The world’s largest meat processors, already using tech in areas like packing, are investing in ways to make their production more automated. 

One of the very biggest, Tyson Foods, has committed to investing more than $1.3bn on adding more automation to its factories over the next three years. 

Investment in automation is not new – two decades ago, Tyson was outlining to investors its spending programme in the area – but expenditure has accelerated in recent years as the pandemic and the ongoing pressure on recruitment has hit the pool of labour. Just Food sat down with Chetan Kapoor, head of optimisation and automation at Tyson, to discuss the US-based giant’s efforts.

Chetan Kapoor: Team member safety is our primary driver for automation. Food processing plants are wet, they can be cold and there are sharp objects. Removing the exposure to them is one thing that automation does really well. Another is productivity. Automation added appropriately improves the productivity of our team members.  

Third is food safety. Automation, machinery in general, has less variation and a more controlled environment should allow us to improve food safety. The fourth, which is much more longer term, technology in our plants allows us to upskill our team members. To use technology you generally have a higher pay grade to do that, so as we transition to a more modern workforce, technology allows us to pay more. Of course, the number of people who work in our plants is going to go down with technology but we have enough attrition anyways for us to make that possible.

That’s right. Also we are a company on a growth trajectory. Even though we’re reducing people, we're also growing at the same time, right? And so, with our number of headcount, as a percentage of revenue, yes, it should go down and we want it to go down but a level that is increasing overall. And we are in places where it’s almost impossible to hire people, that are in remote areas. We have a big challenge in staffing our plants.

Definitely, the pandemic highlighted dependency that we realised could be very challenging for our business and it did bring urgency.

I know that some of the plants in poultry do have adequate labour but in some areas we don’t have adequate labour. The other aspect of labour is that there’s a significant turnover, which is also challenging.

On the beef side, for example, we’re very focused on taking out anything that is hazardous to humans. Bone saws are very typically used to cut big slabs of meat. Automating that fully with a robotics system, with computer vision is a top priority for us. We are already deploying them and, in fact, we had to invent our own machine because we could not buy machines on the commercial market that would fit into our process. 

Then we are finding there are certain jobs, like de-boning chicken and some of the cuts that a human has to make, are extremely taxing on the fingers. Automating that through robotics is a high priority. The challenge there is you want to do it with the precision of a human, too, not just the dexterity of the human. That makes it technically really difficult but, again, Tyson has invested in its own R&D to solve those problems.

Another area we are looking at is non-value-added tasks where you’re just doing material movement, transferring something from here to there. Those things if you add up take a lot of labour. They are also highly repetitive and tasks prone to injury. Automating that is a big part of it and that’s actually a relatively easier part technically, because it’s being done in other industries.  

Productivity in our plants is more than automation. Automation is trying to alleviate labour challenges through machinery. Another part of it is digital technology we are deploying in our plants under the ‘smart factory’ initiative that improve the productivity and the efficiency of the capital that we have invested in our team members, in our equipment and in our infrastructure. Tyson makes all our money in our planks. That’s where we live and die. Most of our capital is in buildings, equipment and team members. How do I get the maximum productivity out of these?  

We have a major initiative, a 'smart factory' initiative, to deploy technologies that drive productivity in these areas. How do we improve team member engagement and problem solving through technology? How do we get more visibility into the equipment in our plants? Where are the bottlenecks? Why is there downtime? Why is one machine working really well in one plant and not delivering in another plant when it’s the same machine? We have so much scale that we can learn within Tyson itself to optimise our operations.

It’s stacking boxes. It’s putting product into a box itself. It’s also putting protein into trays. When you go to a store and buy a tray of chicken or pork, somebody had to put it in that tray. It’s likely a human who did that. Today, robotics with computer vision can do the same thing and do it at speeds at times exceeding humans. We are actually deploying those technologies.

That’s right. We are saying instead of picking the most difficult things to automate, pick the more obvious, the easier things to automate but invest in things that are unique and specific to Tyson for the long term that sets us competitively ahead of everybody else.

The biggest benefit is a lot more engagement from team members, alongside the technical people in the plant and the management of the plant to solve problems as they show up and to get visibility into where the problem is versus stories and anecdotes. Data driven, more collaborative, problem solving, a little bit more of an agile approach to running our plants and distilling the data then to higher level decisions within the company.  

So think of it like a line supervisor looking at the line, the plant manager is looking across a plant [but] the complex manager is looking across multiple plants and the VP is even further ahead. Right there, they’re able to compare and contrast, make decisions at the right level of data that they need. This is a big opportunity.

With this kind of technology, it’s not a job question because you're improving the productivity and getting out of our plants what the plants are designed for. Generally, you would put these technologies into a plant that are not performing to the spec they’re designed for. So, you may have to overspend on labour by going overtime, or you will be spending a lot more on equipment maintenance than you should be. It’s more of an efficiency gain versus a headcount challenge over here.

