Perdue-Chicken-in-Meat-Case

2020 Processor of the Year: Perdue Farms

Dec. 6, 2020
From its ownership structure to its wholesome products to the way it treats employees and its animals, Perdue Farms looks and acts like a family business – albeit a $7 billion one.

"Family values" might be the best way to describe Perdue Farms. From its four generations of family ownership to the treatment of its employees and its farm animals to the wholesomeness of its products, the Perdue family's values seem to permeate this company.

The same values held by founder Arthur Perdue were handed down to his son, Frank, and then to his son, Jim Perdue, the current chairman. While there is a non-Perdue as CEO now, five members of the next generation of the family are currently working in the business, including Jim's sons Ryan and Chris, and three nephews, Carlos, Chris, and Rick –a tradition that is likely to continue for many years.

"Someone recently asked me what my main job is," says the 70-year-old Jim Perdue "I said I'm the keeper of the values."

The original Perdue family farm in Salisbury, Md.

It's a tradition that already has lasted 100 years – this is Perdue's centennial year. Despite being thought of as a chicken company – Perdue is behind only Tyson and Pilgrim's Pride in poultry sales – Perdue also processes beef, pork, lamb and turkey and has growing businesses in pet foods and edible oils. With the exception of beef, the company is vertically integrated. Its consumer products are all premium.

That "premiumization" has been a philosophy for most of the company's history. Many commodity suppliers say their products taste better than the competition's, but Perdue's claim is more than marketing; the company has spent time and money on grass-feeding, spacing, free-range and other animal-raising techniques that it thinks improve the quality and taste of its meats.

$7 billion is a difficult number to reach if you're family-owned; only Cargill and Mars (our 2007 Processor of the Year) exceed that sales level in the food & beverage business. Let's see how Perdue, our 11th annual Processor of the Year, managed that feat.

The business evolves

With operations in grains, energy and recycling, Perdue is more diverse than it appears on the surface. But all those businesses derive from or in some way support the core product: animal protein. Perdue has a lot of vertical integration.

Perdue Farms is based as it always has been in Salisbury, Md. Total company sales are just over $7 billion, with about 60% of that ($4.2 billion) is true food sales. The two main business units are Perdue Foods and Perdue AgriBusiness, the latter ranking among the top U.S. grain companies.

Perdue AgriBusiness, an independent operating division, is ranked among the largest grain companies in the U.S. It is a leading merchandiser, processor and exporter of agricultural products.

Perdue Foods consists of the legacy chicken business and flagship Perdue brand, as well as acquisitions Coleman Natural (all-natural beef, chicken, pork and turkey), Niman Ranch (Certified Humane fresh beef, pork and lamb plus smoked and uncured meats), Prairie Grove Farms (all-natural fresh and processed pork products), Petaluma Poultry (free-range and organic chicken), Panorama (organic, grass-fed meats) and Draper Farms (Northwest-raised free-range and organic chicken).

In addition to those acquired brands, the Perdue brand sits atop sub-brands Short Cuts, Simply Smart Organics and Harvestland, the last being from chickens raised organic or free range. And arriving in 2019 was Chicken Plus – patties, tenders and dinosaur nuggets made with a quarter-cup of chickpeas and cauliflower per serving, also providing 10-11g of protein and a good source of fiber.

Perdue also has expanded into high-end pet treats under the self-developed Spot Farms and Full Moon brands.

The company was founded in 1920 by Arthur Perdue and his wife, Pearl. They originally sold eggs from a small flock of chickens housed in the backyard of their now-iconic farmhouse in Salisbury. In 1925, they built the company's first hatchery, and began selling layer chicks to farmers. Their son Frank Perdue dropped out of college in 1939 to join the company and became CEO in 1951. He really started Perdue down the road of creating branded chicken.

"My dad took the values of my grandfather and, because he was willing to take more risk, grew the company dramatically into the 1970s," says Jim, "which was the perfect blend for the company."

