Sanderson Farms, Inc.

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Sanderson Farms, Inc.

225 North 13th Avenue
P.O. Box 988
Laurel, Mississippi 39441-0988
U.S.A.
(601) 649-4030
Fax: (601) 426-1461

Public Company
Incorporated: 1955 as Sanderson Brothers Farms
Employees: 4,854
Sales: $371.50 million (1994)
Stock Exchanges: NASDAQ
SICs: 0251 Broiler, Fryer & Roaster Chickens; 2013 Sausages & Other Prepared Meats; 2015 Poultry Slaughtering & Processing; 2038 Frozen Specialties, Not Elsewhere Classified

Sanderson Farms, Inc., produces, processes, markets, and distributes fresh and frozen chicken and other prepared food items. It sells whole and cut chicken primarily under the Miss Goldy brand name in the southeastern, southwestern, and western United States. More than 100 other food items, including frozen foods, are distributed nationally and even internationally under the Sanderson Farms brand name. The company was growing rapidly and posting healthy profits in the mid-1990s.

The chicken business that would become Sanderson Farms was founded in the 1940s by D. R. Sanderson and his sons. D. R. Sanderson, better known as Mr. Bob, and his brother had operated a grocery business in Hazlehurst, Mississippi, for several years before going into the chicken business. D. R. had brought sons Dewey and Joe Frank to work in the store as soon as they were old enough “to make change,” according to Joe. It was primarily through the boys’ experience at the store that Mr. Bob instilled in them a hardy Protestant work ethic. “Our father taught us honesty, he taught us industry, he taught us to treat people fairly, taught us to work,” Dewey recalled in company annals. Joe added, “He had a very strong work ethic, and he saw to it that everybody who surrounded him, all his family and all his children, had that work ethic instilled into them.”

The Sandersons also opened a vegetable business in Hazlehurst, through which they shipped cabbage, beans, and other vegetables throughout the region. After World War II Dewey opened a Purina franchise feed and seed business in Laurel, Mississippi, a city about 80 miles east of Hazlehurst and 80 miles southeast of Jackson. Joe was working in a hatchery in Meridian, Mississippi, but he moved to Laurel in 1951 to help the family expand into the growing poultry business. The Sandersons’ chicken business thrived and the brothers decided to simply exit their Purina franchise and devote all of their energy to the poultry operation. Joe and Dewey built the first feed mill and hatchery in the area and incorporated their business in 1955 as Sanderson Brothers Farms.

Shortly after Joe and Dewey opened their feed mill and hatchery, Mr. Bob and his brother Tom constructed a broiler processing plant in Hazlehurst. They opened the operation, in partnership with Durr Wise, as Miss Goldy, Inc. In 1961 Miss Goldy and Sanderson Brothers Farms merged, forming a company with both poultry production and processing capabilities. Demand for the company’s chicken products spiraled, and within a few years the Sandersons began looking for a way to expand. The avenue to growth was provided by a bond issue passed by the citizens of the City of Laurel in 1964. The issue provided $3 million that Sanderson Farms used to construct a poultry complex. The facility, which became a major employer in the area, opened its doors in 1965. The joint effort began a close relationship that the City of Laurel and Sanderson Farms would share for years to come.

Sanderson Farms’ poultry operation prospered during the late 1960s and early 1970s. In 1969 Joe Frank, as his father had done years earlier, brought his son, Joe Sanderson, Jr., into the business. Joe, Jr. watched Sanderson Farms grow from a local chicken producer and processor to a major regional poultry supplier in the southern and western United States. That growth was achieved partly through the acquisition of other companies. Sanderson Farms purchased a processing plant in 1974, for instance, and in 1978 built a new feed mill. Then, in 1981, the company acquired Collins Chill Pack Division, which had been part of a company called MFC Services. That move reflected the company’s strategy of vertical integration, which allowed it to reduce costs and eventually gain control over most phases of the production, processing, and distribution processes.

Aside from savvy operational tactics, Sanderson succeeded by following conservative fiscal, managerial, and personnel practices. Such principles had been the foundation of the company’s success since Mr. Bob had started his grocery operation. The elder Sanderson was known for keeping a tight rein on expenses, for example, and for incurring little debt. Long-time employee Walter Washington related the following incident: “... going down Old Highway 51 there was a long, steep hill and then valleys. He would get to the top of the hill, cut the motor off and cruise down the hill. I said, ’Why do you do that, Mr. Bob?’ and he said, ’I’m saving gas. You never can be a success unless you cut the cost.’ ” Similarly, Odell Johnson, a long-time employee and president of the company between 1984 and 1989, recalled the Sanderson family’s emphasis on integrity: “One of the things that Joe Frank told me the day he hired me was that at any point if I felt like the company was doing anything that was not right and that would affect my conscience, that I ought to leave. I never had to leave. They’ve always believed in treating other people like they want to be treated.”

