Tyson Foods CEO is betting on A.I. and automation to reduce labor costs

February 8, 2022, 11:33 AM UTC

Good morning,

An uptick in digital transformation at companies was ushered in by the pandemic. And as supply chain bottlenecks and labor shortages continue to be a factor, Tyson Foods, Inc. CEO and President Donnie King has made tech a business imperative. 

One of the world’s largest processors and marketers of chicken, beef, and pork is betting big on automation and A.I. During Tyson’s Q1 2022 earnings call on Monday, King doubled down on the company’s set plan to spend $1.3 billion over the next three years to increase automation in meat plants.

“The productivity program aims to deliver $1 billion in recurring productivity savings by the end of fiscal ’24 relative to a fiscal 2021 cost baseline and has three critical focus areas—operational and functional excellence, digital solutions, and automation,” King said.

In the prepared foods segment of the business, “we’re making use of supply chain, digitization, and advanced analytics,” he said. “Our digital manufacturing platform allows us to analyze real-time data to take actions to optimize process conditions that drive better yields, lower costs, consistent quality, and increased output.” 

One place automation is reigning? Deboning chicken, he said. Automation could eventually be used for “more difficult, harder to staff jobs,” he noted. In fiscal 2022, the company expects $300 million to $400 million in productivity savings, and “some of that is coming from the automation piece,” King said. “We’re moving as quickly as humanly possible, as quickly as the supply chain will allow us to get new pieces of equipment,” he noted. The company is in the process of building 12 new plants over the next two years. 

How’s Tyson doing? “First-quarter earnings per share grew 48% to $2.87,” Stewart Glendinning, Tyson EVP and CFO, said on the call. “Our sales were up approximately 24% in the first quarter, largely a function of our pricing initiatives to offset inflationary pressures.” The prices of Tyson’s products increased. For example, the price of beef increased 31.7%. The company’s stock price climbed to $99.09 on Monday from $88.29 on Friday.

The food automation market is expected to grow at a compound annual growth (CAGR) rate of 9.5% through 2027 to reach $29.4 billion, according to recent report released by Meticulous Research. The “fully-automatic segment” (replacing human labor with automation) as opposed to the “semi-automatic segment” is expected to grow at the highest CAGR during the next five years, the report found.

But it’s still an open question what accelerated automation means for workers. Research by The World Economic Forum has predicted that automation will actually result in a net increase of 58 million jobs, and allow employees to gain more advanced skill sets. “There’s plenty of data that says automation can go hand in hand with job growth,” CFO at Bright Machines, a manufacturing software and robotics company, previously told me. 

Time will tell if Tyson’s billion-dollar investment will elevate employees as well. 

See you tomorrow.

Sheryl Estrada

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