080201 Tyson Details Strategy to Offset Costs

New York - Meat producer Tyson Foods Inc. said it will continue to raise prices, simplify production and look for opportunities to sell protein abroad to offset high grain costs that have taken a big bite out of profits.

At the Consumer Analysts Group of New York Conference in Boca Raton, Fla., Tyson Chief Executive Richard Bond said the high cost of corn and soybeans, which are used to make animal feed, has had a "serious effect" on the company's business.

In 2008, for example, Bond said the company's chicken segment will incur about $500 million in grain costs.

The cost of corn has jumped to record-levels due mainly to demand for the alternative fuel ethanol, which is made with corn. Since more farmers planted corn to take advantage of those higher prices, fewer planted soybeans. The smaller soybean supply has led to record-high prices of that grain as well.

Consumers, he said, will have to keep shouldering some of the burden of the higher costs through higher retail prices. But, Bond said, Tyson can only raise prices so quickly in a difficult economic environment, in which consumers are struggling with high gas prices and the weak housing market.

"It is going to be a difficult time as we go through these quarters as we raise prices," Bond said.

Bond said to reduce costs and help offset the commodity increases, the company will simplify its operations. For example, he said, the company will move fewer chickens from one processing plant to another. He added the company will also keep producing larger chickens to try to get as many breast portions out of each bird.

Internationally, Bond said Tyson will look to expand in China and other growing economies where demand for protein is high. He projects Tyson's international business will grow to at least $5 billion in annual sales by 2010 from $3 billion.

Bond said the company is also developing quick and easy meals for families, including sandwich-size bacon slices, wraps and trimmed chicken breasts.

He added Tyson has tested or launched 41 products since opening a new research and development center in early 2007.

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