You can come at the chicken business a few different ways.
You can get to a point you’re happy with and stay there, you can wait for opportunities to arise, or you can create them the way Joe Sanderson Jr. does.
The CEO of Mississippi’s largest public company prefers to run at full throttle, having doubled the Laurel-based company’s poultry production in the past 10 years and tripled it in the last 20 years.
Patience may be a virtue, but it’s not a business strategy for Sanderson, the third generation of Sandersons to run the 11,500-employee poultry company that started as a seed and grain store in Brookhaven in 1947, the year Joe Sanderson Jr. was born.
“Under Joe’s leadership, we have built the last six plants that have been built” in the United States, CFO Mike Cockrell says.
The growth of principal competitors Tyson Foods and Pilgrim’s Pride has mostly come through acquisitions, Cockrell notes. “Frankly, Joe was not patient enough to wait for an acquisition. On the other hand, when you go to build a plant you can put it where you want it. He has chosen to grow the company that way.”
Cockrell has witnessed huge growth since joining the company in 1992 after working as a lawyer in Jackson. “We are three times as big now as when he hired me,” Cockrell adds.
The number six plant for the $2.6 billion company in Palestine, Texas, is scheduled to open in 2015’s first quarter. Palestine, which is to cost $140 million and include a hatchery, feed mill and processing plant, will raise Sanderson Farms’ poultry production by 16 percent.
Another plant planned for North Carolina will add another 15 percent to production totals.
A CEO, Cockrell says, can create shareholder value by squeezing more money out of what the company already has. Or the CEO can keep growing the company. That’s the lever Joe Sanderson pulls, Cockrell notes.
So far so good, he says.
The company’s stock price has climbed along with production, reaching $87.10 a share on common stock in mid-December, a pace that would give the stock price an increase of more than 21 percent for the year and around 80 percent for the past two years.
Shares sold at around $45 apiece in 2004, according to Cockrell.
A growing preference for poultry has helped (per capita consumption of chicken surpassed beef in the 1980s). And in recent years, Sanderson and other meat producers have benefited greatly from feed grain price declines brought by rising supplies.
“Profits at Sanderson Farms doubled in the first nine months of this year due to lower costs,” the Financial Times reported in November.
The very profitable last two years have led to production increases that Sanderson COO Lampkin Butts expects will cause an oversupply and a drop in prices. “Probably in the second half of 2015 or into 2016,” Butts says.
Some softening of any downturn should come through Sanderson Farms’ broad product mix that appeals to retail, food service, discount, export, and other markets. Integral to that vertical marketing effort is the company’s emphasis on value-added products, such as boneless, cut, frozen, marinated, or cooked chicken, Sanderson Farms said in a published company history.
Joe Sanderson Jr. put it this way in the company history:
“When my grandmother wanted to serve chicken, she caught a chicken, wrung its neck, plucked it, cut it up, and cooked it …. 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.”
The value-added approach, according to the company history, began in 1986 when Sanderson Farms purchased National Prepared Foods, based in Jackson, giving Sanderson an entry into the beef, pork, and seafood segments. The company also diversified by moving into the market for further-processed, or value-added, poultry products.
By the early 1990s, more than 95 percent of all chicken products that Sanderson Farms sold were considered value-added, the company history notes.
MBJ Business Person of the Year
The impressive growth of Sanderson Farms under Joe Sanderson Jr.’s leadership makes the CEO an easy choice as the Mississippi Business Journal’s Business Person of the Year for 2014, when combined with his civic involvement and participation in Mississippi’s economic development, including the leadership as chairman of a citizens committee studying the state’s transportation infrastructure needs.
But here is another reason Sanderson stands tall among Mississippi’s business leaders: He kept alive Mississippi’s Professional Golf Association tour event by persuading his board to make Sanderson Farms the tournament’s title sponsor.
The rescue could not have been more timely. The tour event, held in Mississippi since 1968, was headed for extinction, and with it the hundreds of thousands of dollars it earned annually for the Blair E. Batson Children’s Hospital on the University of Mississippi Medical Center campus in Jackson.
Thanks to the poultry company’s support, next month’s contribution to the Batson Children’s Hospital from the Sanderson Farms Championship will exceed $1 million, says Johnny Lang, president of the tournament’s charitable arm, Century Club Charities.
Sanderson Farms joined a trio of title sponsors that span decades: Deposit Guaranty, Southern Farm Bureau and Viking.
It’s a marked change from two years ago. “Things didn’t look nearly as bright as they do now,” Lang says.
At Joe Sanderson’s urging, the company’s board gave the tournament a one-year tryout in 2013 “just to see if it felt right,” Sanderson says.