In 1968, Frank Perdue opened the company's first poultry processing plant in Salisbury, which enabled Perdue to control chicken quality from breeding to the final product. It also improved profit margins through vertical integration. This direct connection to retailers also enabled him to develop and differentiate the brand.

Perdue Farms at a Glance

Founded: 1920
Headquarters: Salisbury, Md.
Sales: $7 billion overall, $4.2 billion in food
Products: Chicken, beef, pork, lamb, turkey, pet treats, edible oils
Employees: 21,000
Plants: 21 facilities across the country
Key Executives: Chairman: Jim Perdue, CEO: Randy Day, Pres-Perdue Premium Poultry and Meats: Mark McKay, Pres-Perdue AgriBusiness: Scott Fredericksen
Brands: Perdue, Coleman Natural, Niman Ranch, Prairie Grove, Petaluma Poultry (Rosie, Rocky), Panorama Organic Grass-Fed Meats, Draper Valley Farms, Spot Farms, Full Moon

"In several ways, he was changing our product from a commodity to a value-added, branded chicken," says Jim. "Throughout the 1970s, my dad kept buying or building facilities to satisfy the demand."

Frank Perdue became the face of company's advertising in the 1970s with TV ads that featured the line "It takes a tough man to make a tender chicken." When other poultry companies were content supplying grocers with unbranded birds, Frank elevated the Perdue name to an ask-for brand.

When Jim took over as CEO in 1991 he became the keeper of the company’s values and the face on TV advertising, the latter he now shares with sons Ryan and Chris. As CEO, he set Perdue on a path of acquisitions and diversification that have changed, at least a little, the look of the company.

It also seems every acquisition taught Perdue something.

"Coleman taught us a lot about the natural/organic side of the business and how to avoid using antibiotics by using natural herbs," Jim says of the 2010 acquisition. "They also had a hog business that was growing fast, especially in natural stores and Whole Foods. So, we needed a pork harvest facility.

"That led us to Niman Ranch in 2015, where we learned more about how an animal is raised affects the quality of the meat. Niman also emphasized our need to reconnect with farmers. That was our original foundation at Perdue, but I think we had moved away too much. This acquisition moved us back. That was especially important because most of our current ideas on animal care come from the farmers.

"Panorama Meats in 2019, which is a grass-fed beef company, expanded our premium protein profile, especially in grass-fed beef."

All the acquisitions, Jim says, were strategic, not opportunistic. "They were all good, well-run companies. The acquisitions followed our strategic planning process. We knew what we wanted to do and we went out and looked for a company that fulfilled those plans."

Pet food is a slightly different story. Perdue uses a lot of the byproducts of its primary businesses, and some byproducts already were being sold to pet food manufacturers. But in 2011, Jim's son Ryan had the idea to start Perdue's own premium product.

The timing was right in two ways. First, Perdue got in at the start of the trend toward premiumization of pet food, a trend that has accelerated since. "We also were lucky in that we began testing at a large retailer about the time some pet foods and ingredients coming from China were banned from stores across the U.S.," says Jim. Wheat gluten from China, adulterated with melamine and cyanuric acid, was used in the manufacture of pet foods at the time, resulting in the deaths of hundreds of pets.

Initially, Perdue was using a copacker, but the business took off sufficiently that a processing facility in Texas was bought. "The products are very premium, made in the USA, all human-grade products, with no antibiotics. Labeling on the package shows where the product was made and where the ingredients come from. Sometimes there's a map showing where the animals were raised and often a story about the farm family that raised them."

Jim Perdue gave the CEO reins to Randy Day (right) in 2017.

The 'family' evolves

Jim remained CEO until 2017, when Randy Day took over. "He's kind of like family; he's been here 40 years and has worked in all areas of the business. More importantly, he embodies the values of Perdue," says Jim. 

Day leads the Perdue Farms senior leadership team, atop Perdue Foods, Perdue AgriBusiness and Perdue Farms corporate functions. He shares Jim’s people-first mentality and is focused on increasing the company’s efforts to cultivate a more diverse and inclusive workforce. Earlier this year, Day co-hosted Perdue’s first-ever “Day of Understanding” intended to open a dialogue around tough topics, with the goal to increase understanding around diversity and inclusion and embrace differences.

