Sanderson Farms has steadily scratched its way up the poultry processors' pecking order. The fourth largest in the US, it produces as well as processes, sells, and distributes fresh, chill-pack, and frozen chicken (whole and cut-up) under the Sanderson Farms label. In addition to buying chicks from some 190 breeders, the company contracts with 600-plus independent chicken farmers, who raise the breeder flocks for Sanderson. Its prepared-foods business processes, sells, and distributes partially cooked or marinated chicken, including frozen entrées. Customers are food retailers, distributors, and restaurants and foodservice operators located mainly in the southeastern, southwestern, northeastern, and western US.
Sanderson Farms' growth is tied to its control over production capacity coupled with close oversight of all operations related to manufacture of its chicken products. It owns seven hatcheries, six feed mills, and eight processing facilities -- four in Mississippi and one each in Louisiana, Georgia, North Carolina, and Texas. The company late 2010 spread its wings and opened new poultry operations in Kinston, North Carolina. In 2011 the facility began processing with an estimated 1.25 million birds per week for the retail chill-pack market. Another new big bird deboning processing facility and hatchery, equipped for 8.9 million pounds of dressed chicken per week, is planned in North Carolina.
Although many chicken processors serve the small bird markets (comprising primarily fast-food purveyors), Sanderson targets the retail and big bird deboning markets, which service the grocery and foodservice sectors. Therefore, the average weight of Sanderson's birds is more than that of other companies' and its total production in pounds is greater, as well.
Despite sluggish demand from foodservice customers, particularly restaurants hurt by cash-strapped consumers eating at home, Sanderson's sales in 2010 marked a new high, increasing by more than 7% from the prior year. The improvement was attributable to higher prices for its offerings along with an uptick in pounds sold (supported by steady grocery sales), amid a decline in the market's overall poultry product supply. Earnings soared more than 60% thanks to lower grain costs (a key performance driver) and operating efficiencies, which set a record in the number of pounds of poultry processed. During 2010 the company processed some 405 million chickens and produced more than 2.6 billion pounds of chicken products, up 8% over 2009.
Most of Sanderson's sales are generated in the US; its major foreign markets include Russia (the largest export market for US chickens), Eastern Europe, China, Mexico, and the Caribbean. Exports, which ran afoul of Russian authorities in 2009 due to antibiotic and anti-parasitic drug residue found in the company's poultry products, resumed in fall 2010. Sanderson looks for foreign sales to buoy dark meat prices in 2011 as consumers shift from red meats to chicken. (Other companies included in the ban were Tyson and Peco Foods.)
Royce & Associates owns about 13% of the business. A fund company, Royce concentrates its investments on the small fries.
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