Tyson Foods Inc plans to spend more than $1.3 billion (€1.2 billion) to increase automation in meat plants over the next three years, chief executive Donnie King said, as a US labour shortage has limited production while demand is booming.
Meat processors have been unable to find enough workers for the past two years due to the tight labour market and health concerns during the COVID-19 pandemic.
Tyson expects to boost production and reduce labour costs by expanding automation, with cumulative savings of more than $450 million projected by fiscal year 2024, King said on a webcast for investors.
The company will increasingly use machines, instead of people, to debone chicken, one of its most labour-intensive jobs and a position with high turnover, said David Bray, group president of Tyson's poultry division.
A capital investment of $500 million in the area through fiscal year 2024 will generate labour savings equal to more than 2,000 jobs, he said.
Labour Shortage
Profitability in Tyson's chicken unit has declined partly due to the labour shortage and because processing plants are operating below full capacity, Bray said.
"We are not servicing our customers to the degree that they expect us to," Bray said.
Tyson slaughtered about 37 million chickens a week on average in fiscal year 2021, accounting for 80% capacity utilisation, and will increase processing to 40 million birds weekly in fiscal year 2022, or 85% capacity, Bray said.
The company aims to slaughter 47 million birds a week over time, reaching about 98% capacity utilisation, to meet strong demand, he said.
"Demand is outpacing supply," he said.
Read More: Meatpackers In The Americas Accelerate Automation After Outbreaks, Lagging Europe
Tyson shifted production during the pandemic to adapt to soaring demand at grocery stores and reduced sales at restaurants.
About 59,000 US meatpacking workers were infected with COVID-19 through January at plants run by Tyson and competitors, according to a US House of Representatives subcommittee report.
In November, the company beat quarterly profit estimates and forecast fiscal 2022 revenue above market expectations on rising meat prices and improving demand from restaurants that have reopened after COVID-19 restrictions.
News by Reuters, edited by ESM. For more Supply Chain News, click here. Click subscribe to sign up to ESM: European Supermarket Magazine.
