In all, it has been a dynamic 12 months since our last ranking â€” part of the reason why those in the Top 100 are where they are.
What follows is a glimpse into the world of our industry’s heavy hitters.
Tyson Foods Inc.
“We’ve accomplished a great deal in our efforts to make Tyson a stronger, more agile company and believe we have the right strategies in place to win,” says Richard L. Bond, company president and chief executive officer. “We’re confident about our future because of our efforts to optimize our commodity businesses, create new products, expand our international presence and increase the value of our byproducts.”
Tyson experienced increased sales of $1.5 billion in fiscal 2007 and generated operating income of $700 million while incurring $300 million in additional grain costs. The company says it also reduced debt by $1.2 billion.
Corn-based ethanol is putting pressure on input costs for the food industry and companies like Tyson. Approximately 25 percent of the U.S. corn crop is expected to be used in 2008 to produce ethanol, compared to only 8 percent in 2002.
“We currently believe we’ll experience almost $800 million in increased grain and related input costs in fiscal 2008,” says Bond.
Grain is a major expense in chicken production, representing almost half the cost of raising a live chicken. Higher grain prices also affect the cost of cooking oil, flour and other ingredients used to produce further-processed and precooked chicken products.
Tyson says it is working to offset the higher costs through its risk management activities and by increasing finished product prices. The company also continues to push for changes in the government mandate on corn-based ethanol and the removal of tariffs on sugar-based ethanol imports.
“According to a recent report, even if the entire U.S. corn crop were turned into ethanol, it would displace only 3.5 percent of gasoline use,” Bond adds.
Tyson maintains efforts to collaborate with retail and foodservice customers to meet consumer needs with innovative food solutions. Bond refers to the success of the Tyson Discovery Center, the company’s new food research and development facility, which includes an R&D team of 120 professionals, 19 research kitchens and a USDA-inspected pilot plant.
“Even with our longstanding customers, we’ve been able to increase the number of projects in the pipeline and speed up product launches,” he says. Customers representing about half of the company’s sales revenue have already been to the Discovery Center, which opened a year ago.
As part of the company’s efforts to capitalize on consumer insights, Tyson has identified three consumer need states for meal preparation. They include:
Homemade with Help™ â€” Tyson is addressing consumer desires to serve their families home-cooked food by providing a few shortcuts. An example is Tyson’s “Trimmed and Ready” fresh chicken, which has already been handtrimmed for the consumer and is ready to cook.
Fast & Flexible™ â€” Because of thefast-paced lifestyle of many consumers, Tyson has developed products such as pre-cooked dinner meats and restaurant-style frozen snacks called Tyson® Any’tizers™. These products can be heated and served in a matter of minutes.
Ready Now™ â€” Eighty-three percent of consumers’ main meals include ready-to-eat foods. Tyson is helping expand the retail grocery deli business with such products as prepared appetizers and gourmet sandwich wraps.
Bond says Tyson is expanding the success of its “Thank You Mom” advertising and promotion plan by tying it into the company’s sponsorship of the 2008 and 2010 U.S. Olympic teams. The company also has successfully promoted Tyson consumer products
Product development and innovation also have been key to the success of Tyson Food Service. Examples include the 2007 reformulation of breaded products to zero grams of trans fat and the conversion of ready-to-cook chicken to “All Natural” with a 50-percent reduction in salt. The company used its Kid Tested, Kid Approved™ development process in the introduction of new products for school cafeterias.
Tyson continues efforts to maximize margins in its commodity businesses, according to Bond, by reducing nonvalue-added costs, improving yields and pricing and optimizing product mix and services. This has included such measures as consolidating some of the company’s beef operations, changes in bird weight and optimizing the number of value-added breast portions from each chicken.
Bond projects Tyson’s international business will grow from $3 billion in annual sales to at least $5 billion by 2010. Driving this increase will be the expansion of the Tyson operations in other countries. Tyson has completed joint ventures in Argentina and China, hopes to expand operations in Mexico and is working on a potential acquisition in Brazil.
