In an address to investors, Smithfield Foods’ president Larry Pope gave a wide-ranging rundown on the nation’s leading pork producer-processor’s operations. He emphasized that changes in Americans’ diets toward protein and away from carbohydrates are making the U.S. packing business a lot more fun "then when meat wasn’t in vogue."
Even though the company already has the largest U.S. market share of processed-pork sales, Pope says it's striving to boost sales further because of the higher profit margins than fresh meat. Currently, more than half of Smithfield’sales dollars come from processed meats. Of those sales, about 36 percent is smoked meats, 22 percent bacon, 16 percent sausage, 10 percent hot dogs and 7 percent lunch meats.
Pope says about 41 percent of the hogs that Smithfield slaughters come from its company farms and contract producers. As the No.1 pork processor, the company’s U.S. market share is about 27 percent, which is ahead of Tyson with 18 percent and Cargill with 8 percent.
The company’s future pork sales growth is expected to come from acquisitions and international sales. Pope points out that Smithfield’s handling of acquired companies is unlike the widespread practice of replacing management and stripping the company down to its core assets. "We consider this a high-risk strategy," he notes.
Last year's acquisition of pork-processor Farmland Foods is working out well, according to Pope. It gave Smithfield a strong Midwestern presence and added established brand names there.
Pope divulged the breakdown of Smithfield sales in the United States: 52 percent to consumers through supermarket chains (the biggest channel is Wal-Mart), about 24 percent through fast-food and other restaurant chains, approximately 17 percent to the food industry for use in products and about 7 percent is exported.
Concerning further sales gains in the pork industry, Pope thinks that federal anti-trust regulators will allow Smithfield to increase its pork market share from the present 27 percent to the low 30's, but that it will not be able to move beyond 35 percent.
Oversease, Smithfield is selling about 300 million pounds of pork annually. In the last year, it processed 1.5 millions hogs abroad, raising 900,000 of them.
As to the company’s involvement in processing and marketing other meats in the United States, , Pope says Smithfield sells 6 percent of the beef and has 11 percent of the turkey market.
He points out that since it was started in 1975, Smithfield’s earnings and stock prices have risen steadily. In 1980, it was 19 cents a share, $2.60 at the end of l989, $11.81 in 1999, and the level was about $27 at the time of his speach.