Thread: Tyson Says Meat Company Seeks Global Growth

"'We have done about as much in the United States as we can do,' Tyson said." I presume he means in "pioneering" the widespread replacement of United States workers with low-wage foreign labor and instituting a close relationship with the "fast food industry", which also has gone "international".


DON TYSON SAYS MEAT COMPANY SEEKS GLOBAL GROWTH

By CHRISTOPHER LEONARD, AP


SPRINGDALE, Ark. -Investors are waiting for Don Tyson's second act.

Sitting in a quiet office in a long row of executive suites at the headquarters of the world's biggest meat company, Tyson promises he has one.

The plan is fittingly ambitious for a man who pioneered a new industrial model for meat production and helped turn a small chicken company into a $27 billion a year enterprise. In short, Tyson plans to duplicate his company's domination of the U.S. livestock industry, but on a global scale.

"Our company, as I would view it today, is in kind of a consolidation stage, getting ready for our growth overseas," Tyson said in a rare and extensive interview with The Associated Press.

If the strategy succeeds, it could do far more than deliver profits to the company and its shareholders. As Tyson Foods Inc. replicates its uniquely American model of corporate meat production throughout the developing world, the company could fundamentally transform rural economies in nations like India, Brazil and China.

In Tyson's view, there is little choice but to start anew in the emerging world.

The company's stock price skyrocketed during the 1970s and '80s but has lagged for nearly a decade. Chronic overproduction of chicken, export bans on U.S. beef because of mad cow disease and increasingly high grain prices have sapped the company's profit potential at home.

"We have done about as much in the United States as we can do," Tyson said.

Tyson serves an unusual role at the company.

On paper, he is simply the former chairman, a member of the board and a senior "consultant" to management. But he has outsized influence over operations because he owns the majority of a special class of stock that gives him roughly 70 percent of all shareholder voting power. That means he can veto or approve any company strategy or shareholder proposal. He spends much of his time these days living on a yacht and deep-sea fishing in the Caribbean and elsewhere, but frequently returns to Springdale and his office down the hall from Chief Executive Richard Bond.

Tyson himself is helping bankroll the company's expansion as big creditors have tightened their lending. An entity Tyson controls invested $38.25 million in September when Tyson Foods issued 20 million shares of Class A common stock. Stephens Inc. analyst Farha Aslam said most of the new cash will be used to fund Tyson Foods' investment overseas.
Tyson demurred when asked what role he plays in the company's planning and operations.

"I had someone ask me that 30 years ago, and my answer was: 'My long-term plan is Friday's payroll,'" he said.

Tyson's influence was reinforced this year as two of his senior lieutenants from the 1970s and 1980s have returned from retirement as consultants for the company.

Former Chairman and CEO Leland Tollett and former President and Chief Operating Officer Donald "Buddy" Wray are focusing their efforts on Tyson's domestic operations, helping trim costs to battle historically high grain prices.

Both Tollett and Wray were at Tyson during the mid-1970s, when grain prices spiked and inflation battered the meat industry in much the same was as today. The two are advising younger managers as they navigate treacherous waters that threaten to sink Tyson's biggest competitor in the chicken business, Pittsburg, Texas-based Pilgrim's Pride
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Saddled with debt and facing the same high grain costs, Pilgrim's Pride's stock has lost nearly all its value this year and the company is facing an uncertain future. To avoid the same fate, Tollett and Wray are sharing tricks they learned in the 70s.

"When you're a manager who hasn't been through this kind of thing, it's nice to be able to turn around and have a cup of coffee with someone who has," Tyson said.

Tyson said he learned his business tactics from his father, John Tyson, who founded the company in 1931. Don began working at the company hatchery when he was 12.

"When I was 14, of course, I could drive a truck. That made me more valuable," he said. When the company opened its first slaughterhouse in 1958, Don was the manager.

Tyson Foods embodied a new mode of agriculture that emerged in Southern states after World War II. Chicken companies were the first to absorb all the local pieces of a small town economy and bring them under one corporate roof. Tyson owned the feed mill, the hatchery and the slaughterhouse. It paid farmers to grow its chicks, using its feed, at a price set by Tyson. This "vertically integrated" model dominates poultry production nationwide and is expanding into pork and cattle production
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Tyson the company grew under Don Tyson's leadership during the 1970s as he bought up competitors and branched out into the hog business. Tyson formed close relationships with fast food chains like McDonald's and became the supplier of choice for processed products like chicken nuggets and chicken tenders, which yielded a higher profit margin than selling chicken through a grocery store.

Now the company plans to duplicate that success in developing nations where a growing middle-class population for the first time can afford to eat meat and visit drive-through windows, said Barclays analyst Chris Bledsoe.

As Tyson builds its own slaughterhouses, feed mills and network of contract farmers, it will follow the expanding footprint of fast food chains moving into countries like Brazil and India, he said.

