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 (whole and cut-up) under the Sanderson Farms label. In addition to buying chicks from some 210 breeders, the company contracts with about 900 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 processed more than 507 million chickens in 2016.

Operations

By product, Sanderson Farms generates over 50% of its revenue from fresh bulk pack chicken sales. Chill packs bring in 35% of sales and frozen chicken products 5%. It has ten hatcheries, eight feed mills, and eleven processing plants.

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 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 350 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.

In all, Sanderson Farms processes annually over 507 million chickens to produce 3.8 billion dressed pounds. Its prepared chicken product line consists of about 70 institutional and consumer packaged partially cooked or marinated chicken items that are sold nationally and regionally primarily to distributors and foodservice operators.

Geographic Reach

Based in Mississippi, Sanderson Farms distributes its chicken products nationwide, as well as in Eastern Europe, Russia, China, Mexico, and the Caribbean. It generates upwards of 90% of its gross sales in the US.

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 represents around 55% 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.

The company sponsors a PGA Tour golf championship, the Sanderson Farms Championship, held every year in Mississippi. The winner walks away with a $4.2 million prize fund.

Financial Performance

In fiscal 2016 (ended October), sales were flat at $2.8 billion. A 7.2% decrease in the average price per pound of chicken mostly offset a 9.2% increase in the gross weight of poultry sold. Chicken prices were negatively impacted by domestic oversupply: in 2015, China imposed an import ban on US chicken amid fears over avian flu, leaving producers with a poultry surplus. A fall in US food service demand was also a contributing factor to price deflation. The lower price of chicken had the effect of increasing demand so that numbers of chickens sold rose by some 7%. Sanderson was also able to increase the average weight per chicken, adding further to gross weight sold.

Net income declined for a second consecutive year, to $189.0 million, due to a 2.1% rise in the cost of sales. Cash from operating activities declined slightly, down 2% to $292.8 million, mostly due to lower market prices for poultry products and cash needed to fund inventory increases, set against a decrease in cash paid for 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 2015 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. The new site has the capacity to produce 1.25 million chickens per week. In 2015, a poultry complex came online in Palestine, Texas. It also produces 1.25 million chickens per week.

In 2016, 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.

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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
  • Sec: James A Grimes
  • 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