Lead by example

14 June 2019

Hides producers must pay close attention to customers’ changing desires and the latest technologies that can make production more efficient. For a big integrated company like US-based Tyson Foods, strategy is key. Senior VP and GM, beef enterprise, Shane Miller, discusses where hides fit in its future.

Tyson Foods is a major producer of both protein and hides, but it still has an appetite for growth. Its recent acquisition of Keystone Foods, and consequent shifts in its management team, was aimed at ensuring that the company continues to meet the demand for meat production – but hides remain a fundamental part of its business plan.

Founded in 1935, the US company has had to constantly respond to changes in its customer base, while remaining committed to consistently high-quality hides for its customers and their consumers. A key element in executing this strategy has been to focus on the integration of foods and hides businesses.

Currently, the company is strategically focused on growing its value-added and international businesses. Recently, this has included continuing to grow its branded, prepared foods business, as well as its international footprint. The Keystone acquisition has been key to expanding its international presence.

“Tyson Foods is not only one of the world’s largest food companies and a recognised leader in protein, it plays a significant role in another business as one of the largest producers of cattle hides shipped to leather-making customers worldwide,” says Shane Miller, senior vice-president and general manager of beef enterprise.

“The hide is, by far, the most valuable by-product from the beef animal, and Tyson’s hide plants and tanneries play a key role in the purchase equation for live cattle. The company has curing operations at each of its six beef plants and tanneries at four of those locations, where hides sourced in-house are further processed into wet-blue. The aspect of our business supports our commitment to use all parts of the animal after processing with as little waste as possible.”

Tyson operates four cattle hide tanneries, and also has further cattle operations in Washington and Nebraska. It processes a full range of wet-blue and brine-cured cattle hides sourced from its own packing plants, and also processes brine-cured pig skins. It is already one of the largest wet-blue tanners in the world, but the Keystone acquisition extends its market reach to give it a total of eight plants and three innovation centres in China, South Korea, Malaysia, Thailand and Australia that, in addition to the three plants the company already operated in China, will help meet growing international demand for protein.

As the food business grows so, too, does the potential for the company’s hides business, but its success depends not only on geographical reach, but also on its ability to remain an example of sustainable and efficient production.

A clear stance on sustainability

The leather industry is under greater scrutiny than ever before, particularly in regard to its impact on the environment, but also in terms of animal welfare and working conditions. For Tyson, these issues have never been far from the top of its list of priorities, as they go hand in hand with efficiency.

“Processing improvements have added incremental value to the hide over the years; however, the most significant change in recent years is the industry’s increased focus on sustainability efforts,” remarks Miller. “Commitment to that change is visible throughout the leather supply chain, from the producer of the cattle through to the customer using the leather to make consumer goods.”

In 2008, Tyson joined the Leather Working Group (LWG), which develops and maintains a protocol that assesses leather manufacturers’ environmental compliance and performance. The company plays a key role in LWG’s executive committee and it is also a supporter of Leather Naturally, which promotes responsibly produced leather products and educates consumers by providing accurate industry information.

“Tyson has helped lead industry progress in promoting sustainable and appropriate environmental business practices within the leather industry,” Miller adds. “The company has helped lead industry progress in areas such as environmental stewardship, animal well-being, and worker safety, and involvement in LWG is one example of its sustainability commitment.”

This comes not only from the industry’s desire to run a better, cleaner business but also from customers, who are more aware of what materials and processes go into the manufacture of products. Customers’ buying habits are also changing and it is up to companies like Tyson to keep track of its evolving needs.

“As their product needs change, it is critical that we are in lockstep with them to ensure we are providing value to support their business,” says Miller. “Delivering exceptional customer service is key. Every day, the Tyson hides and tannery team is working with our customers to provide support in the areas of quality assurance, service, and understanding on the issues of sustainability, traceability and worker safety.

“Through our partnership with our customers we look to their growth and changes in business needs to guide the direction for our hides and tannery production,” he adds. “The company is continually monitoring the leather industry, changes in demand and consumption, as well as evolution in technology to support improved efficiencies, and ensuring delivery of quality product and promoting sustainability. An example of this is our investment made in biogas reuse and water recycling.”

A clear plan for the future

It is a challenging time for the leather industry, with an intense focus on the industry’s production methods and sustainable credentials, growing competition from alternative materials, and development trends in key sectors that could potentially marginalise leather as a key component. Navigating the many different market currents is not an easy task, but it is one that Tyson has been ready to take on as it maps out its strategy.

$2.16 billion
The amount in cash Tyson Foods paid for Keystone Foods in November 2018.
Tyson Foods

“Over the past year, Tyson has concentrated on studying opportunities to improve the consistency of our quality, as well as providing our customers with best-in-class service – both of which demonstrate commitment to our valued customers,” says Miller. “An example of Tyson’s differentiation is our understanding of the technical aspect of tanning, and our ability to demonstrate that with our customers through cutting-edge technology and processes, resulting in high-quality hides and wet-blue.

“Today, more consumers’ quality equation for the products they purchase includes a desire to understand what commitment a brand makes to animal welfare in their supply chain. Tyson is committed to becoming the leader in animal experience, research and innovation by having the most transparent animal welfare practices in the industry,” he adds.

In 2018, Tyson Foods became the first food company to license Progressive Beef, the largest-ever cattle sustainability programme verified through auditors approved by the US Department of Agriculture (USDA). Progressive Beef is a quality management system designed for cattle feeding operators.

“As the company works to bring customer awareness to that commitment, it is working with hide and wet-blue customers to identify ways in which to provide visibility for consumers purchasing leather products,” notes Miller.

Together with the long-term strategic challenges, there are, inevitably, short-term issues that must be skilfully managed in order to continue doing business effectively. At the end of last year, for instance, the polar vortex and the plummeting temperatures in the US had a significant impact on many businesses. For companies such as Tyson that are looking to expand their volume of exports, the spectre of trade tariffs is also a potential cloud on the horizon. Miller, however, takes a relaxed approach to such matters.

“While events such as the government shutdown, and the unusual winter and early spring weather have presented challenges, none of them have posed significant constraints to our business or operations,” he states. “Specifically, on the government shutdown, it came to an end in time to not disrupt inspections. The tariff situation has impacted our export business. However, it is important to note that tariffs have been most detrimental to livestock producers. Resolution on this issue will open tremendous potential for everyone in the supply chain.”

Tyson Foods is long on both optimism and pragmatism. Therein lies the lesson for hides producers across the globe.

Tyson Foods is making key investments in manufacturing as its hide business grows.

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