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Tyson Foods (TSN) on Track to Boost Case-Ready Meat Production

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Tyson Foods, Inc. (TSN - Free Report) has been focused on strengthening the production of consumer-ready products. Moving on such lines, the company said that it is solidifying its case-ready meats business by reusing its plant capacity in South Carolina.  
Incidentally, Tyson Foods intends to open an idle Tyson-owned facility in Columbia and transform it into a meat-cutting facility. This facility will make retail ready, portioned packs of sliced pork and fresh beef, along with ground beef, for grocery and club stores in the eastern parts of the United States. Management said that this facility, with its premium quality, pre-cut, pre-packaged fresh beef and pork, is likely to help the company cater to the burgeoning demand from its retail customers.

More About the New Facility

Tyson Foods will initially invest nearly $42 million to convert the facility into a meat portioning and packaging operation, which is presently anticipated to start production in May 2021. The company then intends to make additional investments toward further enhancements and production equipment for the facility over the next three to five years. Total investments are expected to be $55 million.

Moreover, Tyson Foods notified that the new facility will create job opportunities for 330 people, which is more than double the team strength at the operation, when it was shut down in August 2020. The company’s reinvestment in the plant in Columbia underscores the strategic and geographic significance of South Carolina to agribusiness.

We note that Tyson Foods’ case-ready beef and pork business presently has plants in Iowa, Tennessee and Texas. Also, this meat products company has plans to introduce a new facility in Utah in the latter part of this year. The packaged meat products manufactured by these facilities are called case-ready as they can be directly placed in the refrigerated meat cases of grocery as well as club stores. Certainly, these moves are likely to work well for the company in the face of rising pandemic-led demand in the retail channel, thanks to consumers’ increased at-home consumption.

What’s More?

Tyson Foods has been gaining on rising demand in its retail channel, thanks to increased at-home consumption amid the pandemic. In first-quarter fiscal 2021, the company’s retail core business lines saw share growth for the tenth consecutive time. Management highlighted that its retail business growth is primarily backed by strong brand offerings. In fact, strong retail sales were an upside for the company’s prepared foods and chicken segments during the first quarter. Given the rising demand, the company shifted part of its foodservice production to concentrate on retail.

Continued at-home dining practices are likely to keep aiding growth in retail volumes. Management also expects to see a gradual recovery in foodservice volumes in the fiscal, as away-from-home dining trends pick up the pace. Apart from this, Tyson Foods is benefiting from its brand strength, robust geographical reach and the ability to manufacture locally in its international markets and cater well to the evolving global demand. Another channel performing well for the company is e-commerce. Markedly, e-commerce sales surged 89% year on year during the first quarter of fiscal 2021. Management expects continued strength in the e-commerce channel, as consumers continue adhering to online purchasing.

Shares of this Zacks Rank #3 (Hold) company have gained 20.4% in the past three months compared with the industry’s rise of 10.5%.

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