I’m going to answer based on anecdotes. You take somebody to automation and invariably somebody is nervous. There’s no denying that but then they find out that there’s 30 different openings and 20 new hires every week, so they also look at that reality, right? You’re hiring, continuously hiring. 

I’ve also seen team members get excited about automation. We put one piece of automation in a plant local over here, a box stacking robot. One person who was originally stacking boxes, he was nervous. Then the plant manager spoke to him and said ‘Hey, you're not going to just be doing this.’  

There was another lady, a 60-year-old Hispanic lady who came and said ‘I'm going learn how to use this robot.’ Now, this robot was beautifully designed to be very friendly and had an amazing user interface to make it very easy for our team members. This lady came and actually muscled her way in, she took after it and she was operating the machine. She called it her first computer. She couldn’t speak English, the user interface had French on it but we translated it into Spanish. And then, because of her excitement, her family bought her a computer. So there’s that story. For every person who feels some anxiety about it, there’s plenty of opportunity within Tyson, there’s more people feeling hopeful for a career that is more fulfilling.

Anything I do, I got three boards that I have to clear and one of them is a security board – and you can imagine how much fun that is. They are extremely diligent and restrictive. We have multiple layers of security and networks that you can’t even get to from outside. They’re segregated, sliced and diced. Every software that comes into our plant with new machines has to go through a standards approval process. We have very strict standards on what kind of computer they can have, what kind of operating system they can have and it’s really all done to mitigate the risk of potential breach.

Tyson is extremely concerned about this, just like any other major, Fortune 100 company should be. We have enough processes in place to make sure that some of these things don’t happen – and then there are processes in place to [see], if something were to happen, how do you immediately quarantine it?

A lot of the plants that Tyson has overseas came through acquisition. They all have different levels of automation. We have a plant in Thailand that is very nicely automated, runs beautifully. Right now, we are less focused on the international than we are on the US. A lot of it is because of labour availability wherever it is.

We are actually looking at all of them and all the standard solutions that we are coming up with are being shared and some are being deployed in Asia. Is it a 100% push yet? No. On the other front, I talk about automation and then I talk about digital? The smart factory thing we’re doing here in Tyson [in the US], we’ve actually already done it in our international business. On that front, they are leading ahead of what we’re doing in the US.

We recently did a productivity tool in equipment monitoring deployment in all our plants in Asia, 15 plants. It was done very well, it showed great results and that’s what prepared for it to come back through here. It's almost like some of the international locations are much more entrepreneurial, to try new things.  

In my previous job, I used to work in a Japanese company and we did a lot of business in China, too. I had a start-up in China also and I found in the automation and factory space, you were able to hire highly skilled engineers in Asia more easily than you can in the US. So, when you approached plants in Asia with new technologies that could improve efficiency, the uptake from them over there was much higher and quicker. They have good engineers who came from good schools readily over there, versus in the US, based upon where plants are located.  

Manufacturing in general has never been at the top of the game over here [in the US]. There’s been more software technology. The talent pool definitely was gravitating higher on that side. More innovative approaches, more adoption of tech was easier [in Asia]. And less risk, right? Smaller operations over there.

Well, the US government and different institutions are doing it enough. Companies have to make a concerted effort to make an investment in that area themselves, just like Tyson is doing with its various programmes to upskill its team members. But as long as you are also innovating on the software side of things to do, where the US has kind of led the world, there’s always going to be that challenge. When companies in Silicon Valley can take most of your talent and pay them a dramatically higher amount, it’s going to be challenging. This has changed in the last six months with the tech sector going a little bit slower. We have a lot more people starting to approach us. Things are changing in a direction we like.

Yes, we are. Just measuring the amount of meat left on a carcass using computer vision, that’s an area we’re looking at very dramatically. There’s some other areas that I don’t want to necessarily talk about but that have a significant AI and machine learning component. There’s no other two ways to do it.  

And then there’s also optimisation across the enterprise. As humans, we’re good at doing local optimisation. We can kind of manage it. Looking across a very complex organisation, with so many business units and the bazillion amount of SKUs we make and a very highly integrated supply chain, how do you optimise that? This is not a software problem. This is not an algorithm problem. This is an AI problem. So, there are things over there that are very, very promising that we are looking at and actually doing.

It has to.

Main image: Chetan Kapoor, head of optimisation and automation at Tyson Foods.

One year on from Russia’s invasion of Ukraine, the world will be focused on whether a new, or extended Black Sea Grain Initiative can be brokered to keep food commodity prices from rising again. 

Prices of food inputs – from wheat to maize, corn and sunflower oil – have come down to pre-war levels, as have fuel and energy costs, but still remain elevated in historical terms due to the hangover of supply disruptions linked to the pandemic. 

