Tyson Foods Inc. is well positioned to lead the rush to create and sell plant-based protein products designed to resemble meat, analysts say, with the company expected to be one of the biggest players in the developing market.
At a conference in New York earlier this week, Tyson's President and Chief Executive Officer Noel White said in time the company's line of alternative proteins could be worth hundreds of millions of dollars.
The category, stuffed with food items such as chickenless nuggets or burgers made of soy and pea protein, has over the years caught the attention of meatpackers like Tyson, known for raising and selling the real thing, prompting some to invest and develop their own line of alternative protein products.
"It's a space that we identified some time ago as an emerging category," White said at Wednesday's conference. "I think it certainly has the capability of being a $1 billion business for us."
Tyson, the nation's largest meatpacker, signaled its interest in plant-based products less than three years ago with a 5% investment in Beyond Meat. It later invested in cultured foodpacker Memphis Meats and raised its stake in Beyond Meat, before it started development of its own line of Tyson-branded alternative proteins.
Tyson sold its investment in Beyond Meat last month, just before the California-based firm went public in one of the most successful initial public offerings so far this year. Since opening at $25 per share on May 2, shares have risen as high as $96.78.
"It turned out to be a good investment for us," White said. But it came to a point where Tyson wanted to enter the alternative protein market without directly competing with its investment partner. According to records filed with the U.S. Securities and Exchange Commission, Tyson's stake was worth about $23 million.
"We plan to take full advantage of all the resources at our disposal and move into the category in a meaningful way," White said.
Why certain consumers purchase plant-based products varies. Martin Thoma, a principal at Thoma Thoma marketing agency in Little Rock, said some view it as a healthy option or better for the environment; others just don't want to eat animals.
Millennials, for example, are "very attuned to their impact on the Earth and they're more willing to vote with their pocketbooks and purchase products that are more environmentally sound, sustainably produced or ethically sourced," Thoma said.
Health concerns also play a factor. A demand shift toward alternative proteins sources, such as quinoa, chia and chickpeas has taken place and fueled the public's interest toward meat substitutes.
By 2023, global demand for alternative protein is expected to be 20% to 25% higher than current levels, according to research from Mordor Intelligence. The market accounted for $8.26 billion in 2017.
Alternative protein development at Tyson has not been that costly, according to company executives, but specific figures have not been provided.
At the conference, Stewart Glendinning, Tyson's executive vice president and chief financial officer, said it's not "meaningful in the scheme of $1.3 billion of capital" but plan to add more money depending on the success of the products.
Tyson's resources strengthen its position in the new market.
"We have a transportation network. We have a refrigerated storage network. We have a sales -- so many of the pieces," Glendinning said. "We have the test kitchens. We have the science labs. All of those things that you need to bring a new product like this to market that would otherwise require capital if you were a startup, don't require capital on our side."
Tyson has said it plans to begin market testing for its alternative protein products this summer.
Shares of Tyson slumped 11 cents to close Friday at $82.49. Shares of Beyond Meat fell $3.57 to close at $89.35.
Business on 05/18/2019