Beef is falling out of favor with cost-conscious shoppers as tight supply fuels higher prices, a shift reflected in Tyson Foods’ second-quarter during which volumes of the protein slid 13.1% after the company hiked prices for it 11.5% to offset pressure from a shrinking herd.
The company expects to turn losses around in the back half the year by “staying focused on the levers we can control: plant utilization, operating discipline, customer mix and execution,” the benefits of which should “build as we move through the year,” CEO and President Donnie King told investors Monday during the company’s sales and earnings call.
Although he noted that Tyson expects beef results to remain below historical margin levels until cattle supplies normalize. USDA predicts domestic production will drop about 2% year over year in 2026, resulting in a segment operating loss of $350 million to $500 million in the year.
“We are in the depths of this cycle that keep this 75-year low cattle cycle. We can’t do anything about that. I stay awake and have stayed awake a lot of nights trying to figure out the answer to that. I don’t have the answer to that. What I do have the answer for is us controlling what we can control and that is what we are doing,” King said.
Tyson shutters beef plant, taking a toll on local economy
Among the “controllables” are right-sizing the company’s beef production footprint, which resulted in the permanent closure of the company’s Lexington, Neb., beef plant earlier this year. The facility was one of the nation’s largest, processing about 5,000 head of cattle daily, or about 5% of the total US slaughter capacity, according to analysis by the University of Nebraska.
Shuttering the facility may have been the right choice for Tyson’s business, but it hit the local economy hard – eliminating more than 3,000 jobs and resulting in about $241 million in loss wages and benefits for the area and a $530 million annual hit to the statewide labor income, according to the University of Nebraska.
The closure also resulted in some additional costs for the company around moving product farther, but executives stood by the decision.
“The second quarter was really a transitional quarter for us as we moved into this new harvest footprint,” and while there is “no shying away from the fact that we are still in a beef cycle and the availability of cattle” remains a main issue, “I’m encouraged by the beef business going forward,” Chief Operating Officer Devin Cole said.
He added the updated operational footprint aligns with beef availability and the company is seeing the benefits of a higher capacity use.
CFO Curt Calaway emphasized that “beef remains strategically important to our multi-protein portfolio and customer relationships, and we are focused on long-term competitiveness.”
Diverse portfolio cushions blow to beef
Even though beef units fell, King stressed Tyson Foods’ diversified, multi-protein portfolio and rising consumer demand for animal protein “as a foundational part of healthy diet” as fundamental to the company’s overall performance.
Despite its anticipated struggles with beef, the company’s overall sales increased 4.4% year over year to $13.7 billion, thanks in part to volume gains across its other segments, including pork (up 4.4%), chicken (up 1.7%) and prepared foods (up 0.4%). The only other segment to drop was international, which fell 1% in the period compared to the same time last year.
Indeed, Nielsen data shows Tyson outpacing total food and beverage sales in some categories.
“According to Nielsen data, total food and beverage category retail volume declined 1% with dollars up 1.7% over the 13 weeks ending in March,” King said. “In contrast, our Tyson Retail branded products, which includes our national and regional brands, grew by 2.3% in volume and 3.6% in dollars, outperforming the broader categories.”
This difference is especially notable given consumer confidence fell to a record low and inflation remains elevated more than 3%, he said.
He attributed these gains to the right mix, distribution and marketing.
