About Sanderson Farms, Inc. (production Division)

Sanderson Farms roosts near the top of the poultry producing pecking order. As the third-largest poultry processor in the US, it produces, processes, sells, and distributes fresh, chill-pack, and frozen chicken under the Sanderson Farms label. In addition to buying chicks from some 220 breeders, the company contracts with more than 700 independent chicken farmers who raise the breeder flocks for Sanderson. Its prepared-foods business processes, sells, and distributes partially cooked or marinated chicken. Customers are food retailers, distributors, and restaurants and foodservice operators. The company processes more than 570 million chickens annually.

Operations

Sanderson Farms’ primary focus is producing and processing chicken for consumption. It sells chill pack, ice pack, bulk pack, and frozen chicken. Its products are sold whole, cut-up, and boneless and almost always under the Sanderson Farms brand name. Sanderson Farms produces more than 4.3 billion dressed pounds. Its prepared chicken product line consists of about 90 institutional and consumer packaged partially cooked or marinated chicken items that are sold nationally and regionally primarily to distributors and foodservice operators.

By product Sanderson Farms generates more than 55% of its revenue from fresh bulk pack chicken sales and about 30% from its chill packs. It has ten hatcheries, eight feed mills, and eleven processing plants.

Geographic Reach

Based in Mississippi, Sanderson Farms distributes its chicken products across the US and throughout several international regions, primarily Mexico, Central Asia, and the Middle East. It generates upwards of 90% of its gross sales in the US.

The company operates its business through two wholly-owned subsidiaries: Sanderson Farms, Inc. (Production Division) and Sanderson Farms, Inc. (Processing Division). Its production unit, which produces chickens to the broiler stage, operates in Mississippi, Texas, and North Carolina. The processing unit, which focuses on processing, selling, and distributing chickens, boasts facilities in Mississippi, Louisiana, Texas, Georgia, and North Carolina.

Sanderson Farms’ processing division has two poultry operations in North Carolina. Its Kinston facility processes an estimated 1.25 million birds per week for the retail chill-pack market and has a big bird deboning processing facility and hatchery turning out some 540 million pounds of dressed chicken per year. Its second North Carolina poultry complex in St. Pauls has the capacity to process 1.25 million chickens per week.

A big part of Sandersons’ operations is producing food for the chickens to eat. It operates eight feed mills, four in Mississippi, two in Texas, one in Georgia, and one in North Carolina.

Sales and Marketing

Sanderson Farms markets its chicken products to national and regional supermarket chains, local grocers, and distributors located primarily in the southeastern, southwestern, northeastern, and western US. The company sells and distributes its products through sales personnel located at its corporate offices in Mississippi and through service representatives at each of its processing complexes and via independent food brokers.

Sanderson Farms' sales to its ten largest customers represent around 50% of its total net sales, reflecting a fairly concentrated customer base. Sales to its single largest customer account for over 15% of sales.

To bolster its brand presence, Sanderson Farms has been increasing its advertising spend. The company is spending its extra advertising budget on a campaign to counter accusations of irresponsible antibiotic usage. It markets through television, radio and newspaper advertising, and point of purchase material. It also sponsors the Sanderson Farms PGA Golf Championship, held every year in Mississippi.

Financial Performance

Sanderson Farms has been bringing home the bacon. Its revenue has increased each year for the past nine. Its net income growth was sporadic between 2008 and 2011, but between 2012 and 2017 it has also risen steadily, increasing five-fold over that time.

Revenue in FY2017 (ended October 31, 2017) rose more than 18% to $3.3 billion. The company sold 13% more pounds of poultry in the year (to 4.2 billion lbs.) and also benefited from an average price increase of 6.5%. Sanderson’s new St. Pauls facility contributed to this improvement by processing 29.5 million chicken in its first year of operation (2017).

Net income for the year shot up nearly 50% to $280 million. The company reduced its cost of sales (mainly feedstock for the chickens) as a percent of sales by a few points, allowing much of the revenue improvement to flow to the bottom line.

Cash at the end of FY2017 was $419 million, up $185 million from the prior fiscal year end. Financing activities used $58 million, mostly from paying dividends to shareholders and purchasing stock for employee compensation. Investing activities depleted cash supplies by $166 million due to capital expenditures for facility upgrades and new facility buildouts. Operating activities contributed nearly $410 million, mostly from net income but also from adjustments for depreciation and amortization and deferred income taxes.

Strategy

While many chicken processors serve the small bird markets (comprising primarily fast-food purveyors), Sanderson Farms targets the retail and big bird markets, which service the grocery and foodservice sectors. Therefore, the average weight of Sanderson's birds is often more than that of its competitors and its total production in pounds is greater, as well. The company reiterated in 2017 that the big bird market has been the most profitable market for the company over most of the past decade.

To keep boosting its production capacity, which is key to growing sales, Sanderson Farms regularly adds to its collection of processing facilities. In 2017, for example, a new processing plant and waste water treatment facility (costing $139 million) went live in St. Pauls, North Carolina. Two years prior it brought online a poultry complex in Palestine, Texas. Both facilities produce 1.25 million chickens per week.

Also in 2017, Sanderson announced the selection of new poultry processing sites in Texas (Lindale, Mineola and Smith County). The completed facilities will each consist of a hatchery, feed mill, processing plant and waste water treatment facility with the capacity to process 1.25 million chickens per week. The company is in the early stages of construction, and initial operations of the new complex are expected to begin during the first calendar quarter of 2019.

Throughout 2016 and 2017, an increasingly vocal campaign to reduce the usage of antibiotics in chicken production saw a number of Sanderson Farms' competitors, including Tyson and Pilgrim's Pride, pledge to cut down on usage. Sanderson Farms has responded by producing an advertising campaign defending its use of antibiotics. A number of lawsuits against the company are working their way through court systems.

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Sanderson Farms, Inc. (production Division)

127 Flynt Rd
Laurel, MS 39443-9062
Phone: 1 (601) 425-2552

Stats

  • Employer Type: Public
  • Shop Supervisor: Edward Bynum
  • Feed MILL Manager: Robert Polson
  • Maintenance manager: Ronnie Walker
  • Employees: 9,000

Major Office Locations

  • Laurel, MS

Other Locations

  • Collins, MS
  • Fernwood, MS
  • Hazlehurst, MS
  • Bryan, TX
  • Waco, TX