| Type | Public (NYSE: SFD) |
|---|---|
| Founded | 1936 |
| Headquarters | Smithfield, Virginia |
| Key people | Joseph W. Luter, III (Chairman), C. Larry Pope (CEO) |
| Products | Meat |
| Revenue | US$ 12 billion (2007) |
| Employees | 51,000 |
| Website | www.smithfieldfoods.com |
Smithfield Foods, Inc. is the world’s largest pork producer and processor. Headquartered in Smithfield, Virginia, it runs facilities in 26 U.S. states, including the world's largest meat-processing plant in Tar Heel, North Carolina, and has operations in Brazil, China, France, Mexico, Poland, Romania, Spain, and the United Kingdom.[1] JBS S.A. acquired Smithfield Foods's beef business. It was renamed JBS Packerland.
Smithfield was started in 1936 as the Smithfield Packing Company, now its largest subsidiary, then acquired companies such as Eckrich, Farmland Foods, and Premium Standard Farms. It was able to grow as a result of its highly industrialized pig production in North Carolina and Iowa, raising the pigs using a "vertical integration" system, whereby it controls the animals from conception to slaughter, housing thousands of them together in barns covered with metal roofs.[2] It raises 14 million pigs a year and processes 27 million, producing 5.9 billion pounds of pork and 1.4 billion pounds of beef in 2006.[3] It has sold its products under a variety of brand names: Cook's Ham, Gwaltney, John Morrell, Krakus Ham, Patrick Cudahy, and Stefano’s. C. Larry Pope is the president and CEO.[4]
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The company traces its history to 1936, when Joseph W. Luter Sr and his son, Joseph W. Luter Jnr, opened Smithfield Packing Company in Smithfield, Virginia. A grandson, Joseph W. Luter III, joined the company in 1962, and became chairman and CEO in 1975. Joseph W. Luter IV is an executive vice-president of Smithfield Foods as of 2010, as well as the president of Smithfield Packing, now the parent company's largest subsidiary.[5]
Smithfield began to expand with its purchase of Gwaltney in 1981, Patrick Cudahy in 1984, and Schluderberg-Kurdle in 1986. It opened the world's largest processing plant in Tar Heel, North Carolina, in 1992, purchased John Morrell & Co in 1995, Circle Four Farms in 1998, Carroll's Foods in 1999, and Murphy Farms (the largest pig producer in the United States) in 2000. It bought Farmland Foods in 2003, and Sara Lee's European Meats, ConAgra Foods, Butterball, and Premium Standard Farms in 2007.[5] According to its website, the parent company has 52,400 employees around the world as of December 2010, and produces over 50 brands of pork products and 200 gourmet foods, with an annual revenue of $12 billion as of 2007.[6]
Jeff Tietz writes in Rolling Stone that Joseph Luter III created a "total vertical integration" system, whereby Smithfield controls every stage of pig production, housing thousands of pigs together in identical barns with metal roofs.[3] The company website traces this development to 1990, when, it writes, it began to differentiate itself in the market, managing its pigs from conception to processing, which it says produced "more consistent, higher-quality, leaner meat products."[7] As a result of the vertical integration, Tietz writes, Smithfield expanded by over 1,000 percent between 1990 and 2005.[3] The floors of the barns that house the animals are slatted, allowing waste to be flushed into lagoons—open-air pits the size of two football fields. Smithfield says the lagoons are lined and cannot leak.[2] According to Tietz, they can overflow when it rains and the liners can be punctured by rocks. Tietz writes that the area around one slaughterhouse can contain hundreds of lagoons, each thirty feet deep; the colour of the waste is pink from excrement, urine, blood, afterbirths, stillborn piglets, drugs and other chemicals.[3]
The company confines pregnant sows to 7 ft (2.1 m) by 2 ft (0.61 m) gestation crates, where they spend most of their lives. As the sows grow larger, they are unable to turn around, and must choose between standing or sleeping on their chests. After weaning, they are given one week rest, then impregnated through artificial insemination and returned to the gestation crates. They follow this cycle until their litter size begins to decline, at which point they are replaced. After several supermarket chains and McDonald's expressed concern about the crates, Smithfield announced in 2007 that in ten years it would no longer use them,[9] but in June 2009 the company said the crates would not in fact be phased out within ten years because of operating losses. It said in December 2010 that it was continuing its efforts to convert to group housing for pregnant sows.[10] In June 2011, The Virginian-Pilot reported that nearly one-third of the hogs owned and raised by Smithfield Foods Inc. would be out of gestation crates by the end of the 2011. [11]
When the piglets are about three weeks old, they are weaned and moved without the sow to the nursery, where they are housed in groups of 15 or so, in compartments with wire mesh floors, grouped by age and sex. They remain there for 12 to 16 weeks, then are moved into the finishing buildings and fattened to 250–280 pounds by the age of 25 weeks. They are then moved onto a truck along a corridor created by movable plastic walls, and delivered to a slaughterhouse.
