The leadership team at Tyson Foods ditched its khakis and donned suits to pitch the ongoing Hillshire acquisition to investors and analysts Wednesday.
The event was held at the New York Stock Exchange and was the company's first investor day in seven years.
"Today we're going to introduce you to Tyson 2.0. We're going to introduce you to our recipe for success," said Donnie Smith, chief executive of the company. "There's two words you're going to hear a lot today: synergy and growth."
Analysts have focused questions and concerns at these two aspects of the acquisition.
John Tyson, chairman of the board of directors, also announced that Smith had been named to the company's board of directors.
"Donnie's election to our board not only cements the already strong alignment between the board and our senior management, but demonstrates our shared commitment to a strategic business plan designed to continue delivering impressive growth," Tyson said.
Smith has said growth will come from leveraging Hillshire's leading brands -- such as Ball Park, Jimmy Dean, Aidells and Hillshire Farm -- as consumers increasingly buy processed products.
During Wednesday's investor day, Sally Grimes -- who leads Tyson's insights, innovations, research and development, retail sales, and global brand strategy teams -- said the company's growth strategy mandates expanding the reach of those lines.
Grimes was the former chief innovation officer for Hillshire.
Earlier this year, Jimmy Dean expanded into lunch, dinner and low-calorie offerings -- some of which don't contain meat.
Ball Park has expanded into premium hot dogs and microwavable beef patties. It will soon feature jerky products as well.
"This was about moving beyond a product to a consumer experience," Grimes said.
Andy Callahan, who was the former retail president for Hillshire and now manages retail consumer brands for Tyson, said every brand in the company's portfolio, including the Tyson brand itself, will be given similar treatment.
"Hillshire Farm is not sausage and lunch meat; it's farmhouse quality meats. Ball Park, which originally was managed as a hot dog [brand], is better guy food for better guy time. And Aidells is premium sausage, but it's really classic favorites reimagined for food-loving explorers," he said. "We're in the process with doing this with Tyson and Wright [Bacon]."
Grimes said new products are needed as consumers change. Only 20 percent of households are married couples with children. Millennials constitute 27 percent of the population, and nearly one-third of dinners are eaten alone, she said.
"Long gone are three square meals a day," Grimes said. "The average American actually eats 4.9 meals per day."
Synergies are areas of cost savings made possible when two companies merge. Tyson has projected $225 million in cost savings in fiscal 2014 and more than $500 million by the third year of ownership.
Company officials had mentioned instances of cost savings in past presentations but hadn't provided a detailed picture before Wednesday.
In 2015, $140 million of savings will come from the prepared foods segment, said Donnie King, president of North American operations and food service. An additional $40 million will come from procurement in areas such as packaging purchases, he said.
About $25 million in savings will come from manufacturing and logistics. King said Tyson will have increased control over the product mix in each plant and where facilities are located.
Another $20 million will come from organizational and fiduciary costs. Having one board of directors instead of two will contribute to this category of cost savings, King said.
King said prepared foods would achieve $250 million in cost savings in 2017, procurement will achieve $175 million, manufacturing and logistics will achieve $50 million, and organization and fiduciary will be able to achieve $25 million.
"While this is a big number, it is a number we're comfortable ... committing to," he said.
Business on 12/11/2014