Joseph W. Luter III
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Joseph W. Luter, III, is chairman of Smithfield Foods, Inc. (NYSE: SFD), the world's largest hog producer and pork processor. Under Mr. Luter's leadership, Smithfield Foods has grown to over $11 billion in annual revenues and has successfully integrated more than 53 acquisitions over the last 24 years to expand the company's products both in the U.S. and internationally. The company has also vertically integrated hog production and processing.
Mr. Luter, 67 years old, has been instrumental in translating Smithfield's growth into enhanced shareholder value. Over Mr. Luter's 31 years at Smithfield, the company has delivered a 24 percent average annual compounded rate of return. For the last 15 years, Smithfield Foods has outperformed the S&P 500 Index by more than 160 percent.
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[edit] Background
Following in the steps of his grandfather, Joseph Luter Sr., who founded Smithfield Packing Company in 1936, and his father, Joseph Luter, Jr., who served as CEO until his death in 1962, Joseph W. Luter III is the third generation of his family to lead the company. Mr. Luter was born in Smithfield, Virginia, in 1939 and received his bachelor’s degree from Wake Forest University in 1962. He first joined Smithfield following graduation, working in sales and other departments until he became president in 1966. Mr. Luter served in that role until the company was acquired by Liberty Equities in 1969. In 1975, with the company in severe financial distress, Smithfield’s board of directors asked that Mr. Luter rejoin the company as chairman and CEO. At the time, the company had sales of $115 million, debt of $20 million and net worth of less than $1 million. Smithfield Foods stock was trading as low as $.50 per share.
[edit] Growing the Company
In just a few years under Mr. Luter’s leadership, Smithfield Foods returned to financial health and even began to expand. In 1981, it announced its first major acquisition – the purchase of Gwaltney of Smithfield, its local rival and a well-established pork products company. It was a bold move, leveraging up at a time when interest rates were north of 20 percent. But it doubled Smithfield Foods’ size, enlarged its family of brands, and catapulted the company from being a local packer and processor to becoming a major regional force along the East coast of the United States.
Although Smithfield was prospering, in 1984 the industry was going through hard times, with overcapacity, intense competition and weak consumer demand. In December 1984, Smithfield bought 80 percent of Patrick Cudahy, a 100-year-old Wisconsin company that was losing money but famous for its sweet apple-wood smoked sausages, bacon and ham. For $27.5 million, Smithfield acquired a huge manufacturing plant, valuable new products and its first presence outside the East coast. In 1986, Smithfield acquired another distressed company, Baltimore’s Schluderberg-Kurdle Company, or Esskay, which nevertheless possessed a valuable brand and loyal customers.
These moves were the beginning of Mr. Luter’s strategy of acquiring poorly performing packing companies and turning them around into profitable operations. Since then, Smithfield has acquired John Morrell & Co., Farmland Foods and multiple other regional pork processors in the United States.
[edit] Vertical integration
Mr. Luter is also the architect of Smithfield’s strategy of vertical integration. In the late 1980’s, there was not enough local hog production to meet the company’s growing needs. Smithfield was trucking in more than 1.5 million hogs a year from the Midwest, an expensive endeavor. In addition, cyclical hog prices were squeezing its profits. And so, in 1987 Smithfield began to produce its own hogs through a joint venture with Carroll’s Foods. This helped to provide a reliable supply of raw material, smoothed out the effects of cyclical price, and ended the company’s dependence on Midwestern hogs.
At the heart of this strategy was Smithfield’s proprietary SPG (formerly NPD) genetic stock. In 1991, the company acquired the exclusive U.S. rights for genetic lines of this specialized breeding stock from Great Britain’s National Pig Development Company. Starting with a pure genetic base of sows airlifted from Great Britain in 1991, Smithfield controls the production of its fresh pork products from before conception to final processing.
Mr. Luter pioneered the pork processing industry’s entry into vertical integration through hog production by entering into a venture to form Brown’s of Carolina in the early nineties. In 1999 and 2000 Smithfield added Carroll’s Foods and Murphy Farms to its group of hog production companies, making it the world’s largest producer of hogs, more than three times the size of the nearest competitor. The hog production companies merged into one in 2001 as Murphy-Brown. In addition, the Smithfield Beef Group is the fifth largest beef processor in the U.S. and the company’s Five Rivers cattle feeding joint venture is the largest in the U.S. with a one-time total feeding capacity of 811,000 head.
Vertical integration has enabled Smithfield to deliver safe, affordable, consistent, and traceable products that satisfy consumers’ increasingly demanding requirements. It has also made Smithfield less exposed to the traditional cyclicality of the pork industry.
[edit] Smithfield Today
Today’s Smithfield is a true multi-national company with major operations in France, Poland, Romania and Mexico, all of which have been acquired under Mr. Luter’s leadership. The company has joint ventures in Spain and China.
It has also grown beyond just the pork industry. In 2001, it acquired Moyer Packing Co., the largest beef processor in the eastern U.S., and Packerland Holdings, a large Midwestern processor. Together, these made the Smithfield Beef Group the nation’s fifth-largest beef processor.
In recent years under Mr. Luter’s leadership, Smithfield has become a leader and a trendsetter in environmental stewardship. The company is committed to various environmental enhancement initiatives, including a comprehensive environmental management system (EMS), developed to meet the internationally accepted and respected ISO 14001 standard. In 2005, Smithfield announced that it had become the first in its industry to achieve ISO 14001 certification for all its U.S. hog production and processing facilities. Smithfield companies have been honored with five Virginia Governor’s Environmental Excellence Awards, a Wisconsin Governor’s Award for Excellence in Environmental Performance, and 48 Environmental MAPS Awards from the American Meat Institute.
[edit] Recent career
Luter announced in June 2006 that he would relinquish the title of chief executive officer of Smithfield Foods after serving in that position for 31 years. Larry Pope took over for Luter as the company's CEO.