“It’s important that we have events like our Day of Understanding because we live in a diverse world and, in order to stay relevant, we need to reflect that world," says Day.

"Fostering and celebrating diversity is the right thing to do.” He is the fourth CEO in the company’s 100-year history and the second non-family CEO.

In addition to Day, Mark McKay is president of Perdue Premium Poultry and Meats, and Scott Fredericksen is president of Perdue AgriBusiness.

The Perdue family still controls company stock. There has been no serious consideration given to public offerings of stock or equity investors. "This still is a commodity business in many ways, and commodities (corn and soybeans) are two-thirds of our costs to raise a chicken, so we're subject to cost and price fluctuations. But general shareholders don't like ups and downs, they like only one direction, up.

"I remember when my dad came out with the Oven Stuffer Roaster, a big 8-lb. chicken. At the time, 1973, it was difficult to do and cost a lot of money. For us, it was losing money for a couple years. A public company probably wouldn't have stuck with it. But being private, we were able to stick with it, and it turned into a very good business after a couple of years."

While much of the portfolio, under any brand, is still cuts and portions of meat, adding value is a continuing goal. So is cementing relationships with customers (retailers and foodservice) and creating a meaningful connection with consumers. Even before the COVID pandemic, there was an emphasis on taking care of employees.

"We've been a people-centered business from the very start, that was one of my father's biggest things," Jim recalls. "We started wellness centers in all our facilities with doctors coming in, and not just to treat on-the-job injuries but to help employees manage things like diabetes and blood pressure.

"It's free to our associates, and we pay them for the time they're in the wellness center. Not only is it the right thing to do, it's lowered our health care costs," says Jim. "In 2008, the U.S. Health and Human Services agency gave us an award for these health centers.

"We're only successful because of the people who work in our operations – that's something I got from my dad. He always said if you take care of your people and you produce quality products that are relevant to the consumer you will stay in business. That's a mantra we still use today."

So, animal care became a natural extension of those family values. "Niman Ranch taught us how better animal care can result in a better product." Perdue's Harvestland brand adopted those philosophies, touting its chickens "are raised cage free and fed an all-vegetarian diet. We never give our chickens antibiotics, hormones or steroids or animal byproducts."

In a website statement on animal care, the company states, "We believe in responsibly raising animals for food" and "We're raising animals to higher standards."

Specifically:

  • No cages or crates
  • No antibiotics ever
  • No drugs for growth performance
  • Freedom to express normal behavior
  • All-vegetarian diet with no animal by-products
  • Audited and verified

In the early 2000s, the company became the first poultry company to take a stand against the use of antibiotics. "It took us 12 years to totally eliminate antibiotics, but it was the right thing to do."

Jim notes the company decided to launch an ecommerce effort, a direct-to-consumer business, in January of this year – just before the COVID pandemic hit. "It was just fortuitous, but it really helped drive the success of that initiative," he says. "Sometimes luck helps, in any business. I really think ecommerce will be a permanent change in how consumers procure their food after this pandemic is over."

Like other big food companies, Perdue also has made measured investments in up-and-coming companies. "We're not organized like other companies that have a whole department dedicated to that, but we certainly will do it. We already have interests in a couple of businesses that we think have a future. It's a good way to keep your ear to the ground and watch for new technologies." But he would not name those companies.

"I've been doing a lot of contemplating in this 100th anniversary year. It's been an interesting journey," says Jim. "How will Perdue look in 20 years? I think animal care will become more and more important. Sustainability and the environment will continue to be important. How can we become more transparent to the consumer, tell our story of how the animal was raised?

"People want to know what's in their food, where it came from, how the animals were raised, but how they're getting that information is changing. In the old days, my dad would take out a full-page ad in the newspapers. Now it's social media. The idea is the same, getting your message out, but how you do it now is very different."

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