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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 225 breeders, the company contracts with nearly 800 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 600 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 4.5 billion dressed pounds each year. Its prepared chicken product line consists of about 125 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 about half of its revenue from fresh bulk pack chicken sales and about 35% from its chill packs. It has 11 hatcheries, nine feed mills, and a dozen processing plants.

Geographic Reach

Based in Mississippi, Sanderson Farms distributes its chicken products across the US and throughout several international regions, primarily Mexico, Cuba, Central Asia, and the Middle East. It generates about 95% of its gross sales in the US.

The company's primary processing and production facilities are located in about 20 cities across nearly half a dozen US states: Mississippi, Georgia, Louisiana, Texas, and 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, through service representatives at each of its processing complexes, and via independent food brokers.

Sanderson Farms' sales to its two largest customers represent around 35% of its total net sales, reflecting a fairly concentrated customer base.

To bolster its brand presence, Sanderson Farms markets through television, radio and newspaper advertising, and point of purchase materials. It also sponsors the Sanderson Farms PGA Golf Championship, held every year in Mississippi. Advertising expenses totaled $38.9 million in 2018, versus $40.7 million in 2017 and $25.1 million in 2016.

Financial Performance

Until 2018, when demand for chicken and market prices fell, Sanderson Farms saw rising revenue every year for nearly a decade. Net income growth has been sporadic and, in 2018, it fell to its lowest level since 2012.

In 2018 revenue fell 3% to $3.2 billion. That year, boneless breast meat market prices averaged 17% lower than they were in 2017; jumbo wing market prices fell 25%. Sanderson Farms had a 9% decrease in the average sales price of poultry products in 2018, but that was partially offset by a 5% increase in sales volume.

Net income, which had shot up nearly 50% to $275.5 million in 2017, fell 78% to $60.6 million in 2018. Cost of sales increased 10% that year. 

The company ended 2018 with $121.2 million in net cash, nearly $300 million less than it had at the end of 2017. Operating activities provided $131.4 million in cash while investing activities used $306.7 million and financing activities used another $122.8 million.

 

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. In fact, 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. Also in 2017, Sanderson announced the selection of new poultry processing sites in Texas (Lindale, Mineola, and Smith County). 

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 responded by producing an advertising campaign defending its use of antibiotics. However, the company ultimately yielded to public pressure and announced that it has dropped the preventive use of antibiotics (effective March 2019).

Company Background

Sanderson Farms began in 1947 when Dewey Sanderson started a Mississippi farm supply business to sell seed, feed, fertilizer, and other supplies. His sons Dewey Jr. and Joe Frank Sanderson joined the company in 1951, when it became Sanderson Brothers. It began breeding poultry and was incorporated four years later as Sanderson Brothers Farms. The company became vertically integrated with its 1961 purchase of broiler processor Miss Goldy.

The company expanded over the following 25 years and went public in 1987.

Sanderson Farms, Inc. (production Division)

127 FLYNT ROAD
Laurel, MS 39443-9062
Phone: 1 (601) 425-2552

Stats

Employer Type: Privately Owned
Feed Mill Manager: Robert Polson
Employees (This Location): 150
Employees (All Locations): 9,000

Major Office Locations

Laurel, MS

Other Locations

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