
highly profitable case-ready program.
The company reported case-ready
sales of approximately $1.6 billion this
past year and is forecasting doubledigit growth in 2006, much of which
goes right to the bottom line. This past
February, Tyson Foods began caseready production at its plant in Sherman, Texas, the third plant dedicated
to the segment. By this fall, the facility should be operating at 80 percent

capacity and eventually will produce
7 million pounds per week.
"Case-ready is important to customers because it reduces their labor,"
said Noel White, group vice president
of Tyson Fresh Meats, Dakota Dunes,
S.D., who also made a presentation at
the conference. "It is important to Tyson because it gives (us) the opportunity to double our margins compared
to commodity beef and pork." White
also hinted that Tyson is on the verge of
bringing its case-ready program to "another major retail chain. "The potential
for case-ready is very large," he said.
International ingenuity
International opportunities are vital
parts of the company's future business
plan and key to its surviving domestic
market challenges. In North America,
Tyson has established operations already in place in Canada (Lakeside Beef
processing plant and feedlot facility located in Brooks, Alberta) as well as in
Mexico (Tyson de Mexico), where it is
the largest producer of value-added
chicken. Additionally, Tyson has
established joint
ventures in Panama, China, Ireland and Russia,
producing valueadded foods.
But the company isn't stopping there
and is in negotiations to invest more
in international operations. "We are
in discussions right now," said Tyson
of some international acquisitions it is
pursuing. "We do have some offers out
in China for a growth opportunity. We
are looking in Mexico, Argentina and
Brazil," all of which are valued at less
than $100 million.

"It's the toughest I've
seen it and I've been
around more years than
I can remember."

MEAT&POULTRY

April 2006

Where's the beef?
White also pointed out how the
company has been challenged by a
longer-than-usual cattle cycle, which
historically lasts between 10 years and
12 years and is now pushing 14 years,
thanks to bovine spongiform encepha-

www.MEATPOULTRY.com

lopathy discoveries in North America
and the ensuing trade bans. "Supply
issues coupled with international export bans, which have really turned
into political issues at this point, have
made this a very difficult operating
environment," he said.
The market is looking to turn, however, said White, based on growing
heifer retention numbers, larger slaughter forecasts (expected to be close to 30
million head by 2010 compared to 27.5
in 2006) and indications of increases
in cattle already coming to market in
the next couple of months with beef
production expected to increase by 5
percent this year.
"More cattle will mean better capacity utilization for us," White said. "And
this is really the key because we need
to operate in the mid 80 percent range
to efficiently manage the fixed costs in
our plants. We've been operating in the
lower 70s and now are close to 78 percent following our two plant closings.
We have the opportunity to get into the
low 80s perhaps by mid-summer."
Tyson summarized by saying, "I can
tell you, simply, we could use some help.
We could use some help with cattle supplies based on the numbers and based
on the estimates," he said. "We could
have used some help in the export markets, chicken and beef, and get through
some of the political ramifications as
countries argue about what's safe and
what's not safe in a larger context."
But Tyson said the company has no
intention of taking its foot off the pedal
in the face of a challenge, no matter the
scope. "If you think about a NASCAR
driver - when he gets in a curve he
doesn't slam on the breaks. He keeps
powering and accelerating through the
curve," Tyson said. "And I can tell you
that's what we're going to do. We're going to power through that curve. We're
going to be a stronger company in the
straight stretch and we'll be further
ahead of our competition."
We would like to hear from you- your comments
and questions about this article are welcome.
E-mail the author at: jcrews@sosland.com

http://www.MEATPOULTRY.com

Meat + Poultry - April 2006

Table of Contents for the Digital Edition of Meat + Poultry - April 2006