Smithfield has come under criticism for the millions of gallons of untreated fecal matter it produces and stores in the lagoons. In a four-year period, in North Carolina alone, 4.7 million gallons of hog fecal matter were released into the state's rivers. Workers and residents near Smithfield plants have reported health problems, and have complained about constant, overpowering stenches of hog feces.[3] In 1997 the company was fined $12.6 million for violation of the federal Clean Water Act. It was third-largest civil penalty levied under the act.[12] The facilities in North Carolina came under scrutiny again in 1999 when Hurricane Floyd flooded a number of ponds holding fecal matter (lagoons, in industry parlance), and many of the hog farms that contracted with Smithfield were accused of polluting the state's rivers.[13] Smithfield agreed in 2000 to fund development of environmentally sound waste management technologies for use on North Carolina swine farms; commit $15 million to fund research at North Carolina State University;[14] and make an annual contribution of $2 million to fund environmental enhancement grants in the state.
In 2005 the company received ISO 14001 certification from the International Organization for Standardization for its U.S. hog production and processing facilities, with the exception of new acquisitions; in 2009 14 U.S. plants, and 21 farms and facilities in Romania received certification.[15] In 2006 its hog-production subsidiary Murphy-Brown agreed to adopt new measures to enhance environmental protections at its facilities in North Carolina in a landmark environmental pact with the Waterkeeper Alliance, once one of Smithfield's biggest critics.[16] In 2010 Smithfield released its ninth annual Corporate Social Responsibility report, and announced its appointment of a chief sustainability officer and two sustainability committees.[17] In 2009 it said it had reduced greenhouse gas emissions at its plants by four percent since 2007. It had also cut its processing emissions per 100 pounds of production by 62 percent compared to 2007, and its first-processing emissions per animal by 41 percent. Smithfield attributed the improvements to the divestiture of the beef group.[18]
In 2009 Mexican newspapers linked Smithfield's pig farming practices to the outbreak of H1N1 (swine flu).[19] The Washington Post reported that farmers in the area had been complaining about headaches from the stench, and wild dogs had been eating pig carcasses that were lying in the open; the Post also reported that health officials had found no link between the Smithfield facilities and the H1N1 outbreak.[20] The speculation of a link arose, according to local Mexican media, because residents in the area complained of the swarms of flies around waste lagoons. Mexican health officials said that the type of fly is known to reproduce in pig waste, and that the swine flu outbreak may be linked to these pig farms.[21] At the end of April 2009, Smithfield denied any responsibility for contributing to, or being the source of, the virus.[22]
Smithfield is working on packaging reduction efforts. In 2009 Armour-Eckrich replaced an oversized rectangular package for smoked sausage with crescent-style packaging. The new design reduces the amount of plastic film and corrugated cardboard used by more than 840,000 pounds per year. In addition, several plants are switching to or testing a new bagging system that helps reduce plastic use. The John Morrell plant in Sioux Falls, South Dakota, piloted the system for Smithfield in 2010, reducing the amount of plastic required by about 40,600 pounds a year. Farmland Foods reduced the amount of corrugated packaging entering waste streams by more than 5 million pounds per year. Smithfield Packing reduced the size of its tubs for deli meat, using 17 percent less plastic for each one. The company also cut the size of the boxes that transport chicken frankfurters to its largest customer, eliminating about 20,000 pounds of corrugated material a year.[18]
On December 15, 2010, the Humane Society of the United States (HSUS) released an undercover video taken by one of its investigators who worked for a month at Murphy-Brown, a Smithfield subsidiary in Waverly, Virginia. The investigator videotaped 1,000 large female pigs living in gestation crates during their four-month pregnancies; the sows are moved for three weeks to a nursing stall, then artificially inseminated and returned to the gestation crates. HSUS said in a statement that its investigator found unacceptable and systemic abuses.[23] The Associated Press reported that the investigator saw:
