Tyson aquires Smart Chicken's organic brand. Is that good or bad? Tyson, one of the largest U.S. poultry producers wants to build up a presence in the fast-growing organic segment. Sales of frozen or refrigerated organic chicken have climbed by about two-thirds over the past four years, according to research firm SPINS. Organic chicken sales increased nearly 12% to $333 million over the 52 weeks ended April 28, while conventional chicken sales grew 3% to $7.7 billion over that period, according to data compiled by Nielsen Perishables.
Organic meat tends to be more expensive than conventionally produced kinds. To qualify for the U.S. Department of Agriculture's organic seal, chickens must be fed organic grain, which is raised without synthetic pesticides and fertilizers. Antibiotics, which are widely used in conventional meat production to treat sick birds and prevent disease outbreaks, are prohibited. Organic chicken farms are required to let the birds go outdoors.
A pack of regular boneless, skinless chicken breasts is priced around $2.49 a pound in U.S. grocery stores this week, according to the USDA, while the organic product sells for about $6.91 a pound.
"What we saw here was an opportunity to bring in another brand into our house of brands, and put us in a position to capture a marketplace that is growing," said Doug Ramsey, Tyson's president of poultry.
Colorado-based Pilgrim's Pride Corp., the second-largest U.S. chicken processor after Tyson, in 2016 converted one of its plants to produce organic chicken. Last year, Pilgrim's spent $350 million to buy GNP Co., a Minnesota company marketing organic chicken under the Just Bare brand, which Pilgrim's has been working to expand into more retail locations.
Perdue Farms Inc., another major U.S. chicken firm, based in Maryland, entered the organic market with a deal in 2011 for Coleman Natural.
Organic chicken, though, remains a small fraction of Pilgrim's and Perdue's overall poultry production.
Tyson plans to run Tecumseh Poultry as a wholly owned, independent subsidiary, though the company will have access to Tyson's supply chain to help it grow, Mr. Ramsey said.
The Wall Street Journal reported in April that Tecumseh Poultry was exploring a sale. The company was projected to earn about $40 million before interest, taxes, depreciation and amortization this year on about $170 million in revenue, people familiar with the matter said at the time.
Smart Chicken touts its air-chilling process, which uses cold air to cool chicken while it is being processed, versus the water-chilling method used by the bulk of the U.S. poultry industry.
Tyson already sells some organic prepared foods, including chicken nuggets and strips under its Nature Raised Farms brand, and Aidells organic sausages.