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Tyson Foods (TSN) Gains on Rise in Retail & Foodservice Demand

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Consumers’ preference for protein-based food and revival of outdoor dining trends bode well for meat manufacturing companies. Renowned meat products player Tyson Foods, Inc. (TSN - Free Report) has been gaining from such trends. It is particularly gaining from sturdy growth in the retail wing, thanks to solid brand offerings. Also, its food service segment has been witnessing growth. Efforts to strengthen portfolio offerings as well as production are yielding. Such factors are playing out well for the company, as it continues to battle headwinds stemming from the pandemic. Let’s delve deeper.

Strong Demand is an Upside

Tyson Foods is gaining on higher demand in the retail channel. In the third quarter of fiscal 2021, the company delivered growth in the retail channel across all segments. Management, in its last earnings call, highlighted that retail contributed more than $1 billion to overall sales improvement year to date and more than $300 million in the third quarter. The fiscal third quarter marked the company’s 12th consecutive quarter of retail share gains in core business lines owing to solid brands. In fact, strong retail sales were an upside to the company’s overall fiscal third-quarter results. The company has also been gaining from rebound in its foodservice category, as the restaurant industry started to reopen. Consumers are resuming their outdoor dining habits owing to leniency in pandemic-led restrictions. Improved foodservices business mainly benefitted the Prepared Foods and Chicken segment during the third quarter.

Efforts to Boost Portfolio Strength

Tyson Foods continues to focus on boosting production to cater to the rising demand for protein-packed food. It boasts a rich portfolio of protein packed brands that are growing rapidly across the globe. Acquisitions have played a vital role in boosting the company’s brand portfolio. Notable buyouts of the company include the European and Thai operations of BRF S.A., Keystone Foods business and GrupoVibra among others. The company has been coming up with well-chalked innovations. It recently introduced Hillshire Farm SNACKED!, which is likely to strengthen its snacking portfolio.

Tyson Foods has been steadily expanding its fresh prepared foods offering, due to consumers rising demand for natural fresh meat without any added hormones or antibiotics. In this respect, the buyout of Tecumseh is quite noteworthy. The company has been venturing into alternative sources for meat and protein products, evident from its investment in Memphis Meats and the launch of Raised & Rooted brand. In June 2021, Tyson Foods announced that it is rolling out a range of plant-based products in chosen retail markets and digital platforms in Asia Pacific under the First Pride brand.

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Other Growth Measures

Tyson Foods has been resorting to a number of operational and supply chain efforts to place itself better for the long run. In this regard, the company is investing in capacity expansion and automation technology investments.  The company is expanding production in its beef business to meet solid U.S. and international demand for better-quality items. Apart from these, the company is constantly looking for ways to improve cost structure as well as enhance operations and customer service. Another area of focus for Tyson Foods has been its e-commerce, as consumers are shifting to online shopping, especially amid the pandemic.

Wrapping Up

Operating amid the pandemic, Tyson Foods has been encountering incremental expenses related to transportation, production facility sanitization, underutilization and reconfiguration of plants.  Tough labor market conditions, massive inflationary pressures stemming from raw material costs and other global supply chain issues have been a drag.  

Despite such hurdles, Tyson Foods has been successful at maintaining a firm footing. Solid brands, robust geographical reach and the ability to leverage its manufacturing capabilities are helping the company to cater to the evolving global demand. Such aspects are likely to keep supporting this Zacks Rank #3 (Hold) company’s performance in the times ahead.

Shares of the company have gained 3.6% in the past three months against the industry’s decline of 6.4%.

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