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Tyson Foods and Beyond Meat: A Future of Sustainable Protien Production
Tyson Foods is the United States largest meat producer. Their products, spanning brands such as Tyson Chicken, Hillshire and Sara Lee, are many of the most iconic brands in the meat, poultry and pork markets in the US. Domestically, they have 24% market share in the United States beef market, 21% in chicken and 17% in pork. Tyson Beef, which comprises of 42% of Tyson’s revenue, is the largest and most successful product line within the entire beef industry. It is impossible to discuss the global food and agriculture system and not discuss Tyson.
Even though Tyson Foods made $41b in 2015, their core business is under fire from numerous angles. First, the United States is becoming increasingly cognizant and aware of the realities of the food system, primarily how we treat our livestock. Videos and vivid images have gone viral showing life of livestock at factory farms. This is pushing consumers to move up market to more humanly raised livestock that leave less of an impact. Second, American consumers are starting to discover the values in alternative proteins, such as dairies, beans, legumes and protein based snacks, which are cannibalizing many consumers beliefs that the only way to consume protein are from livestock. Finally, and most importantly, as the world increasingly wakes up to the realities of climate change and examines its core root causes, the agriculture sector, and particularly our society’s reliance on livestock, is increasingly scrutinized.
University of Oxford researchers predict that by 2050, the food and agriculture system will account for more than 50% of our global carbon emissions. Many consumers initially focused on transportation, electricity and infrastructure as ways to cut emissions as they were seemingly more obvious and tangible to see and understand, but consumers are now waking up to the real problem of agricultural production. Today, the methane produced from livestock constitutes about 15% of global C02 emissions and its share of the market is growing rapidly. This number also doesn’t include the environmental impact of resources (such as food and water) allocated towards livestock or its impact on the land. Consumers are waking up to this and eating less and less meat every year, which is directly impacting Tysons core business of raw livestock products.
In the backdrop of all of this transformation, a new wave of businesses have emerged that are creating plant-based meat substitutes that have the same look, feel, bite and texture of real meat. Recent advancements in food chemistry combined with consumer interest which is fueling private sector R&D spending, is creating the future of how we consume proteins in a sustainable way.
Beyond Meat, a Los Angeles based producer of plant-based meat substitutes, is a lot different than many other food companies. Founded out of a lab at University of Missouri with a goal of reducing our global reliance on livestock and backed by top venture capital firms like Kleiner Perkins and the founders of Twitter, Beyond Meat, which is carried across hundreds of super markets across the US, has quickly become the face of this new generation of plant based protien businesses. By using pea protien and coconut meat, with beet juice to add juice, Beyond Meat has created a hamburger replacement that has received rave reviews from NYTimes food critic Mark Bittman too hard to impress men’s lifestyle magazines like Playboy.
To diversify their product offering, reach consumers who have abandoned meat, and secure a role in the future of protien consumption, Tyson Foods acquired a 5% stake in Beyond Meat. While the valuation or size of their investment was never announced, it is believed to value Beyond Meat in “the hundreds of millions of dollars”. By investing in Beyond Meat, Tyson now has a strong hold into the most disruptive business model in its space, is buying good will with environmentalists, and better positioning itself for a world in which we aren’t nearly as reliant on livestock as their environmental costs just became too large.
This is just the first pin to drop for Tyson Foods as they try to prepare for a world where the environmental impact of our food system and reliance on livestock are under greater scrutiny. To stay ahead of the curve, they should invest in similar companies across numerous food groups. Impossible Foods, a San Francisco based competitor focused on both beef and chicken, is starting to work on a plant based pork product that could cannibalize their recent $8b acquisition in pork product company Hillshire Farms. Other companies are also going after the “egg-less” market as well, which is tangential to their poultry business, which would be a smart investment for Tyson to pursue as well.
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