Tyson Foods Uses Analytics to Maximize Its Potential

Tyson Foods (NYSE: TSN  ) has been rewarding its investors, seeing stock appreciation of 103% over a three-year time frame and currently yielding 0.9%. However, this all begins on Main Street. In other words, Tyson Foods must continue to perform well in the consumer world in order for its stock appreciation to be sustainable.

Tyson Foods has many initiatives to achieve this goal, but let's focus on one of those initiatives, which is to ensure quality partnerships with retailers.

The Quri effect
Quri is a retail analytics and intelligence company that Tyson is working with. Its job is to make sure that Tyson products are being displayed and merchandised correctly at retailers such as Wal-Mart Stores and Kroger, which both sell Tyson products. Quri uses online analytics and surveys to study retail performance, but it will also send its people out into the real world.

Therefore, if you happen to see someone snapping pictures of Tyson products, or its related signage or shelving at Wal-Mart, then you will at least know why. (That said, you never really know why people do certain things at Wal-Mart stores.)

Justification
Tyson Foods isn't taking this approach because it doesn't trust the retailers it supplies. This initiative is based on industry trends, which are somewhat alarming yet leave much room for improvement -- and is a potential positive for investors.

According to Retail TouchPoints, Quri reports that 49% of in-store displays are missing completely. Tyson Foods wants to make sure that it doesn't fall into that category. In addition, it turns out that promotional pricing is wrong 22% of the time. 

While there has been a ton of chatter about a promotional retail environment, Tyson Foods doesn't want to go the promotional route, which often leads to contracting margins and a weakened bottom line. Rather, it wants this initiative to lead to strategically placed items "to drive impulse purchases and increase average order value," according to Retail TouchPoints

Another interesting stat is that promotional items are out of stock 15% of the time. Once Tyson products are delivered to retailers (every one to two weeks), Tyson Foods doesn't have much of a clue about what is going on. At least, that used to be the case.

With Quri by its side, Tyson Foods has gone from blind to being able to access actionable data that might lead to improved merchandising, product placement, and pricing. This, of course, has the potential to lead to top- and bottom-line growth. Though this is not a guarantee, with this move, Tyson Foods has put itself in a better position than it had been in previously.

Relationship-building
This initiative isn't just meant to benefit Tyson Foods. The data will also be shared with retailers such as Wal-Mart and Kroger. If Tyson Foods sells more products, it's also good news for Wal-Mart and Kroger. And if Tyson Foods can help retailers help themselves, then it will lead to strengthened relationships. This would likely have another positive effect for Tyson Foods: It will allow the company to introduce more new products to these retailers.

While many customers are loyal to Tyson products and will continue to visit retailers for them, it's the new, innovative products that will drive the top line. Tyson's recent boneless fried chicken is one example. Therefore, relationship-building is imperative to Tyson Foods' future success.

The Foolish takeaway
Tyson Foods has established a positive partnership with Quri, and this is likely to lead to improved results. Tyson also provides chicken for Taco Bell and Kentucky Fried Chicken -- both Yum! Brands companies -- as well as McDonald's and Burger King Worldwide.   These companies certainly aren't going anywhere, which gives Tyson Foods a solid and reliable revenue stream. With Tyson taking the initiative to maximize its top- and bottom-line potential at retailers, the upside potential appears to outweigh the downside risk. 

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