Joe Frank assumed the presidency of Sanderson Farms in 1982. By that time the company was generating roughly $100 million in annual sales and enjoying healthy profits. Sanderson Farms continued to post steady gains under the leadership of Joe, Jr. Indeed, sales shot up to more than $130 million in 1985 and then to $150 million in 1986, by which time Odell Johnson was acting as president. Sanderson took a big step forward in 1986 when it purchased National Prepared Foods, based in Jackson, Mississippi, giving Sanderson an entry into the beef, pork, and seafood segments. Sanderson also diversified by moving into the market for further-processed, or value-added, poultry products. Sadly, Mr. Bob died in 1985. He was credited with developing the company from a small feed and chicken operation to one of the larger poultry companies in the United States.

Sanderson Farms grew rapidly during the late 1980s and early 1990s. Family owned, the company had traditionally funded growth internally. In 1987, though, the Sandersons took the company public with a stock offering that raised more than $16 million. During the next several years Sanderson Farms used capital generated from the sale of stock to finance growth. The company invested heavily, expanding with projects at plants in Hazlehurst, Jackson, Laurel, Collins, and in Hammond, Louisiana—between 1991 and 1994, Sanderson invested more than $125 million to grow its operations. In addition to increasing production and distribution capacity, the company diversified into new product lines. Most notable was Sanderson’s 1990 introduction of a line of frozen entrees that included chicken primavera, lasagna, seafood gumbo, and Mexican casserole.

Expansion and diversification pushed sales and profits to new highs. Annual revenues climbed to $166 million in 1988 before leveling out around $186 million during the early 1990s, while operating profits averaged about $18 million per year between 1988 and 1991. Joe Sanderson, Jr., followed Odell Johnson as president in 1990. Johnson had started working at Sanderson when the company was processing 30,000 chickens a week; by the time he retired, Sanderson was processing nearly two million chickens weekly. Joe, Jr., became the third generation of Sandersons to lead the enterprise, bringing 20 years of experience at Sanderson Farms with him to the helm. As noted above, the company invested heavily to expand, diversify, and update facilities after Joe, Jr., became president. In 1992, for example, Sanderson Farms began constructing a new $40 million processing plant, hatchery, and feed mill.

Besides expanding Sanderson Farms, Joe, Jr., achieved growth by maintaining the company’s long-time strategy of vertical integration. To that end, Sanderson Farms’ management worked to become involved in all aspects of the marketing process with a broad product mix that appealed to retail, food service, discount, export, and other markets. Integral to that effort was the company’s emphasis on value-added products, such as boneless, cut, frozen, marinated, or cooked chicken; “When my grandmother wanted to serve chicken, she caught a chicken, wrung its neck, plucked it, cut it up, and cooked it,” Joe, Jr. explains in company literature, “...when my wife wants to serve chicken, she goes to the supermarket, buys chicken already cut into pieces, often boneless or skinless, takes it home and cooks it. When my daughter wants to serve chicken, she buys it already cooked, takes it home and serves it.” By the early 1990s, more than 95 percent of all chicken products that Sanderson Farms sold were considered value-added.

By 1992 Sanderson Farms employed a work force of 2,500 people. Revenues jumped to $210 million in 1992 and then to a whopping $269 million in 1993, while operating profits bulged from $16 million in 1992 to more than $32 million in 1993. The company rapidly boosted sales to $372 million in 1994, a record $43.8 million of which was operating profit. Augmenting an aggressive expansion strategy were general trends in the marketplace that complemented Sanderson Farms’ offerings. Consumption of chicken in the United States continued to rise, for example—per capita chicken consumption had already climbed from 30 pounds in the 1960s to about 80 pounds in the early 1990s. Furthermore, Sanderson was realizing healthy growth in demand for its various frozen entrees and foods sold to wholesale accounts and for the retail market under the Sanderson Farms label.

In 1995 Sanderson Farms was operating four hatcheries, three feed mills, five processing plants, and a byproducts plant, and employing more than 4,000 workers. Furthermore, it was contracting with more than 600 growers and breeders that supplied its chicken. In 1994 Sanderson Farms processed more than 160 million chickens to create about 522 million pounds of dressed meat. In addition to various chicken products, which made up about 80 percent of the company’s revenues in the mid-1990s, Sanderson sold various processed beef, pork, and seafood items. A complete line of fresh and frozen chicken was marketed under the Miss Goldy brand name, primarily to retailers and distributors in the southeastern, southwestern, and western United States. Under the Sanderson Farms label, the company was shipping more than 100 different processed and prepared frozen entrees and specialty food products to wholesalers and retailers throughout the United States.

In the long term, Sanderson Farms planned to boost its share of the U.S. poultry market by focusing on value-added products and by diversifying its product and market mixes. As it had since the Sandersons started it, the company prided itself on keeping a low level of debt and advocating a conservative management philosophy.