Townsends, Inc.

views updated

Townsends, Inc.

919 North Market Street, Suite 420
Wilmington, Delaware 19801
U.S.A.
Telephone: (302) 777-6650
Fax: (302) 777-6660
Web site: http://www.townsends.com

Private Company
Incorporated: 1937
Employees: 3,000
Sales: $350 million (2003 est.)
NAIC: 311615 Poultry Processing

Townsends, Inc., is a private, family-owned, Wilmington, Delaware-based poultry company that processes nearly 625 million pounds of chicken each year. The company is one of the top three producers of boneless breast meat. About 80 percent of Townsends' boneless breasts, parts, whole birds, and roasters are sold domestically to poultry distributors, retail chains, and food service institutions. The rest is exported, primarily to Japan, Hong Kong, and Singapore. The first broiler company to become fully integrated, Townsends in recent years has chosen, in the face of consolidation in the poultry industry, to sell off some operations and pursue niche opportunities in value-added products. The company's Speedy Bird product line offers pan-fried and fully cooked chicken products. Organic chicken is sold under the Pristine Cuisine label, and the Ruby Dragon brand covers chicken products that target the Asian market. In addition to Delaware, Townsends maintains operations in Arkansas and North Carolina. The company is headed by the third generation of the Townsend family, P. Coleman Townsend.

Company Founding in the 1890s

Townsends' founder, John Gillis Townsend, Jr., was a transplanted Delawarean. He was born in 1871 on a farm in Maryland, close to Selbyville, Delaware. When in 1894 he moved his wife and two children to Selbyville, using a mule-drawn cart, he began a remarkable association with his adopted state, which combined highly successful careers in both business and politics. As an entrepreneur, he started out in the lumber business, but soon became involved in fresh produce, eventually earning the moniker the "Strawberry King." In the early 1900s Selbyville was one of America's top strawberry producers. Townsend also opened the first tomato cannery in the state's Delmarva region, and became involved in ice plants and banks. In addition, Townsend joined forces with T. Coleman Dupont in 1911 to create the Du Pont Highway, which opened up remote southern Delaware to increased commerce.

Townsend launched his political career in 1901 when he was elected to the Delaware state house of representatives, serving one term. Then in 1916, he ran for the governorship of Delaware as a Republican and won. As governor from 1917 to 1921, Townsend was credited with the passage of legislation involving women's rights, school reform, modern road construction, and social services. In 1928 Townsend was elected to the U.S. Senate from Delaware, serving two terms, from 1929 to 1941. While in the Senate he played an important role in crafting legislation to help the country recover from the Great Depression, with his ideas on banking contributing to some New Deal reforms, including the creation of the Federal Deposit Insurance Corporation. He also played a key role in the passage of legislation regarding silver purchases and the protection of farm patents. After being defeated in his reelection bid in 1940, Townsend again offered his services to the nation following World War II, when he was named as an alternate delegate to the first United Nations Assembly, held in London. He also would serve as a trustee for numerous colleges and universities and was a member of the Mount Rushmore National Memorial Commission. He lived well into his 90s, passing away in 1964.

Townsend Becoming Involved in Poultry in the 1930s

During and between stints in public life, Townsend nurtured his business empire. Increasingly he was aided by his son, Preston Townsend. After leaving the governorship, Townsend concentrated on fruit trees and by the mid-1920s he had more than 5,000 acres in production, making him the second largest orchard owner in America. His attention shifted again in the early 1930s, when he and Preston recognized a business opportunity in the emerging poultry industry in Delmarva. Many farmers at this time had decided to raise chickens because it was more reliable than other forms of agriculture. It could be pursued year-round and not be subject to the vagaries of the weather. The Townsends decided to become involved in the chicken business and incorporated a company to pursue it in 1937.

Chickens had been introduced in the United States by European settlers and were raised on almost every farm, mostly for family consumption. Excess products were sold in town or exchanged for goods at the general store. Chickens were also commonly kept by people in town, but it was not until the post-Civil War era that a large-scale poultry industry began to develop. Even then, raising chickens was considered women's work. As the poultry industry began to flourish, however, men began to become more involved and took control. The industry experienced significant changes in the 1920s. Poultry science programs were instituted at American colleges, as the small-farm chicken enterprises run by women and children gave way to large organizations. Hatcheries gained wide use in the 1920s, as did research facilities funded by the major feed companies: Ralston Purina, Quaker Oats, and General Mills' predecessor, Larrowe Milling. In 1934 Kimber Farms was established in Fremont, California, to engage in genetic research to develop chickens for desirable traits, such as the ability to lay a large number of eggs. Vaccines also were developed to cope with the results of not only the chickens' compromised immune systems caused by genetic hybridization, but also the spread of disease caused by the increasingly more crowded conditions under which chickens were kept. Battery cages arranged in rows and tiers became standard in the 1940s, as did the practice of using confinement sheds for broiler chickens. These practices were in many ways a response to the increased demand for poultry and eggs that would be the result of red meat rationing during World War II. Many dairy barns were then converted to the factory system to meet the new market for fresh eggs and broiler chickens after the war.

Townsends built its first hatchery in Millsboro, Delaware, in 1938. The chicks produced from the hatchery were then supplied to farmers who were contracted to raise them on a profit-sharing basis. As with many industries, poultry, in the postwar years, moved toward vertical integration. Well-known poultry giants Tyson and Perdue began to acquire all sectors of production: breeder and commercial flocks, eggs, hatcheries, grain, feed mills, medications, slaughter, processing, and delivery. But it was Townsends that in 1957, with the opening of a poultry-processing plant, became the first broiler company to realize full vertical integration, controlling the process from grain to the delivery of the finished product.

