Tyson Foods

views updated

TYSON FOODS

Tyson Foods, Inc. of Arkansas made news in the mid-1990s, not for its position as the largest poultry producer in the nation, but for its alleged political connections to the Clinton administration. As governor of Arkansas, Bill Clinton showed favoritism toward Tyson with tax breaks and personal services. In return Clinton accepted considerable presidential campaign funds from the company. Mike Espy, former secretary of agriculture during the first part of the Clinton administration, was accused, and later cleared, of accepting inappropriate gifts from Tyson. In 1998 Tyson accepted a settlement from the Office of Independent Counsel, agreeing to pay $6 million in penalties and costs for its alleged influence-buying. The unfavorable publicity, however, has not discouraged millions of consumers from buying Tyson products.

The history of Tyson Foods started with an Arkansas farmer, John Tyson, who hauled about 50 chickens to sell in Chicago during 1935. He named his business Tyson Feed & Hatchery and began making a profit buying and selling chickens prior to World War II (1939–45). Tyson eventually started raising chickens as well, and the company, incorporated in 1947, expanded significantly after the war.

Don Tyson joined his father in the business in 1952, and the company began to expand its production facilities. A large processing plant was built at the site of the company headquarters in Springdale, Arkansas. Tyson introduced an ice-pack processing line, which helped it to be more competitive. In an era when people were eating more and more chicken Tyson was in a good position to fulfill consumers' needs. In 1963 the company went public and changed its name to Tyson's Foods, Inc. Three years later Don Tyson took over as president following the accidental death of his father.

Improved methods for producing larger numbers of broiler chickens drove the prices of chicken down in the late 1960s. When Tyson lost more than a dollar per share in earnings in 1967 the firm began the process of acquiring smaller companies to increase its share of the market. In 1969 it purchased Prospect Farms, Inc., which became a precooked chicken division. In the same year Tyson successfully fended off a lawsuit from Arkansas chicken farmers who felt that the company had discriminated against them as suppliers.

In 1971, after a period of growth and diversification, the company's name was changed to Tyson Foods. The company acquired Ocoma Foods, Krispy Kitchens, and the poultry division of Wilson Foods. It also began to market the first breaded chicken breast patty and bought a hog operation in North Carolina. In the early 1970s, as Americans increasingly favored chicken over beef and pork, Tyson became a leader in introducing new chicken products. In addition to the chicken patty it sold chicken hot dogs and bologna, just a few of the 24 specialty products it had developed by 1979. A new chill process was used to produce fresh chickens and prolong shelf life.

Tyson bought the rest of Wilson Foods in 1978. In 1980 Tyson introduced a Chick 'n Quick line, which offered easy-to-prepare chicken portions. The company was also the largest producer of rock Cornish game hens and the biggest producer of hogs. Precooked chicken patties for restaurants also became big sellers during this period.

By the early 1980s the consumption of chicken had increased 30 percent since 1970. Tyson's ability to mass-produce chickens rapidly, as well as its introduction of prepared chicken products, had helped it to expand in this market. It continued to acquire other companies and by 1984 had expanded its operations into five other states besides Arkansas. Don Tyson won the gold award from the Wall Street Transcript in 1986 for his business successes.

A major coup for Tyson in 1988 was the takeover of Holly Farms Corporation, the national brand-name leader in chicken sales. Tyson battled for six months with the Nebraska firm ConAgra for control of Holly Farms and in 1989 Don Tyson finally agreed to pay $1.29 billion for Holly Farms. In 1990 Tyson's sales increased 50.7 percent as a result of the Holly Farms acquisition. Tyson's beef and pork operations also increased substantially after the merger.

Tyson next got into the seafood market in the early 1990s by acquiring Arctic Alaska Fisheries Corporation and Louis Kemp Seafood Company. Although the seafood market operations were not profitable at first, market activity was bolstered by the acquisition of the seafood division of International Multifoods Corporation.

Tyson continued to expand and to buy up competitors and suppliers. In 1994 the company decided to build four new poultry plants at a cost of $400 million and also bought a controlling interest in a Mexican chicken-processing company. In the same year it bought Culinary Foods, Inc., which manufactured specialty frozen foods, and Gorges Foodservice, Inc., a processor of beef for the food services industry. Tyson tried unsuccessfully to purchase WLR Foods Inc., a Virginia producer of turkey and chicken products. In 1995 Tyson purchased the chicken plants owned by Cargill, adding an additional output capacity of 2.5 million chickens per week. An equal increase in capacity was brought about with the acquisition of McCarty Farms Inc. of Mississippi. In 1997 Tyson took the very significant step of purchasing Hudson Foods, Inc., the fifth-largest producer of chickens in the U.S.

Don Tyson retired as chairman in 1995 and turned over control of operations to Leland E. Tollett. By the mid-1990s Tyson had reached the top position in chicken sales in the nation; by 1998 its sales had increased from $2.54 billion in 1989 to $6.4 billion. In the mid-1990s Tyson entered into a joint venture with the People's Republic of China, opened an office in Mexico, and established a resource office to help the company market goods on the international market. In 1998 the company exported its products to 43 countries.

Tyson Foods, in the words of its company philosophy, successfully sought to "segment, concentrate, and dominate." Tyson achieved all three goals through its many acquisitions; in the late 1990s Tyson also capitalized on the public's increasing desire for easily prepared chicken products.