Tyson Foods Inc (TSN.N) announced on Tuesday that it would close two US chicken plants, impacting nearly 1,700 workers, on May 12. This decision highlights the ongoing struggles the largest US meat company faces in sales as it tries to enhance its underperforming chicken business.
According to a company statement, the facilities in Glen Allen, Virginia, employing 692 workers, and Van Buren, Arkansas, using 969 workers, will be shut down. Tyson will redirect chicken demand to other plants as part of a strategy to maximize capacity utilization at its facilities.
The company cited operations’ current scale and economic inefficiency as the main reasons for the closures. Last year, Tyson faced challenges in fulfilling chicken orders due to limited supplies and labour and aimed to increase production. To meet demand, the company previously purchased chicken from other producers.
Tyson’s earlier prediction of strong chicken demand in supermarkets during November and December of last year proved incorrect, as stated by CEO Donnie King during a quarterly earnings call last month. Consequently, the president of the company’s poultry business was replaced in January.
As Tyson strives to improve performance, closing plants is justified, says CFRA Research analyst Arun Sundaram. He expects more restructuring measures from the company in the future.
Tyson’s shares were slightly down in afternoon trading. Sales for the quarter ending December 31 missed analyst estimates, with total operating margins falling to 3.5% from 11.3% the previous year. The company anticipated that the current quarter would be weaker than the end of 2022.
Magaly Licolli, director of Venceremos, a group advocating for poultry workers in Arkansas, said that Tyson is “desperate” and trying to save money by cutting jobs and burdening remaining workers with more responsibilities.
As of October 1, Tyson had approximately 124,000 US employees, with 118,000 working at non-corporate sites like meat plants. According to an announcement made in October, all corporate employees will be relocated to Springdale, Arkansas.
Tyson’s Virginia plant employees, represented by the United Food and Commercial Workers Local 400 union, criticized the decision to close the plant. Tyson stated that workers affected by the closures could apply for positions at other company locations.
Tyson’s decision to close the two chicken plants has garnered mixed reactions. While some understand the need to improve performance and address inefficiencies, others express concern for the impacted workers and the communities where the plants are located.
The company has expressed commitment to helping affected employees through the transition, offering them the opportunity to apply for positions at other Tyson facilities. Additionally, Tyson plans to work with local community leaders to provide resources and support to those workers during this difficult time.
Despite these efforts, concerns about the long-term impact on the local economies of Glen Allen, Virginia, and Van Buren, Arkansas, remain. The loss of jobs and potential ripple effects on supporting businesses and industries could be significant.
As Tyson continues its restructuring efforts, the company will need to balance cost-saving measures with the welfare of its employees and the communities it serves. Shareholders and investors will closely monitor Tyson’s strategies and performance to determine whether the company can turn around its struggling chicken business and improve overall profitability.
Environmentalists and animal rights activists are also watching Tyson’s moves closely, as the company has faced criticism for its environmental impact and animal welfare practices. The closure of the two plants may prompt discussions on the sustainability of the meat industry and the need to explore alternative protein sources.
In the face of these challenges, Tyson Foods will need to adapt and innovate to remain competitive and sustainable in an ever-changing market. The company’s ability to navigate these obstacles and find new solutions will be critical to its future success.
