TSN
#Sure.
It's <UNK>.
What we've seen is both in retail and Food Service the answer to your question, it's more in retail.
Overall, consumer product, so food that Tyson sells to consumer retail stores and otherwise, we have been ---+ year-over-year we're doing great.
We have fantastic volume growth, as it relates to Chicken specifically.
That's where the largest benefit is coming from.
The Chicken business in Food Service is strong, and I would say getting stronger.
So it's not a ---+ we don't make either/or decisions, because all that business is very profitable to us.
We talk about value-added, if you think about our retail and Food Service businesses collectively, that's what we mean.
So as primary products that we're focused on, and so it's been in this quarter, I would say more retail benefit, but looking forward, I think we're going to be well-balanced in both channels.
Yes, so a couple of things about Beef.
So it looks like that next year's fed supply will be up, I think, a little better than 2%, maybe even approaching 3%, but certainly somewhere in that area.
And if you look out another two or three years past that, I think you can count on the same thing, maybe barring another drought, like we had three or four years ago.
So it looks like to us that the fed supply will continue to increase, and as the fed supply continues to increase, that certainly having more cattle available to process improves our business.
There's another thing that I think helps us with our outlook, or feel more and more positive about our outlook on Beef, and that is the continued growth of our case-ready offerings.
Coming up in, I believe it's October, there is a new regulation on retailers around having to keep up with where the raw material comes from, as they grind ground beef back of house.
And I think that portends a bright future for our case-ready grinds business.
We've certainly been in lots of conversations, and we have the capability to do a lot more of that business than we're doing today.
So that could also help improve our Beef margins over time.
We've got a solid outlook, and feel very, very good about that part of our business.
<UNK>, so certainly the export factor is a part of it.
We do over-index, particularly into Asia, and with the drop credit being down some 15% or 20% versus a year ago, and those markets being a little softer than we'd like them to be, and certainly the values going to those markets being a little softer than we'd like them to be, that has affected us versus the competitive set.
But there's another factor I think that needs to be weighed in.
If you look at the regional disparities in, let's call it the Southern region of cattle procurement and the Northern region, we way over-index in terms of our slaughter capacity in the north, and cattle in the south have been about $1 a hundredweight, so somewhere on the order of $8 a head cheaper than cattle had been in the north.
We think that will change over time, as some of the smaller feed lots that tend to be in the north, closer to the grain, begin to increase capacity, as the supply of cattle increases.
So we think that favors us going forward, certainly from where we have been.
I think those are really the two biggest factors.
Our plants are running great, our efficiencies, all the stuff that Steve and his great group are doing to manage the business are in good shape.
Those environmental factors are what they are, and we'll continue to manage them over time.
Thanks, <UNK>, it's <UNK>.
So think about the way that we are growing or have grown the Prepared Foods business, the retail branded portion, the same approach is going to be applied to, and it's starting to be applied to the Tyson brands in Chicken.
So overall, speaking to the Core 9, we have, like I said, a lot of innovation in the pipeline.
There's a lot of great things that are already out there in the marketplace: Jimmy Dean hash browns, Jimmy Dean frittatas, new Hillshire snacking platform, which Hillshire snacking is going very well, by the way.
It's going to be definitely on the back of innovation.
There is no question about that.
Applying that to the Chicken segment, your question in particular, we see there's going to be a plenty of opportunity for us to drive growth in areas where right now there hasn't been a lot of innovation.
You think of fresh tray pack chicken, it's been relatively static for years and years.
We like that opportunity for us to continue to think about how it can be different.
So I would expect you to expect that our innovation efforts against an entire portfolio, Chicken and Prepared Foods, will deliver some significant benefits.
And we'll be talking, like I said, more about that in the future quarters here, but we are applying the same model in terms of marketing innovation to Chicken as we have historically to the Prepared Foods business.
I'll let <UNK> comment on some the other, I'll comment on some of the other.
Let me talk about China in general, in particular.
So our China business continues to improve over expectations year over year.
As Sally and the team work to shift our strategy from being a customer-centric strategy to be more of a consumer-centric strategy, we're seeing that long-term will provide, we think, significant value.
And she has a new general manager in China in place, a new sales lead in place.
