Mumbai: US meat processor Tyson Foods Inc. plans to expand its business in India and other emerging markets such as China and Brazil, betting that economic growth will spur consumers to eat more chicken and other non-vegetarian foods, and switch to packaged products.
In India, the firm is talking to retailers, including Reliance Retail Ltd, to sell meat and vegetable products, chairman John Tyson said in an interview. In China, expansion could involve two-three acquisitions or alliances, to be announced in the next three-six months.
New focus: Tyson Foods chairman John Tyson hopes with economic growth, consumers in emerging markets will switch to packaged foods. Axel Seidemann / Bloomberg
“We will focus more on the international emerging markets as with the growing economy, people will have the desire to consume more protein,” said Tyson.
The US firm, which ended 2007 with $26.9 billion (Rs1.31 trillion today) in revenue, is present in India through Godrej Tyson Foods, a joint venture set up in June with Godrej Agrovet Ltd, a unit of diversified Godrej Industries Ltd.
The venture, in which Tyson Foods invested $16 million for a 51% stake with Godrej holding the remaining 49%, sells processed chicken under the Real Good brand and ready-to-eat foods under the Yummiez brand.
A February report by business advisory Rabo India Finance Ltd—using data from the agriculture ministry—estimated the size of the Indian poultry market, the world’s fifth largest, at $3.1 billion.
Godrej Tyson Foods hopes to cash in on India’s unorganized poultry market and tap the potential for packaged meat products. The market will evolve as consumers opt for more hygienic and convenient alternatives such as packaged products rather than buy meat from the neighbourhood butcher’s shop, said Tyson.
India’s processed poultry market is estimated at 1% of the total market and is growing at 20% a year, said Pawan Kumar, research analyst for the food and agri business at Rabo India Finance, who expects the expansion of retail chains and increased emphasis on hygiene following avian influenza outbreaks in recent years to drive the growth of the organized poultry market.
Tyson owns 60 poultry plants in the US and its chairman said emerging markets need to invest in standardization and technology.
“In (the) US and (the) UK, we have a more organized movement of live chicken, and very good equipment for processing chicken, while in the emerging markets, more efficiencies are needed in areas like delivery of chicken, poultry farming and others,” he said.
The low price of chicken feed in emerging markets is one attraction for the company. Soya bean and corn costs much less in India, Brazil and China, and is also plentiful. The three countries don’t have to import soya bean or corn, Tyson said. Rising prices of soya bean and corn have increased production costs for most meat producers.
Godrej Tyson’s revenue is around $50 million yearly and the company hopes to increase this to $200 million in three years, Tyson said. He expects to invest $2-4 million next year to develop products and expand its marketingnetwork.
Last month, Tyson Foods said it would sell 20 million shares of common stock and issue $450 million in notes to repay debt and raise money for acquisitions, strategic investments and expansion.
“We have a war chest of about $1.5 billion available to us for consideration as opportunities come up in the US and in two-three prime markets.”