The undercover investigator saw no veterinarians at the facility. A manager told the investigator to ignore a pig with a basketball-sized abscess on her neck, then cut the abscess open with an unsterilized razor. Smithfield told the Associated Press that it has "zero tolerance for any behavior that does not conform to our established animal well-being procedures."[23] The company responded by sacking three workers. Temple Grandin, a professor of animal husbandry, was asked by Smithfield Foods to review the footage taken by HSUS and recommended an inspection of the facilities from animal welfare expert Jennifer Woods.[24]
The Virginia state veterinarian, Richard Wilkes told The Virginian-Pilot in January 2011 that Smithfield Foods had been "very responsive and very responsible in how they've addressed the issues" raised by the undercover investigation. Wilkes said he was invited to visit the farm in December as part of the investigation. He said he did not see "any indication of abuse" of the pigs and was impressed with the pigs' demeanor. A Humane Society spokesman said that Smithfield had provided the state vet "with a pre-announced, white glove tour."[25]
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The Smithfield Packing plant in Tar Heel, North Carolina, had been the site of a long dispute between the company and the United Food and Commercial Workers Union (UFCW), which had been trying to organize the plant for over a decade. Employees at the plant voted against the union in 1994 and 1997, but the National Labor Relations Board (NLRB) later alleged that unfair election conduct had occurred and ordered a new election. In 2006, the U.S. Circuit Court of Appeals found in favor of the NLRB, and Smithfield agreed to comply with the NLRB's remedies to ensure a fair election.[26]
Smithfield and the employees at Tar Heel had repeatedly called on the UFCW to hold a new election and the company had agreed to pay half the cost of an independent observer to ensure a fair election process, but the union had refused the offer, arguing that Smithfield would not allow a fair election and should have recognized card-check organizing.[27] After a year-long series of public demonstrations, several lockouts, a number of protests and a shareholder meeting which was disrupted by shareholders supporting the union, the UFCW called for a boycott of Smithfield products. In October 2007, Smithfield countered by filing a federal RICO Act lawsuit against UFCW.[28] In October 2008, the UFCW and Smithfield reached an agreement, under which the union agreed to suspend its boycott campaign in return for the company dropping its RICO lawsuit and allowing another election. On December 10 and 11, workers at the plant voted 2,041 to 1,879 in favor of joining the UFCW, bringing the 15-year fight to an end.[29]
In January 2009, Smithfield was assessed a $900,000 penalty by the U.S. Justice Department to settle charges that the company engaged in illegal merger activity during its takeover of Premium Standard Farms LLC in 2006.[30]
Established in 2002, the Smithfield-Luter Foundation is a non-profit organization that acts as the philanthropic wing of Smithfield Foods. The Foundation is dedicated primarily to providing scholarship opportunities to the children and grandchildren of Smithfield employees. It has given $5 million to Christopher Newport University in Newport News, Virginia, to establish the Joseph W. Luter III School of Business and a leadership scholarship program,[31] and $5 million to the University of Virginia Cancer Center in Charlottesville, Virginia.[32] The Foundation also provides support for its "learners to leaders" programs, begun in 2006, which operates in Sioux Falls, South Dakota; Green Bay, Wisconsin; Denison, Iowa; and Norfolk, Virginia.[33]
Smithfield offered $200 million to Maxwell Farms for the portion of Butterball that Smithfield did not own. A decision had to be made whether to buy Maxwell's share or sell Smithfield's. On September 10, 2010, Smithfield announced the sale of its 49 percent share in Butterball for an estimated $175 million, to be used to pay debt.[34] Maxwell Farms LLC and Seaboard Corp. completed their purchase of turkey business in December 2010.[35]
In February 2009, the company announced that it planned to close six plants and to reduce the number of its independent operating companies from seven to three.[36]
Smithfield Foods is in talks with Richard Petty Motorsports to share main sponsorship of the iconic #43 car in the NASCAR Sprint Cup Series for 2012, and conceivably beyond. Although no plans have been made public, it is also widely speculated that Aric Almirola will be hired to drive the car.[37]