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 entrées. Customers are food retailers,
distributors, and restaurants and foodservice operators. The
company processed more than 476 million chickens in 2015.
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
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
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
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,
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
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.
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
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.