About Sanderson Farms, Inc. (production Division)

Sanderson Farms has steadily scratched its way up the 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 190 breeders, the company contracts with 800-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 entrĂ©es. Customers are food retailers, distributors, and restaurants and foodservice operators. The company processed more than 476 million chickens in 2015.

Operations

By product, Sanderson Farms generated nearly 50% of its fiscal 2015 (ended October) revenue from fresh bulk pack chicken sales, while chill packs and frozen chicken product sales made up around 37% and 6%, respectively.

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, which combined process more than 9.37 million chickens per week.

Sanderson Farms has a poultry operation in Kinston, North Carolina, which processes an estimated 1.25 million birds per week for the retail chill-pack market, and a big bird deboning processing facility and hatchery, equipped for 9.7 million pounds of dressed chicken per week.

Altogether, during FY2014, Sanderson Farms processed 476 million chickens to produce 3.4 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 90% of its gross sales in the US, while its largest export markets are Mexico, China, and Russia.

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 represented nearly 53% of its total net sales during 2015, reflecting a fairly concentrated customer base.

To keep its brand in front of customers, Sanderson Farms has increased adverting spending significantly. It spent $13.1 million on advertising in 2015 and $12.9 million in 2014. Its ad budgets for 2013 and 2012 were $3.34 million and $1.27 million, respectively.

Financial Performance

Sanderson Farms had enjoyed healthy revenue and profit growth over the past few years until 2015 (ended October). Prepared chicken sales rose in 2015, but poultry product revenue fell 11%. The company sold 12% more pounds of poultry, but at lower prices.

Net income fell in 2015 compared to 2014, off some 13% to 216 million. The drop was from a record high profit of $249 million in 2014. Sanderson has higher cost of sales in 2015.

The company also generated less cash in 2015 as cash flow slowed to $297 million from $306 million in 2014.

Strategy

While many chicken processors serve the small bird markets (comprising primarily fast-food purveyors), Sanderson Farms targets the retail and big bird deboning 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 deboning market has been the most profitable market for its company over most of the past decade.

To keep boosting its production capacity, which are key to growing sales, Sanderson Farms regularly adds to its collection of processing facilities. In 2015, for example, the company broke ground on a new processing plant and waste water treatment facility (at a cost of $139 million) in St. Pauls, North Carolina, which would be capable of producing and selling 500 million additional pounds of dressed poultry meat per year once completed. Also in 2015, the company's new poultry complex in Palestine, Texas came online. It should produce 342.7 million pounds during fiscal 2016.

Sanderson also looks for foreign sales to buoy dark meat prices as consumers shift from red meats to chicken.

Food safety is a growing concern throughout the food supply chain. As one of the few chicken processors building new plants, Sanderson has the opportunity to build in more sanitary handling methods and processes from the ground up.

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Sanderson Farms, Inc. (production Division)

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

Stats

  • Employer Type: Public
  • Credit Manager: Bobby Hill
  • Sec: Timothy Rigney
  • Corporate Sales Manager Export Sales: Andrew Szymanski

Major Office Locations

  • Laurel, MS

Other Locations

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

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