In its more than 80-year history, Smithfield Foods Inc. has transformed from a small meatpacking plant to a global consumer packaged goods and protein company. This evolution began with Smithfield aggressively buying out competitors as well as a few processors that brought the company into new categories. It also included Smithfield itself being acquired, by a Chinese company.
Today, the company has 45 facilities across the U.S., many the result of acquisitions, plus operations in Mexico, Poland, Romania and the U.K. It employs more than 54,000 people worldwide. Its 14 core brands are Smithfield, Eckrich, Nathan’s Famous, Farmland, Armour, Farmer John, Kretschmar, John Morrell, Cook’s, Gwaltney, Carando, Margherita, Curly’s and Healthy Ones. Read more about their products and brands on Smithfield's Top 100© page
Coming off 8 percent sales growth in 2017, with sales now at more than $15 billion, Smithfield perhaps has never been stronger. It remains the world’s biggest pork processor, although the company is poised for growth into “all kinds of adjacent categories,” promises President/CEO Ken Sullivan. This seems like an excellent time to name Smithfield Foods our 2018 Processor of the Year.
Smithfield Packing Co. was founded in 1936 in Smithfield, Va., by Joseph Luter Sr. and Jr., the first of four Joseph Luters to run the company. The father and son had been employees at P. D. Gwaltney, a pork processor also in Smithfield.
The town of Smithfield’s reputation for producing specialty hams and meats dates back to the late 1700s. In 1926, the Virginia General Assembly established rules requiring that the celebrated Smithfield Ham – a salt-cured, country ham – be produced within the corporate limits of the town of Smithfield, a rule that continues today.
Smithfield sees many benefits to being vertically integrated. In addition to its 45 processing facilities, it owns some 500 pig farms in the U.S. and has contracts with another 2,000 independent farms around the country.
“As recently as the 1980s, Smithfield was a small company,” says Sullivan, defining small as less than $500 million in sales. “Over the period from 1985 to 2005, we went through a period of rapid growth and transformation. The company just exploded. We were consolidating the pork industry.”
The Luters’ first acquisition, in 1981, was their former employer and cross-town rival Gwaltney. In the years that followed, Smithfield bought nearly 40 companies, including Eckrich, Farmland Foods, John Morrell, Patrick Cudahy, Murphy Family Farms, Circle Four Farms and Premium Standard Farms.
In 1992, Smithfield opened the world’s largest processing plant, a 973,000-sq.-ft. facility in Tar Heel, N.C., which by 2000 could process 32,000 pigs a day.
Smithfield long had been a public company. During those two decades, when a lot of food & beverage companies were making acquisitions with abandon, Smithfield’s soaring stock price supported the acquisitive growth.
Symbolic of those heady days, Smithfield placed an ad in the Wall Street Journal in 2001 that compared the pork company’s stock performance to some of the most popular stocks of the day, even Warren Buffett’s Berkshire Hathaway. “We were outperforming everything and everybody, and it was an incredible story for those 20 years,” recalls Sullivan.
By 2005, Smithfield was slaughtering 27 percent of the country’s hogs, and commodity pork products represented half of the company revenue. “We also bought a lot of beef assets during that time and embarked on an international expansion.”
A number of factors converged in 2005 to halt the go-go times. Recently acquired hog farms, which had been a solid revenue source, suffered unexpected losses. The Renewable Fuels Standard (which started diverting biofuels, primarily corn ethanol, into gasoline) shot up the costs of corn and soybeans fourfold.
“We also had some anti-trust considerations because of the rapid growth of Smithfield and its consolidation of the pork business,” says Sullivan. “Frankly, we would not be allowed to double in size again, even if we had the funds.”
All those things conspired to sour investors on the company, and the stock price suffered. But it ushered in a decade-long period of introspection. “The world had changed, but we hadn’t,” says Sullivan. In 2006, Joseph Luter III turned over the company’s leadership to the first non-family member, C. Larry Pope.
Pope began to change the company, increasing its focus on consumer packaged meats. Smithfield acquired the Armour and Eckrich brands from ConAgra Foods in 2007 and, in the same year, purchased Sara Lee’s European packaged meats business through a joint venture. At the same time, however, Smithfield focused its business by divesting its beef operations and later its turkey business as well, making pork its sole focus.