More crucially, food commodity exports out of Ukraine, one of the world’s largest suppliers of wheat, barley and sunflower oil, have still not fully returned to levels in the months before Russia’s invasion on 24 February 2022 as the war rages on. 

A new Black Sea Grain Initiative – struck in July last year and due to expire this month following an extension – will be equally crucial to keep the supply doors open. 

Extended in November for 120 days, the existing agreement covers key inputs for food manufacturers – corn, wheat, sunflower, barley, rapeseed and soya beans. 

“The situation remains volatile – there is no end in sight to the conflict. This is what makes market participants very nervous,” Sara Girardello, the head of grains research at GlobalData-owned LMC International, tells Just Food. 

“The Ukrainian agricultural sector is still probably facing challenges related to the availability and price of inputs. Power outages are delaying operations at ports and logistical infrastructure. There is a high risk attached to grain supply from Ukraine.”

“The Ukrainian agricultural sector is still probably facing challenges related to the availability and price of inputs. Power outages are delaying operations at ports and logistical infrastructure. There is a high risk attached to grain supply from Ukraine.”

Global food security became a major concern in the days and weeks following Vladimir Putin’s military encroachment into Ukraine and it remains a major concern 12 months down the line, particularly as the world continues to grapple with the worst inflation in decades. 

With no visible signs the year-long conflict is going to end anytime soon, the last thing rich and poor nations alike would want right now is further disruption to the trade in food commodities, just when bright spots are starting to emerge on the inflationary front. 

During the run of 2022 financial results issued in recent weeks, commentary by food industry executives has been closely watched for a sense of how long the inflationary headwinds might play out in 2023. 

Opinions differ but the consensus generally infers double-digit input-cost inflation for the first half of the year and then an element of slowing in the back half. Hain Celestial, the US-based food manufacturer, has even reservedly pointed to the prospect of deflation, although that prospect might still be beyond the 2023 horizon. 

More likely is disinflation – a slowing in the rate of price increases – making it more difficult for manufacturers to pass on higher prices to retailers, and, bringing some welcome relief to the consumer. 

“The prices of these commodities have come down to pre-war levels but they’re still high,” Girardello argues. “If you look back two years, prices are still very high, gas prices are still very high. There’s a lot of stickiness in the system for prices to come down. It takes some time.” 

Taking up the commodity supply shortfall from Ukraine is not an easy option, she says, as there’s only so much arable land available for crop production in other countries. And then weather events can be another driver of price, Girardello adds.

A European Council report in December provided estimates of Ukraine’s crop production and exports, with the weight and constraints of the war evident. 

“Russia’s unprovoked and unjustified aggression against Ukraine has caused significant human casualties and forced millions of people to flee their homes. The war has also had a significant and lasting impact on the global food market,” according to the policy body of the European Union. 

Before the war broke out, Ukrainian farmers sowed 17 million hectares of spring crops in 2021, but that was down 22% the following year with 2.8m hectares of arable land remaining unsown, the European Council said. 

It estimates Ukraine will export 30m tonnes of grains in the 2022-23 growing season, compared to around 50m tonnes in 2021-22. 

“As a leading exporter of grain, Ukraine has seen a dramatic drop in its exports, resulting in major food security concerns for millions of people around the world. However, food prices are still above 2021 levels and the outlook remains difficult,” the report concluded.

French bakers came out in protest on the streets of Paris in January, warning the production of bread and croissants was under threat from surging electricity and raw material costs. Bakers are also reliant on gas to fire ovens. 

Other food manufacturers around the world have not been immune either to the higher energy costs, largely as a result of the war in Ukraine and the depleted gas supply out of Russia. 

However, measures food manufacturers could take to address or head off future shocks from energy prices are thin on the ground beyond actions they were already taking within their sustainability and efficiency agendas.

Nonetheless, some companies are looking for solutions. One stand-out has been Finnish food group Fazer, which as a result of the conflict and gas supply constraints, is exploring electrifying its bakeries and turning to solar energy. 

Thijs Geijer, a senior economist at Dutch financial services firm ING, suggests the “importance of gas in the energy mix of food manufacturers” differs between countries – estimating the level being 60% in the Netherlands but less than 40% in Poland and Spain, for instance. 

Fazer summed up the difficulties in its recent annual report: “Until 2022, Russia was the largest exporter of oil and natural gas to the European Union, and almost half of the gas consumed in the EU came from Russia. The food processing industry is energy-intensive, and the majority of thermal energy is provided by natural gas. The single largest use of electrical energy is used for refrigeration purposes.” 

Last year, Fazer invested in energy back-up systems for some of its major production lines and “made back-up plans for production processes using natural gas in Finland and the Baltics to ensure business continuity”.