Townsends did not yet confine itself to the poultry industry, however. In the 1950s the company also focused a great deal of attention on its agricultural interests. To the surprise of many, Townsends cut down its orchards during this period, converting the land for use in cultivating corn, soybeans, and feed grain that could be used by the company's growing poultry operation. In 1951 it built a soybean extraction plant, used to process the crop for use in the poultry business as well as an ingredient for use in salad oil, which became an important product line for Townsends.

Townsends' poultry business took on increasing importance over the years. In the late 1970s the company built a state-of-the-art hatchery, followed in 1982 with the opening of a modern feed mill, and a soybean oil refinery in 1985. At this point, a third generation of the Townsend family, P. Coleman Townsend, stepped in to head the company and lead it into the future. A 1969 graduate from the University of Delaware with a degree in Agricultural Science, he was now in his late 30s and well prepared to take over as chief executive. By the mid-1980s Delaware's chicken country was producing nearly $340 million worth of broilers each year, but Townsends, under Coleman Townsend's leadership, moved into other major poultry producing areas in the United States. In 1986 the company acquired operations in Siler City and Pittsboro, North Carolina, and in Batesville, Arkansas. Both operations would be supported by local farmers working on a contract basis. In North Carolina, Townsends would operate two breeder farms, a hatchery, feed mill, and a compost facility. The Arkansas operation grew to include four farms, a feed mill, hatchery, and a poultry-processing plant.

As it entered the 1990s Townsends ranked as the ninth largest poultry company in the United States, and one of the largest producers of boneless breast meat. The company found a healthy balance between its North American business and overseas sales, which were especially strong in Japan. Because white meat was the preference of customers in the United States and Canada, there was an excess of dark meat, which fortunately was favored by other countries. Much of the company's growth over the years was the result of the rising level of chicken consumption, but that trend leveled off in the early 1990s. Although a recession hurt the industry, consumers still preferred the more expensive cut-up chickens, rather than whole fryers, which accounted for just a small amount of Townsends' business. The market was strong enough for broiler parts that in 1992 the company opened a new state-of-the-art tray packaging plant in Delaware, capable of weighing and applying price tags on trays of boiler parts for distribution to East Coast supermarkets. The introduction of high-tech innovations to the poultry industry, while a boon on one hand, also proved to be a problem with the company's less educated workforce. To help address this issue, the company launched a program to assist employees in receiving a high school education.

Company Perspectives:

Townsends, Inc. has passed through three generations in its history—John G. Jr., Preston C., and P. Coleman Jr.—each of whom has seized opportunities and expanded the company's horizons. That is a tradition we are proud to carry into our future. And we still value a firm handshake and a man's word of honor, which in today's world, just might be the most innovative quality of all.

Challenging Conditions in the 1990s

Townsends faced other challenges in the 1990s, primarily the result of consolidation in the industry. It found it increasingly difficult to compete with other vertically integrated poultry companies like Tyson and Perdue. As a way to diversify, Townsends toyed with the idea of pursuing aquiculture, hoping to transfer the company's success in creating a vertically integrated operation for chicken to the hatching, growing, and processing of striped bass and other fish. It was a long-term vision, however, that was never realized.

To better compete in the poultry industry, Townsends began the process of repositioning itself as a value-added chicken processor rather than a vertically integrated operator. One attempt at making this change came in 1996 with the acquisition of Grace Culinary Systems, a Laurel, Maryland, prepared foods manufacturer, supplying traditional foodservice accounts, supermarkets, and mass merchandisers with several lines of premium, cooked, and chilled packaged foods. It also offered some items vacuum sealed for in-package cooking. Grace Culinary was renamed Townsend Culinary. The business became the source of undesirable publicity, however. In June 1998 the plant was hit with a class action lawsuit filed by the Equal Employment Opportunity Commission, which charged that a number of immigrant women employees were asked by supervisors to perform sexual favors or risk losing their jobs. Many of the violations occurred before Townsends acquired the company, but the conduct continued under new ownership. Two years later, in June 2000, the company reached a settlement, agreeing to pay $1 million, split among 22 defendants. Less than a month later, Townsends sold off the business.

In 2000 Townsends sold off other assets as well, including a chicken processing plant and a soybean processing plant. The buyer was Little Rock, Arkansas-based Mountaire Farms. Although both facilities were located in Delaware, company officials made it clear that Townsends had no intention of leaving the state. The move was part of a strategy to cope with changing industry conditions. Consolidation in the industry coupled with a significant oversupply of chickens was resulting in low prices and depressed profits. Townsends earmarked the money received from selling the plants for further expansion into the prepared chicken market. Nevertheless, the company intended to keep its chicken processing plants in North Carolina and Arkansas. To support the North Carolina operation, Townsends bought a feed mill in the state. But the Pittsboro, North Carolina, poultry plant would be troubled by wastewater discharge problems that fouled nearby creeks and resulted in state fines. In 2004 Townsend restructured its North Carolina operation, moving 200 jobs from Pittsboro to the Siler City plant to shift some production to the Siler plant in an effort to lower the amount of waste produced at the Pittsboro facility. In addition, Townsends cut 225 of the 1,500 jobs at Pittsboro as part of the company's plan to allocate more resources to better grow its processed foodservice business.

Principal Competitors

ConAgra Foods, Inc.; Gold Kist Inc.; Tyson Foods, Inc.

Key Dates:

1894:
John Gillis Townsend moves to Delaware and launches a lumber business.: 1916:
Townsend is elected governor of Delaware.: 1938:
Townsend becomes involved in the poultry industry.: 1957:
Townsends, Inc. becomes the first fully integrated poultry company.: 1986:
Poultry operations in Arkansas and North Carolina are acquired.: 2000:
Facilities are sold as part of an effort to reposition the company in the processed chicken market.