Tyson Beef Margins Fueled By Demand Growth

Tyson Foods says it is well-positioned for long-term, sustainable growth. ( Tyson Foods )

Tyson Foods’ executives told investors its beef margins are benefitting from a structural shift higher due to both domestic and global demand growth and a favorable supply of cattle.

Chairman John Tyson, president and CEO Noel White and other senior executives told investors and analysts during Tyson’s  Investor Day at the New York Stock Exchange last week the company continues to meet changing consumer needs and is well-positioned for long-term, sustainable growth.

Improved global economies are driving the demand shift for beef, and key indicators suggest U.S. beef exports will continue to rise and value-added growth will continue, said Steve Stouffer, group president of Tyson Fresh Meats.

“As we’ve seen an increase in global middle class income, the demand for high-quality, U.S. grain-fed beef continues to grow, which is supportive for higher beef margins,” Stouffer said.

He also noted larger supplies of U.S. fed cattle are a contributing factor as U.S. packing capacity utilization has improved. For margins, Stouffer said, “A flat global cattle supply, coupled with growing demand, creates margin opportunity.”

CEO White said Tyson is poised for long-term growth because the company understands “consumers and can meet their needs through a broad portfolio of diverse products. As we look ahead, prepared foods and value-added chicken are expected to be the most profitable segments and international is where we see the most opportunity for significant growth.”

The company said it has delivered a total shareholder return of 695% over the past 10 years, compared to a 328% return of the S&P 500 during the same time frame.

Some key points from Tyson’s presentation:

  • Through recent international acquisitions, Tyson Foods is positioned to take advantage of rising global protein demand. Over the next five years, it is estimated that nearly 98 percent of protein consumption growth will happen outside the U.S. and approximately 70 percent of that growth will be in Asia.
  • A worldwide decrease in pork supply due to the impact of African Swine Fever on the Chinese pig herd could offer significant upside to Tyson Foods’ poultry, pork and beef businesses, but could also increase raw material costs for the company’s prepared foods business.
  • Beef has enjoyed demand growth resulting in higher beef margins. This trend is expected to continue due to factors such as increasing global middle-class income, increases in live cattle supplies and the continued growth of the company’s case-ready, value-added business.
  • Tyson Foods’ poultry business continues to grow its mix of value-added products through acquisition and innovation in the retail and foodservice channels. Examples in retail are the recent acquisition of the Smart Chicken® brand that offers premium, organic, air-chilled chicken and plans to launch new Tyson®Air Fried chicken this fall.
  • Demand growth for alternative proteins is being driven by people who love eating meat but also are open to a diet that includes plant-based proteins. Company leaders believe this growth is “incremental and meaningful in potential size” and recently introduced the company’s first plant-based and blended