"To me, it feels a lot like the story of the United States circa 1960, before we got this explosive growth in" fast food chains, Bledsoe said.

"Personally, I don't think international growth is going to look like a straight line," he said. "There are going to be fits and starts. But there is a long-term success in key emerging markets where population growth is very robust — and income growth."

Tyson's strategy swung into high gear this fall.

In September, Tyson bought two Brazilian poultry companies and acquired majority ownership in a third. The company didn't disclose terms of the deal to buy Macedo Agroindustrial and Avicola Itaiopolis. It acquired a 70 percent ownership of Frangobras.

Tyson announced three joint ventures in China this year, including last month's purchase of a 60 percent share of Shandong Xinchang Group's poultry operations. It also purchased the majority interest in chicken processing plants in Zhucheng and Shandong, and majority interest in a poultry operation being developed in Haimen City near Shanghai.

In India, Tyson bought a 51 percent ownership of Godrej Foods, Ltd., based in Mumbai. The joint venture will be called Godrej Tyson Foods and is expected to have annual sales of about $50 million.

Replicating Tyson's business model isn't always easy.

In India, for example, nearly 65 percent of the population still makes a living off of agriculture and the government restricts the size of farms, said Peter Hobbs, adjunct professor of agriculture at Cornell University.
As companies like Tyson enter India, they face pressure not just to produce meat profitably, but also to provide employment to a rural population that dwarfs that of the United States.

"What would you do with 65 percent of 1.2 billion people? Where would they be employed? I don't think the Tyson-type model would be able to employ that many people," Hobbs said.

Tyson said his control over the company's voting stock will help the firm navigate such obstacles as it finds the right model for India.

"It lets you do long-range plans. It lets you buy a little company in India and know that the best it's going to do for a couple years is break even," he said. "If you're a real public company, that's got to have quarter to quarter (expletive) increases, somebody is going to be on your ass about what the hell did you buy India for."

Brazil is an easier fit, Tyson said, because of the country's tradition of large plantations and ranches. It isn't hard to sign up large landowners to build industrial barns on their 1,000 acres of pastureland. Tyson plans to use Brazil as a base from which to export to markets around the world, he said.

One thing that seems clear is that Don Tyson will be pushing the company's growth for years to come. He still gets a gleam in his eye when showing photos of the company's new slaughterhouses in Brazil, and says he loves just about every aspect of the meat business.

"Gee, I couldn't think of working in a clothing store, setting inside waiting for somebody to walk in the door. In the chicken business, hell, you're out the door and on the street all the time."

Note - there was no date on this article. It appears on AOL's News Page, 11/02/08.

The Tyson company also has extensoive operations in Mexico. What the Indian situation is for them though is that chicken production can play a key part of helping integrate small farm communities in distributed locations into the national economy. If farmers can feed grain to poultry then sell the poultry dressed and processed and ship the poultry they lose a lot less of the consumer price of their produce to transport and distribution than shipping bulk grain. Should the Indian government incentivize massive centralized facilities like Tyson or the small farmers. This is a very important question whether in India or Mexico.

It may be all good and wonderful that Tyson is going global, as long as those products don't end up on dinner tables in the US with no health and safety inspections.

Let them go. With the state of the global economy where do they think it will get them?

Do they honestly believe that the people of this country are going to be willing to shell out outrageous prices for their product as they consistently raise prices to compensate for losses? They have repeatedly shown that the lie of lower priced goods as justification for cheap labor is exactly that......one big LIE.

People are fed up.....and more are becoming fed up with each passing day. Money is tight. Things are going to get a heck of a lot worse before it ever gets better. There's going to be a massive reversion back to reliance on self and locally provided food supply.

Where will that leave them? Relying on a majority consumer base of their very own, grossly underpaid slave labor who cannot afford to buy the products? Having to drastically reduce their prices so that their slaves can afford them?

What's going to happen when the governments of the countries they are outsourcing to decide that they are going to TAKE the lion's share of profits and control of these enterprises?

Inevitably they are all going to take a major financial beating and get everything they have coming.

I say let them leave and good riddance. We don't NEED them.

I gave up all Tyson products after the scandal during Clinton's first term between Clinton's Secretary of Agriculture and Tyson Foods. Tyson Foods was bribing this guy and he was greasing the skids for them on government contracts and standards. My decision has been more than validated by information I have learned since joining ALIPAC regarding Tyson's employment of illegal aliens. God forbid they put any more products in our stores.

I gave up all Tyson products after the scandal during Clinton's first term between Clinton's Secretary of Agriculture and Tyson Foods. Tyson Foods was bribing this guy and he was greasing the skids for them on government contracts and standards. My decision has been more than validated by information I have learned since joining ALIPAC regarding Tyson's employment of illegal aliens. God forbid they put any more products in our stores.

Fine, I quit buying Tyson years ago. Ta-ta