We've got a very, very strong team in China, and I'm very optimistic about their ability to continue to improve over time.
I will say, though, that the dynamics in that market are very difficult.
Corn and soybean meal are significantly higher in China than they are here in the United States, and the wholesale markets ---+ we're still somewhat beholden to the wholesale markets because we haven't made a full switch into value-added retail yet.
So the wholesale markets continue to be weak, and quite a bit weaker than we would have thought the wholesale Pork market would have indicated.
Usually, those two markets move in concert.
The wholesale Pork market has moved up, and Chicken has not moved up near as fast as the wholesale Pork market has.
So very difficult operating environment, but the team's doing a great job strategically turning that business.
There's some other stuff in other, and I'll let <UNK> address that.
<UNK>, what also is in other is that bucket of expenditures that doesn't necessarily apply to segments.
So for example, merger and integration costs have been in there, and to a lesser degree, we also have our SAP activities.
We've had one launch and we're in the process of another upgrade over the next year.
So you'll see some of those costs in there, as well.
I don't know specifically that we were seeing the exact same thing.
What I would say, <UNK>, for our Prepared Foods business, a lot of the pricing ---+ when we have input cost deflation, it flows through pricing at a pretty significant way.
We try to of course continually decrease trend line margins over time, but that's ---+ whatever benefit we would see, there's large part of that, that flows straight through to pricing reduction.
So whatever movements that we would see up or down, that's our intent.
And like I said, trying to make that less volatile over time, in terms of our earnings, is all about brand investment, innovation investment, and continuing to drive the agenda there.
That's the way that he we think about fluctuations in commodity cost inputs, through the Prepared Foods business.
We'll have <UNK> dig in a little deeper on your question.
He can follow up maybe later today.
Okay.
<UNK>, it's <UNK>.
We haven't set guidance as it relates to where we think we're going to hit the top end.
What we have done is really spent a lot of time on what our innovation pipeline is setting up as.
I would say not just in retail, also in the food service.
And we like where we sit today.
10.9%, and sitting at sort of that lower end of the range for us the right spot to be right now, given the investments that we're seeing, the availability of those investments in the business.
As it relates to where we start to hit the ceiling, we have different MAP objectives, marketing, advertising, promotional spend by brand, and some of them are more ready than others, so Jimmy Dean, we have called out in the past, as something that we continue to invest highly against.
Lots of ROI there.
And our intent is to get more brands to that same position over time, and it will be done by continuing to innovate, and bring the investment up.
So no guidance forward, as to where we think the ceiling is.
What I would just say is, as we start to see the progress, that would get us closer to the top end of that range, we're going to invest to continue to have a strong, growing Prepared Foods business at those ---+ within range margins.
So for ---+ we have announced last year I think you've seen this that we will be by the end of 2017, calendar 2017, our entire system will be with no antibiotics for use in human health.
And we feel this is a really consumer-driven discussion.
We have No Antibiotics Ever products available today.
We continue to be ahead of, frankly, executing our strategy that we've intended, and we will go where the consumer is.
So in terms of what our supply chain is doing to support that, the message you should take away is we feel good about where we are.
Actually, we're a bit ahead of where we thought we would be, and we'll continue to make progress to drive that agenda.
Thanks, Rob.
One of the things that we continue to come back to are those five elements that I talked about in the prepared remarks.
Not commenting on competition, how quickly they can come up the curve, I won't speak to that.
But it's not any one thing, it's all those in combination that give our model the strength that is has.
And the operations improvements, we don't typically talk a lot about, but it's been really, really impressive, what we've done.
We're really thinking about what's the headline there.
What have we done that is going to be notable or should be notable is that we feel the Chicken business is now in a spot where it's a pull business versus we're pushing supply on the market.
So our pricing mechanisms reflect that.
Our move to more value-added products, whether it's par-fried products, fully cooked, we're building capacity against those because we continue to see tremendous demand.
The buy versus grow strategy we have talked a lot about, and then just staying on top of all those things that give us the best supply base, that can make sure our customers are served excellently with great service is really what we're about.
I don't know if that's satisfying to you or not.
It's really those five things we talked about, in combination.