It felt so right that within 45 days of that year’s tournament, Sanderson had helped beef up the tournament’s total prize money to more than $1 million and signed up his company for three more years as title sponsor.
Building a poultry empire
Less than 90 miles separate Brookhaven from Laurel. But what Sanderson Farms has built in Laurel is a world apart from what Joe Sanderson’s grandfather D.R. Sanderson, uncle D.R. Sanderson Jr. and father Joe Sr. began with in Brookhaven.
The early Sandersons ran a Bookhaven feed and seed store starting in 1947, where Joe Jr. and brother Dewy began working as soon as they were old enough to make change.
In the mid 1950s, the Sandersons started raising chickens they sold to processing plants in Jackson, New Orleans and Mobile. “That business was very good,” Joe Sanderson says.
In 1961, the Sandersons bought their first processing plant, an operation in Hazlehurst. A plant in Laurel went up in 1965. Joe Sanderson finished high school in Laurel and headed off to Jackson’s Millsaps College.
“I came home from college in 1969,” Sanderson says. “I worked on the farms for a couple of years.”
Next up was the plant in Laurel. “I did every job there was to do,” he says, starting as a night shift supervisor on the evisceration line.
A year later, Sanderson became a packaging supervisor, then a shipping supervisor and finally a sales representative. He followed that with a stint as a sales manager.
“Then, in 1974, I became division manager of the Laurel plant.”
By 1979, Sanderson was running a newly purchased plant in Hammond, La. Then came a job back in Mississippi rebuilding, expanding and managing a plant in Collins.
After a year in Collins, Sanderson took on a key executive role back in Laurel as director of processing and sales. “I worked under Odell Johnson,” who soon went from director of operations to company president, opening up the operations chief position to Sanderson.
“In 1989, Odell retired and I became president of the company,” Sanderson says.
Johnson had guided the company to significant growth. When he began work for the Sandersons, the company processed 30,000 chickens weekly. When he retired, the number had grown to 2 million.
With capital from going public in 1987, Sanderson Farms was poised for growth for the first time since the Collins plant acquisition a half dozen years earlier.
“In 1990, my team and I developed a plan to double-shift each of our four plants and build a new plant in McComb,” he says. “Since that time, we have built four more complexes, including Palestine.
In addition to Mississippi and Texas, Sanderson Farms has plants in Georgia and North Carolina. Palestine will be the third Texas plant.
“We built the plants through capital we had,” Joe Sanderson says, emphasizing the company’s preference to stay free of debt.
For the first nine months of 2014, Sanderson Farms sold 2.27 billion pounds of poultry products compared to 2.21 billion for the same period the previous year, the company noted in its third quarter earnings conference.
Net sales for the quarter totaled $768.4 million, up 3.98 percent from $739 million during the same quarter last year, COO Lampkin Butts said at the earning conference.
Will run on Saturdays
COO Butts, whom Sanderson cites as a valued executive with decades of service to the company, lists Sanderson Farms’ strengths thusly:
» Talented people who are willing to work hard and are committed to excellence;
» A low-cost producer;
» A favorable product mix;
» A track record of growth;
» A strong balance sheet.
Then there is Joe Sanderson Jr. himself, Butts says.
“He is a decisive leader and a brilliant visionary,” the COO adds.
“Joe is passionate about the chicken business and Sanderson Farms. He has always believed in working hard to be among the best in our industry. Joe likes to work hard, play hard, and still be able to laugh at the end of a long hard day.”
Sanderson took over the top executive post in January 1998, having experienced firsthand every aspect of the family business. “I enjoyed working on the farms and in the plants, working my way up,” he says. “I had great teachers, my father and Odell Johnson.”
In addition to Butts, several other executives have worked alongside Sanderson for 40 years. “The CFO (Mike Cockrell) has been with me 25 years,” he says, noting as well that several members of the executive committee have been on board a quarter of a century.
“They enjoy the excitement and energy of growth, and the energy of winning and rewarding our shareholders,”
Sanderson says his managers must be detail oriented and willing to do their homework. “We are very thorough. We value our customers. We will do what they need us to do,” he adds. “If they need us to run on a Saturday, we are happy to run on a Saturday.”
Of course, the extra effort is not without rewards. An annual bonus of up to 25 percent of yearly salary goes to every salaried worker if the Earnings Per Share target is reached. This year, the company is projecting bonus payments totaling $23 million, according to the Q3 earnings report.
Some would argue that the nation’s third largest poultry company should have its headquarters in a state with a higher profile than Mississippi, CFO Cockrell says. The new headquarters building Sanderson Farms built in Laurel in 2006 after Katrina should have put an end to any conjecture on relocation, he says.
“We never considered leaving South Mississippi,” Cockrell says. “It’s home.”
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