Tyson continues exploring ways to increase the value of its by-products, including the conversion of fat into fuel. In December 2007, Tyson and ConocoPhillips started turning beef tallow into renewable diesel fuel. Production started at 100 barrels a day and is now operating at 300 to 500 barrels a day. Tyson’s alternative fuel joint venture, Dynamic Fuels, will convert low-cost fat, grease and other feedstock into renewable synthetic jet fuel. A production facility is being constructed in Louisiana and is expected to begin production in 2010.
Cargill Meat Solutions
In September 2007, Cargill introduced the Excel™ Australian Grain Fed Beef brand, an extension of the Excel™ Fresh Meats brand. The company saysthe expansion allows the Excel brand to better serve the growing global demand for high-quality beef in markets such as Japan, Korea, China, Australia and the United States, and will only include high-quality grain-fed beef from Australia. Cargill Meat Solutions donated 94,520 pounds of ground beef to America’s Second Harvest, the Nation’s Food Bank Network. The donation, the largest ground beef donation in Second Harvest’s 26-year history, allowed member food banks
The Urban League of Kansas has selected Cargill Meat Solutions as the 2007 recipient of its Equal Opportunity Corporate Diversity Award. Each year, the award recognizes one business in the Wichita community that understands, embraces and promotes diversity in the workplace. Additionally, Safeway and Cargill Meat Solutions joined with the ABC reality show “Extreme Makeover: Home Edition” to help make two Delaware families’ homes extremely special. Safeway and Cargill donated a stainless-steel backyard grill for the duplex home accompanied by a $1,000 gift card for “guaranteed tender” Rancher’s
Chef Stephen Giunta, a certified master chef and culinary director of Cargill Meat Solutions’ Culinary Innovation Center (CIC), received the Pioneer Award from the Research Chefs Association (RCA) in recognition of his food industry leadership and his pioneering spirit in combining culinary craftsmanship with food science. In March this year, Giunta accepted the award at the RCA’s annual conference and Culinary Expo in Seattle, Wash. Cargill Value Added Meats (CVAM) also acquired certain assets of Willow Brook Foods. The transaction includes Willow Brook’s operations in Springfield, Mo., as well as the Albert Lea, Minn., cooked meat operation, known as Schweigert Foods. Additionally, CVAM will acquire Willow Brook’s brands.
Cargill launched three new brands: Meadowland Farms Ground Beef, Valley Tradition and Circle T Beef. The new brands are produced at Cargill’s three strategically located regional facilities (Fresno, Calif., Milwaukee and Wyalusing, Pa.). Each facility specializes in producing high-quality lean ground beef. Cargill also launched a new multi-cultural branded line of beef called Rumba, www.RumbaMeats.com. The company says the Rumba brand provides culturally relevant cuts that fit perfectly into authentic Hispanic-, Asian- and African-American recipes. The brand took approximately five years to develop and has been successfully rolled out nationwide, including in the Phoenix, Dallas, Houston and Fresno markets.
ConAgra Foods Inc.
“As announced previously, we have entered an agreement to divest our Trading & Merchandising operations. The deal is the right strategic step for us, and the timing underscores our confidence in our core food businesses. The transaction does not change our EPS growth commitments,” Rodkin says. “While profits from the Trading & Merchandising operations have been extremely high over the past four quarters due to unprecedented volatility in commodities markets, our sole focus is on more repeatable earnings and cash flow growth from our core food operations. Due to the innovation, pricing, marketing, and cost-saving initiatives under way, we are confident the foundation has been set for strong future profitability.”
Smithfield Foods Inc.
Smithfield also acquired ConAgra’s Butterball turkey business through a 49 percent-owned joint venture with Maxwell Farms. The combination of Butterball and Carolina Turkeys, owned by the joint venture, was renamed Butterball, LLC, and is now the largest U.S. turkey producer, with sales of more than $1 billion.
A week after the closing of fiscal year 2007, Smithfield completed the acquisition of Premium Standard Farms, a vertically integrated provider of pork products. The company says this enabled Smithfield to capitalize on its vertically integrated model and expand its share in hog production to 17 percent from 14 percent. The company says the merger increased its share in pork processing to 31 percent from 26 percent.