In Belgium, raw materials and labour costs are a bigger area of concern for biscuits and snacks maker Lotus Bakeries. 

“We have gas ovens and gas ovens need gas. There’s no quick alternative,” Lotus finance chief Mike Cuvelier tells Just Food. “Energy for us is of course a cost but it's not high on the list of primary costs or direct costs. We first have our raw materials, we have our labour, we have our transport, we have packaging. 

Cuvelier says having a factory in the US – opened in 2019 – was a natural hedge against rising energy costs. 

“We’ve seen energy increases in Europe. We have not seen that in the US. So, that's another reason why we are of course happy to have made the decision to move to the US. It also hedges you against those regional differences or changes in the environment,” he explains 

Meati Foods, meanwhile in the US, emphasised the benefits of being a plant-based business producing animal-free proteins from mycelium, when asked by Just Food what countermeasures it has taken. 

The start-up “consciously electrified as many systems as possible” at its so-called mega ranch in Colorado, “in order to leverage renewable energy sources”. 

Meati added: “Simplicity in ingredients somewhat translates to less energy demand. Same as it relates to the simplicity of growth, harvest, production, and packaging all being done in-house under one roof. This is the ‘supply chain solution’ theme, with the idea that the more complex the supply chain, the more energy required to make it all run (transportation, facilities, workers) and the more vulnerable it becomes to total failure due to one piece of it failing.”

An observation made by Cyrille Filott, a global strategist for consumer foods, packaging and logistics at Dutch investment bank Rabobank, is how the parameters around purchasing by food manufacturers have taken on more significance. Not just because of the war in Ukraine, but Covid, too. 

He argues the use of solar or wind-driven energy sources has “become more important” within their sustainability agendas. 

“Before Covid, companies would be looking at price, quality and availability, or PQA, of any product, whether that be energy prices, commodities, agri-commodities or packaging materials. Through the Covid crisis and supply chain issues that were related to that, but also energy price volatility, those three parameters are more critical than ever,” Filott explains. 

Risk management around price and price volatility is also playing a more important part in the thinking of packaged food makers. 

“Those three PQA parameters are very much key and would be run in the past by the procurement function. What I’ve seen in terms of change, especially for larger companies, not necessarily smaller companies, are rethinking how to do this,” he says. 

“’Should this be left to procurement or is there a much broader important supply chain role that needs to be managed from a board level?’ They are now appointing people at higher levels, whether it’s the management team or just one level below, but really at higher levels to have a holistic view on the supply chain.” 

Turning to renewable energy sources such as solar, wind, water and geo-thermal resources might be a solution to address costs and supply, whether it be reasons associated with sustainability or a by-product of the war in Ukraine. 

However, ING’s Geijer points out some food manufacturers have switched to coal as an alternative energy source, or oil, to replace gas. 

In a more drastic example, he notes the decision by Netherlands-based pulses and vegetables producer Hak to close its manufacturing plant for six weeks to save on energy costs.

Switching production priorities is another example, Geijer says. “Some companies took the opportunity to make smarter use of different sites. Directing more production to the most efficient site or the one with the most favourable energy contract.” 

So what might food makers, particularly in Europe, have learnt from the energy crisis? “That it can’t be taken for granted that energy costs are just a small part of the total costs,” Geijer asserts. 

“In 2019, energy amounted to just 2% of total costs for EU food manufacturers. In 2022, there were big differences between companies, but it was probably more in the range of 7.5 to 10%, without price caps or compensation. Investing in [your] own energy production is a way to reduce some of that risk.”

Hedging has been a price risk management tactic employed by food manufacturers for years, and companies in other industries, too. But as commodity prices come down, some are locked into contracts, explaining to a certain degree why inflation is not expected to ease until the latter half of 2023. 

Nestlé CEO Mark Schneider presented just that scenario last month as he discussed the company’s financial results for 2022, a year when the group raised prices by 8.2% to counter elevated input costs. 

“In some cases, you have forward contracting that then creates cost pressures going forward. In other cases, you still have catching up to do because, on a full year-over-year basis, even though the price may have eased a little bit over the last few weeks and months, you’re still north of where we were a year ago,” Schneider explained. 

A new Black Sea supply deal or an extended version of the existing agreement will no doubt ease fears over a bout of resurgent inflation, but the ultimate decision rests with Putin. As the world prepares to mark one year since the invasion, it’s anyone’s guess as to how long the conflict will last from here. 

For now, with Ukraine poultry and grains producer MHP securing a European loan last month to support sunflower oil exports, the future for Ukraine’s agricultural output looks uncertain. And for world food prices. 

UK-based analyst Martin Deboo at US investment bank Jefferies, presented a number of inflationary scenarios for 2023 in a recent report, including deflation, but with a caveat. He noted the “uncertain and challenging climate with an understandable bias to caution”.