Saturday, 11 September 2010

WSJ - Tyson CEO Counts Chickens, Hatches Plan (2 billion chickens - 20 million pigs - 7 million cattle - Points to BioLargo Technology Opportunity



Tyson CEO Counts Chickens, Hatches Plan

Since being named Tyson Foods Inc.'s chief executive in November, Donnie Smith has helped steer the biggest U.S. meat company out of one of its worst periods ever. Now that profits have replaced record quarterly losses, the hard part looms.

Meatpackers have a history of spoiling good times by increasing production too aggressively in a dash for market share, which pushes their livestock costs higher and helps keep them hostage to the boom-and-bust commodity price cycle.

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Federal antitrust regulators are airing concerns about whether big agribusiness companies have too much power over farmers. Tyson, which annually slaughters two billion chickens, 20 million pigs and seven million cattle, sells meat to some of the world's biggest fast-food chains and supermarkets.

Mr. Smith thinks the U.S. economy will remain flat for a while, but is optimistic that the Springdale, Ark., company has gotten its costs down enough to gain customers. He worries that the recession has fomented a "big is bad" feeling about companies.

The lanky 50-year-old works in the shadow of one of the most powerful families in food. The family of Don Tyson, the 80-year-old mogul who helped bring industrial scale to chicken farming, controls about 70% of Tyson's voting shares, and his son, John, is chairman.

Mr. Smith, who teaches a Sunday school class, says one of his most important jobs as CEO is to promote an ethical culture. The company employs 120 chaplains and he blogs about integrity.

From his egg-shaped office, Mr. Smith shared his views on leading his flock.

Excerpts:

WSJ: How long will the economy be flat?

Mr. Smith: I don't necessarily think we are headed to a double-dip recession. But I don't think it is going to be a quick pull out of the hole, either. If we are going to gain share in this market, we need a good cost structure.

WSJ: How are you lowering the cost of chicken?

Mr. Smith: We were very uncompetitive in our yield of breast meat. The primary reason is that several years ago we made a move towards more mechanical deboning. Now we have made a move back to hand deboning, and we've seen a tremendous yield improvement... which drives out cost.

WSJ: Has government support for the corn-to-ethanol fuel industry affected your business?

Mr. Smith: Prior to 2006, before ethanol became the user of one third of the corn crop, the cost of producing a pound of chicken was in the mid-20 [cents] range. Today, it is mid-30s.

WSJ: What do you want to see done with the ethanol industry?

Mr. Smith: Let industries compete without tax incentives.

WSJ: What's your management style?

Mr. Smith: I've got this little saying: the answer is always in the room. We have to free people up to operate in an environment where there is no fear. We are going to make mistakes. Don't worry about it. Let's fail fast and fail forward. Then take that empowering spirit, and let's go solve some problems.

WSJ: On your internal company blog, you mention the Bible as a favorite book. Does your faith affect the way you manage?

Tyson Foods Inc.

Revenue, in billions Profit/Loss, in millions Employees
2010
(nine months ended July 3)
2009
(nine months)
2010
(nine months)
2009
(nine months)
mid 2010 mid 2009
$21.0 $19.5 $557 ($93) 117,000 107,000

Mr. Smith: I don't think you can say, "I do all my church stuff on Sunday between nine and noon, and the rest of the time I am either out for myself or running my business."

My faith influences how I think, what I do, what I say. There are a lot of great biblical principles that are fundamental to operating a good business. Being fair and telling the truth are biblical principles.

WSJ: How moral can a company be?

Mr. Smith: We are going to do what is right. And we're going to do what is right for one reason: because it is right. Now listen, we've got 117,000 people. There might be somebody that steps out of line occasionally. We will correct that.

WSJ: The Bible says the chances of a rich man getting into Heaven aren't good. Can a Fortune 500 CEO get into Heaven?

Mr. Smith: This one will, because I did what the Bible said I had to do to get into heaven. Feeding people is a laudable purpose in life.

WSJ: The recession has brought widespread complaints of Wall Street greed. What do you think?

Mr. Smith: There seems to be this attitude that big is bad. And it really does bother me. Big banks are bad. Big Ag is bad. And you know what? We're not bad.

We provide jobs for 117,000 people around the world. We make great, safe food products.

WSJ: Last thing: Which of your beef customers makes the best hamburger?

Mr. Smith: There is zero chance I am answering that question. No, I will tell you who makes the best hamburger: I do.

WSJ: So it's not McDonald's? Burger King? Wendy's?

Mr. Smith: On my grill.

Write to Scott Kilman at scott.kilman@wsj.com


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