Donnie King
President & Chief Executive Officer at Tyson Foods
Thanks, John, and thank you to everyone for joining us this morning. Earlier this morning, we announced our fourth quarter and total fiscal year 2023 Results.
In Q4, we saw another quarter of sequential improvements in our overall earnings, as we continue to make good progress in improving our performance. And I want to thank our team members for delivering these results in what continues to be a tough macro-environment. Consumer demand for protein remains relatively stable and we are well-positioned to meet this demand, giving us confidence in our long-term prospects.
Q4 also wraps up an unusual fiscal year, where all of our core protein categories were challenged, and yet one, where our branded business delivered solid results. While we continue to see challenging market dynamics, our broader portfolio is set-up well for the future.
As we anticipated, our results continue to improve sequentially in Chicken, with Q4 building on the momentum we gained in Q3 as part of a much better second-half of fiscal '23, after a difficult start. Our brands continue to perform well and we grew market share across our core business lines, outperforming our peers. This helped our Prepared Foods segment generate solid adjusted operating income in 2023. Market dynamics in Beef and Pork were challenging this past year, causing spread compression, although for different reasons. Despite these headwinds, our goal remains to be best-in-class operators, so that we can manage these businesses as efficiently as possible.
We remain focused on what we can control. One of our priorities is to execute with excellence. Our operations have improved across the business. And we have a long runway of opportunities to perform better. Controlling the controllables extends to capital allocation as well, where we will remain disciplined with capex and working capital. We continue to execute our multi-point plan, focused on efficiency and modernization. You've seen us take bold actions to improve performance, and everything remains on the table to drive operational excellence and address inefficiencies. Our plan is working and we are seeing tangible benefits of our efforts to end fiscal 2023. I remain very confident in our long-term strategy and optimistic about our future. Rest assured that we are leaving no stone unturned to drive long-term value for our shareholders.
Let's dive into an overview of segment performance by starting with an update on market share. Our brands continued to outpace the broader food and beverage category in volume growth across the retail channel in Q4. Our volume grew, while the overwhelming majority of food and beverage peers saw volume declines. Our core business lines, including the iconic retail brands, Tyson, Jimmy Dean, Hillshire Farm and Ball Park, saw Q4 volume growth of 3.2% versus last year, far outpacing our competition. Those four brands also all hold favorite brand status with consumers over our nearest competitor by a wide margin. We continue to show market share leadership in most of the retail categories in which we compete, delivering both pound and dollar share gains across our core business lines.
We are accelerating foodservice, where our Focus 6 categories, including value added chicken, breakfast sausage, dinner sausage, pepperoni pizza toppings, bacon and Philly Steak, outpaced the broadline industry in volume growth in the quarter both versus last year and sequentially. We have a strong foodservice portfolio and are aligning with key customers as we build momentum for the future.
Speaking of winning with customers, we're proud to have made the Top 10 for the second year at a row in the most recent Kantar Power Rankings. In fact, Tyson finished in the Top 10 in seven of the nine categories they measure, as we continue to focus on meeting customer needs and planning the future together with them.
Moving to our segments, beginning with Prepared Foods. As I mentioned, our brands performed well in Q4, in fact, over the last year. Nearly three-quarters [Phonetic] of U.S. households purchased a Tyson core business lines product, which is an increase of 90 basis points. While this is impressive across our portfolio, it's worth noting that our product with the highest penetration rate is only in about a third of households, leaving us room for continued growth. This performance in retail helped Prepared Foods have a solid year in fiscal '23, with strong growth in AOI. As you know, our branded foods business is a strategic growth pillar for the future. We believe it is imperative to support our brands with marketing and advertising. As consumers began to face what could be a more difficult economic environment, we ramped up our MAP support for our brands in the second-half of the year and we'll continue to do so as we move into fiscal 2024.
While the full-year AOI for Chicken was a modest loss, our progress toward improved performance continued in Q4 with sequential improvement versus Q3. In fact, this is the second consecutive quarter with more than $100 million in sequential AOI increases. I'm proud of what our team has accomplished over the past six months. Not only did we hold on to the operational enhancements we've made in Q3, we made incremental improvements in yield and in our live operations. This allowed us to take advantage of improving market conditions, including lower grain costs, leading to a positive margin to end the year. As we head into new fiscal year, we expect a better outlook for input costs, while seeing the benefits to some of the bold actions we took this year.
Coming into fiscal '23, we expected Beef to be under pressure due to limited cattle supply. This trend held true as cattle costs appreciated at a faster rate than the wholesale price of boxed beef, eroding export opportunities due to a strong U.S. dollar and low-price of competing exporters and ultimately creating a very tight spread scenario. We also expected to see signs of rebuild of the herd to surface as cattle prices moved higher. However, this did not materialize. Until significant heifer retention and subsequent herd rebuilding takes place, we expect challenging supply conditions to remain. In this context, while the timing remains uncertain, we will be prepared by focusing on operational discipline.
Moving to Pork. As you know, in fiscal '23, the industry suffered from supply-and-demand imbalances, which negatively impacted spreads. While we are seeing some signs of improving spreads and lower grain costs, there is still an imbalance between supply-and-demand of Pork. Our team is focused on running the business as efficiently as possible, while continuing to review all the options. We saw significant sequential and year-over-year improvement in AOI in Q4, driven primarily by improving spread and operational enhancements.
Before I turn the call over to John to review our financials and FY '24 guidance, I want to give you my priorities for the coming year. First is improving our financial strength, with a focus on cash. I want to emphasize that we will be disciplined and prudent with capital, while remaining committed to our dividend as the primary way of returning cash to shareholders. As you saw in our earnings press release this morning, we increased our dividend for the 12th consecutive year. We will continue to evaluate our production footprint and network to drive efficiencies. As you saw, we've made significant changes in Chicken by announcing the closure of six of our older, less-efficient plants, which we expect to improve our capacity utilization and mix. In a similar move to leverage efficiencies and reduce network redundancies, we also recently made the difficult decision to take two of our smaller Fresh Meat's case-ready value-added facilities offline. Production from these locations will shift to larger, more efficient plants and our harvest capacity, sales volume and, importantly, our customers will see no impact. We are reviewing whether there are similar opportunities across our segments.
In Chicken, we will remain focused on further enhancing our competitiveness going forward. Prepared Foods was the profit engine for the Company last year, we want to sustain and build on that strength by supporting our brands and driving momentum in foodservice, while being responsive to changes in the market conditions. Some of the key focus areas are making better use of our data, shifting more of our MAP support to digital media and being disciplined with revenue management.
In Beef, multiple outcomes are possible during the current cattle cycle. We believe we have best-in-class assets and team members and are aligning with the right suppliers and customers, giving us confidence that we'll be prepared for all of them. In Port, we believe we have a bright future ahead of us and are excited about the team we've built that continues to drive operational improvement and synergies with our Prepared Foods business.
As we've said before, we're taking a hard look at our cost structure to drive operational excellence. Our ongoing productivity initiatives are focused on things that can be deployed at scale, enterprise-wide, including procurement, logistics and digitalization. These are a few of the initiatives that will make us a fundamentally stronger business as we go forward.
With that, I'll turn the call over to John.
