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Tyson Continues to Build Prepared Foods Powerhouse

November 15, 2017

Tyson Foods announced it has acquired Original Philly Holdings Inc. – one of the leading producers of Philly-style sandwich steak and cheesestake appetizers in the country, for an undisclosed amount.

Founded in Philadelphia in 1981, Original Philly Cheesesteak Co. was originally known as Roxborough Meat Co., and produces portion-controlled Philly Style sliced steaks for distribution to foodservice, retail, and convenience outlets. Today, the company consists of two business units – Original Philly Cheesesteak Company, which produces raw Philly Style sandwich steak products, and Philadelphia Pre-Cooked Steak Company, which produces fully-cooked Philly-style steak sandwich  products.

“Original Philly Holdings is a natural, strategic fit with our Prepared Foods Business,” said Sally Grimes, president, Tyson Foods Prepared Foods Group. “The Original Philly brand and portfolio of products are highly regarded in the foodservice industry and have a growing list of customer relationships with chain and convenience store operators. We look forward to combining our commercial and operational resources with Original Philly Holdings’ capabilities to offer new solutions to customers and consumers, expand distribution, and continue the growth and legacy of the business.”

Prepared Powerhouse

In recent years, Tyson began a process of de-commoditization, shifting more into the higher-margin prepared food space.

In July 2013, Tyson struck one of the largest deals in the food space, when it announced it had agreed to acquire Hillshire Brands in an $8.55 billion all-cash deal.

However, between 2013 and 2014 the company also agreed to acquire Don Julio Foods, a maker of flour and corn tortilla products; Circle Foods, a maker of handheld Mexican foods; and Bosco’s Pizza Co., a maker of par-baked frozen pizzas and pizza sticks.

With the completion of the Hillshire deal, Tyson doubled its prepared food sales from 18 percent of revenue, and earned the top brands of chicken, stack-pack bacon, sausage, breakfast sandwich, hot dogs, corn dogs, and super premium sausage, creating a $40 million prepared food powerhouse.

And despite its surprising move in October 2016, when Tyson became the first key meat company to invest in a meat alternative startup when it acquired a five percent stake in Beyond Meat, Tyson continues to be dedicated to building out its prepared food platform.

By April 2017, Tyson was once again adding to its meat holdings, with the announcement of its acquisition of AdvancePierre, a Cincinnati-based national producer and distributor of value-added ready to eat sandwiches, sandwich components, entrées and snacks, in a deal worth $4.2 billion.

Tyson’s acquisition of Original Philly was announced at the same time as the company announced strong fourth quarter and full-year financial results. For the year ending September 30, Tyson Foods’ net income totaled $1.774 billion, up from $1.768 billion for the year before. Fourth quarter net income was $394 million up from $391 million, while sales totaled $10.145 billion up from $9.156 billion.

“We delivered our overall goal of at least 4 percent operating income growth, e.p.s. growth in the high single digits and 3 percent volume growth in value-added products,” Thomas P. Hayes, president and chief executive officer of Tyson Foods, told Food Business News. “Fiscal 2017 was a year of great change, and despite some challenges, our team remained focused on delivering for long term for our shareholders and driving demand for consumer-relevant products through innovation, customer growth and through category leadership initiated through transformation to a more agile and efficient organization structure to accelerate growth and sustainability.”

Not Alone

Meat consumption in the U.S. jumped by 5 percent in 2015 – the largest increase in 40 years, according to a report by Rabobank Food & Agribusiness Research and Advisory Group. Consequently, consumers are more often opting for snack foods as health plays a greater role in food choices, and younger consumers blur the lines between snacking and formal meals, reports Food Dive. Today, 24 percent of all snack foods are eaten during meal times, according to a report issued by The NPD Group, compared to 21 percent five years ago – a trend that is expected to continue, with expectations that the trend will increase by another 12 percent.

As consumers turn away from snacks that contain high amounts of sugar or hollow calories and toward convenient foods and snacks that offer higher protein levels, demand for meat has also increased. This shift in consumer demand has been reflected in an uptick of buyouts of meat-based snack food makers in recent years.

In March of last year Jack Link’s Protein Snacks announced it had acquired the meat snack division of Grass Run Farms – a collective of American family farms that produce 100 percent grass-fed beef and beef snacks from operations that raise beef cattle using sustainable and responsible methods without the use of antibiotics or added hormones. Terms of the deal, which included trademark and distribution rights, were not disclosed.

Last year also saw General Mills agree to acquire premium meat snack company EPIC Provisions, a Texas-based producer of meat-based protein bars from ingredients sourced from antibiotic and hormone-free chicken, turkey, pork, bison, lamb, and grass-fed beef; and saw Hershey acquire Krave Pure Foods – another premium jerky maker that Hershey told Bloomberg could become a brand worth $500 million.

More recently, in the spring of this year, Conagra Brands announced it had agreed to acquire Thanasi Foods, a protein-based snack manufacturer, and maker of Duke’s® meat snacks and BIGS Seeds, for an undisclosed amount.

And only weeks ago, Hormel Foods Corp. announced its largest acquisition to date, paying Arbor Investments $850 million for premium deli meat and salami company Columbus Manufacturing Inc.; and Evans Food Group announced it had acquired California-based pork rind producer Gaytan Food Inc. for an undisclosed amount.

-Lynda Kiernan

Lynda Kiernan is Editor with GAI Media and daily contributor to GAI News. If you would like to submit a contribution for consideration, please contact Ms. Kiernan at lkiernan@globalaginvesting.com.

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