Monday, July 20, 2015

Will pigs fly? The acquisition of Hillshire Brands Co by Tyson Foods, Inc

The recent acquisition of Hillshire Brands Co. by Tyson Foods takes meat sales to a whole new level. The protein providing giant won the bidding war against Pilgrim’s Pride Corp.  In an interesting turn of events, Hillshire was poised to purchase Pinnacle Foods – Bird’s Eye frozen food producer. Hillshire gained attention while negotiating this deal, and ended up on the other end of a bidding war for Hillshire.  In the end, Hillshire was bought by Tyson and was forced to forgo the purchase of Pinnacle Foods and Pinnacle’s accompanying debt.

In this battle of the meats, and with ‘The Coherence Premium’ and ‘Seven Ways to Fail Big’ fresh on the brain, I have to wonder how the decision makers of Tyson, now a meat giant, will poise itself to avoid disaster. One way they may be doing this is by playing devil’s advocate.  Where Tyson’s executives and negotiators caught up in their bidding war and desire to become a meat giant, or did they do their due diligence of asking the tough questions we learned from our readings…Did they make their process transparent to the board?  Did they establish a limited charter and clear ground rules?  Are they organized for success?  Are they focusing on a strategy and not the process?  Are they asking the right questions and not just thinking that this acquisition is the answer to all their problems? 

If we use the CaseStudy: when Expansion Is the Enemy of Coherence to examine this merger.  We see some areas that set this new organization up for success are similar regulations, comparable in store locations, more vying power for grocery shelf space, and analogous distributions.  However, this does not mean this blending will be an easy one.  Some experts, like Joe Cahill of the Chicago Business, believe in order for Tyson to improve their profitability they will need to make deep cost cuts, especially on the cusp of such an overpriced purchase.  Tyson reports they will expect to find $300 million in cost synergies from the merger of these companies.  Additionally, a larger presence on grocery shelves for Tyson with products that carry a higher profit margin seems like it could be a win-win for the new organization.  And then there is the culture and marketing practices and focus, will Tyson embrace the Hillshire successes or in the heat of efficiencies loss one of the most profitably features of the Hillshire purchase?

I am also curious to know if Tyson will have the right recipe to become coherent.  Do they have strong enough leadership within Tyson to integrate these two brands and companies?  With Hillshire leaders leaving the organization, does Tyson have what it takes to take Hillshire’s signature brands - Jimmy Dean sausage and Ball Park Franks- and create the tight focus needed to be the biggest meat protein company?  I believe consumers will be the judge and jury on this one.  Can this closer alignment to their core business be more successful - will consumers still embrace this successful chicken provider with their sausages and franks? Customer preferences and consumers love for all things meat could be the ticket to Tyson’s capabilities-driven strategy.  Only time will tell…as Leinwand and Mainardi tell us coherence “requires hard choices, including divesting businesses, streamlining nonessential functions, and paring product and service lines.  It means resisting the temptation to leap into a hot new market where your capabilities system can’t help you or to pursue easy profits at the expense of strategic focus.”   One fact is clear Tyson will need to make some hard decisions and be intensely focused on its strategy to be the clear leader in the prepared foods business.

Reuters Top News

Tyson wins bid for Hillshire in battle of meat titan

10 Brands That Will Disappear in 2015 - AT&T (NYSE:T) - 24/7 Wall St.

Is the grim reaper next at Hillshire Brands?

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