I can't point to any one that's going to be the silver bullet or the panacea for somebody that competes with us to get right, but that's what we're proud of, and that's what we continue to stay focused on.
Well, we love consumer insights.
So how revolutionary we can be, will be dependent upon what the consumer tells us, and where that takes us.
We're sorting through right now.
It's going to be an exciting time.
There's a reason to believe that we should ---+ not only in I would say fresh, frankly but also in the frozen case, be doing things that would be above and beyond what people are thinking about today, based on what consumers are telling us.
We really double down on those consumer insights.
You've probably got to wait and see, and without stealing the thunder of anybody on our innovation team.
We'll talk more about that, whether it's Cagney or other events; that's something that we're really going to be continuously focused on, and we're excited to do that.
I wouldn't say that, <UNK>.
We couldn't ascribe any certain amount of basis points that are going to drive any one part of the model.
What I would say is as we've talked about our margins prospectively into 2017, we feel like they're going to be about the same as 2016.
The idea that we have done things, like we don't have unprotected fixed prices, we continue to drive our business throughout the channels that we have access to.
There's a lot of reasons to be happy with the model that you have here at Tyson, as relates to Chicken, because we aren't just a one-trick pony.
We have a lot of focused channels that we do really well in, and we're continuing to drive our expertise in those category captaincies.
We're up to 143, which I think is about double from where we were at the time of the acquisition.
Things that we're working with our customers to get to a better place, those are the things that we'll focus on.
Grain, we've looked at this, have the same margins, up or down, are we going to have some periods of time based on the slope of the curve.
That's the course that's going to affect margins.
On balance, we look to make sure that we run our model with no excess, and that's where we've been, and that's been the driver of our success.
We think the volume growth ---+ depends on which category you're talking about.
The overall Core 9, as we've talked, has done really well.
Can't speak to what our competition's going to do.
Certainly, we have predictive models, based on what input costs are doing.
We think we're pretty good at that, understanding where they would go in a rational environment.
We're not very good at predicting irrational behavior.
I think if the competitor is are going to act rationally, we have a pretty good bead on what we should be doing in terms of investing against our brands.
The idea that this has done a great job for us, we continue to stay focused on where are the right levels, and where are the right gaps, because into the fall of last year, our gaps became such that it was detrimental to the volume of the business.
And like I said earlier, we want to make sure that we're in the right spot as we go into 2017 with protein, that's going to be available, and we want to make sure that we're available on shelf and we have the primary position.
Don't know if that answers your question, but we feel we're in the right spot right now based on the investments that we've made.
Sure.
The main drivers are just really the thoroughness at which we're approaching our projects.
We're embedding a heavy amount of safety practices at a new level, and also continuous improvement.
So that's delayed the spend a bit, but it's still coming.
What I would say is we don't say there's going to be a certain level that we would top out at necessarily, in terms of investment.
It's going to be ---+ let me use an example.
If every brand came up to the ROI that we get on Jimmy Dean across the Core 9, we'd be spending a lot more, and be getting fantastic return for it.
The model, what that looks like across every single property, we haven't necessarily done that, I would say.
The idea of us continuing to invest, when we get the margin structure that we have and it continues to get better, we will put the foot on the gas.
The idea is that we will not find ourselves in the position, we don't think, where we're stopping the investment, because we feel like it's going to be way too high.
We generally focus on our investments continuing to go north on our branded products.
But where that ceiling is, it's really something I can't comment on right now.
No, I wouldn't say, I would say no, it wouldn't.
Really, it's ---+ for us, it's more about the slope of the curve.
So it's not whether or not it's going to be at a certain sustained level or not, it's how quickly we go up or down.
And that certainly affects all of our business, frankly, not just poultry.
So we feel like our model is in a much better position, because we have the value-added mix.
So we have the pricing mechanisms that don't change all at once.
And so, we feel like we're in a really good spot there.
Yes, that's fair.
I'd say again, I'd point to the slope.
It depends upon the slope of the change.
So before we go, let me reiterate something that we said earlier.
With the expected adjusted EPS growth this year in the neighborhood of 40%, we have set the bar high, but we have momentum, and we're confident in our ability to achieve high single digit growth next year.
We're growing now, and we're going to keep growing.
Thanks for joining us, and have a great day.
