This week, consumer product industry and business media has been absorbing the news that Tyson Foods has agreed to acquire Keystone Foods, a key supplier to global restaurant chain McDonald’s Corporation. This development and indeed the unfolding strategy has both strategic and supply chain leadership storylines and implications. Tyson Foods

 

The Acquisition

Tyson announced that the company is willing to pay $2.2 billion in cash for Arkansas based Keystone Foods. The move is billed as an effort to expand sales, product margin and to establish more recurring restaurant and food service revenue channels. That includes the opportunity to add assorted meat processing plants to existing networks in Asia and the United States.

Keystone Foods describes itself as a global food services company that supplies the world’s finest consumer brands with high-quality, fresh, and frozen animal protein products including poultry, beef, fish, and pork. The company’s distribution model is primarily focused on supplying the U.S. market, particularly restaurants and food-service companies. The company began to expand its business to Asian based markets, selling a wider variety of meat products primarily based on the needs of larger global-based restaurant chains such as McDonalds. In late August of 2014, this blog highlighted a development where food regulators in China uncovered the alleged existence of certain expired meat products within the McDonalds supply chain in China. At the time, the global restaurant chain had dependence on long-time supplier OSI Group and its then China based subsidiary, Shanghai Husi Food Company for local supply of meat product. McDonalds subsequently suspended all cooperation with Shanghai Husi and positioned alternative suppliers Cargill and Keystone Foods to increase supply capacity within China.

Of late, Tyson, noted as one of the largest meat suppliers by sales, has invested billions in  a series of add-on acquisitions designed to move away from being primarily an operationally focused supplier of commodity meat products subject to constant market fluctuations, and more positioned to be supplier of higher-margin branded packaged meat products to grocery chains and food outlets. Acquisitions included names such as Hillshire Farms, Smart Chicken, AdvancePierre Foods and Original Philly Cheesesteak Company.

 

The CSCO Context to Leadership Direction

Tyson’s CEO is Tom Hayes assumed the company’s senior leadership role in late 2016. Hayes came to Tyson after previously serving as Chief Supply Chain Officer and Executive Vice President at Hillshire. His supply chain management background further included a role as Senior Vice President and Chief Supply Chain Officer for Sara Lee Corporation’s North American Retail and Foodservice businesses from 2009 to 2012. Most of Hayes’s background stems from food service and packaged foods companies.

A recent published article by Bloomberg Businessweek focused on Tyson, describes the CEO, in-part, as:

Hayes, 53, is an upbeat, shoulder-punching, “call me Tom” kind of leader—“a man of the people,” as more than one member of his team describes him. All that bonhomie has emboldened and perhaps insulated the CEO, who’s positioned himself as a forward-thinking renegade in an industry many consider ethically unsound, environmentally catastrophic, and mired in old-world thinking.

In its profile report, Businessweek noted the perception that Hayes understands, from his professional background, the way consumers think and what they want, and is additionally very comfortable talking about the hard issues that include supply chain related labor exploitation or poor working conditions along with practical approaches to animal welfare concerns throughout the supply chain.

In his first few months as CEO, he replaced six of 10 existing division heads with new hires from outside the meat industry. He further created new corporate leadership roles for technology and sustainability efforts , After meeting with many of Tyson’s then global critics and organizations, he declared new corporate-wide sustainability goals for Tyson’s extended supply chain described as practical and achievable. He raised the wages of meat workers by double-digit numbers over three years and expanded third-party monitoring animal welfare practices.

Hayes has further spurred longer-term strategic efforts to move the company from a processor and distributor of branded meat products to a longer-term goal as producer of protein-based products. Thus far, that has included spurring strategic investments in Israeli start-up Future Meat Technologies and San Francisco based Memphis Meats, developing lab-grown beef, poultry and fish that has Bill Gates as an investor. Yet, the CEO has been quick to note practicality that he does not envision in his lifetime, a world where there are not animals raised to feed human consumption.

From our lens, all of the above actions ring very much toward the tenets of a leader that has cut his or her teeth in the day-to-day operational aspects of end-to-end supply chain business process, team, technology, and people management needs.

 

Latest Challenges

Ongoing trade and tariff developments involving the U.S., China and other nations have precipitated an imbalance of U.S. domestic supply which has financially impacted the industry including Tyson. In its reporting of the Keystone Foods acquisition, The Wall Street Journal commented that the move was a bid to both boost sales as rising supplies and tariffs squeeze farmers and meat companies. Indeed, a supply network focused mindset would translate to having global supply chain presence to serve and more efficiently distribute to major regional markets.

Reader Takeaway

The moniker of this blog was purposely chosen- Supply Chains do Matter in supporting the fulfillment of strategic, tactical, and day-to-day business outcomes. Supply chain leaders and teams gain invaluable experience in strategy, in understanding all aspects of serving customers, and in the nuances of supporting various global-based customer fulfillment needs that present local cultural challenges.

Increasingly, such leadership experience has opened more doors towards the qualifications to assume CEO leadership roles.

We will continue to highlight such profiles in this blog as an inspiration for all of our community.

Bob Ferrari

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