Smithfield Foods

Company profile

The company traces its history to 1936, when Joseph W. Luter, Sr. and his son, Joseph W. Luter, Jr., opened the Smithfield Packing Company in Smithfield, Virginia. The latter served as chief executive officer (CEO) until his death in 1962. A grandson, Joseph W. Luter III, joined the company the same year, and in 1966 became chairman and CEO until Smithfield was taken over by Liberty Equities in 1969. The company hired Luter again as CEO in 1975 when it found itself in financial difficulties. His restructuring of the company is credited with its improved performance, and he remains on the board of directors. His son, Joseph W. Luter IV, is an executive vice president of Smithfield Foods and president of the Smithfield Packing Company, the parent company's largest subsidiary.

Smithfield began to expand in 1981 with its purchase of its main competitor, Gwaltney of Smithfield. This was followed by the acquisition of almost 40 companies in the pork, beef, and livestock industries between 1981 and around 2008. Patrick Cudahy was purchased in 1984 and Schluderberg-Kurdle in 1986. In 1992 the company opened the world's largest processing plant, a 973,000-square-foot facility in Tar Heel, North Carolina, which in 2000 could process 32,000 pigs a day.

It purchased John Morrell & Co in Sioux Falls, SD in 1995, Circle Four Farms in 1998, and in 1999 bought the two of the largest pig producers in the United States: Carroll's Foods and Murphy Family Farms of North Carolina, at that point the largest producer. Jill Hobbs and Linda Young write that Smithfield's purchase of these companies constituted a major structural change in the U.S. pig industry. Farmland Foods of Kansas City was added in 2003, as were Sara Lee's European Meats, ConAgra Foods Refrigerated Meats, Butterball (the poultry producer), and Premium Standard Farms in 2007. It sold its 49 percent share in Butterball in 2008 for an estimated $175 million.

The acquisitions have caused concern among regulators in the United States regarding the company's control of the food supply. After Smithfield's purchase of Murphy Family Farms, the Agriculture Department described it as "absurdly big." As of 2006 four companies – Smithfield, Tyson, Swift & Company, and Cargill – were responsible for the production of 70 percent of pork in the United States.

The company had 50,200 employees in the United States, Mexico and Europe as of 2016, and an annual revenue of $14 billion. It raises 15.8 million pigs a year, producing 3.8 billion pounds of fresh pork and 2.7 billion pounds of packaged meat, sold as 50 brands of pork products and 200 gourmet foods. Along with specialty brands such as Paula Deen Collection, and international brands such as Weight Watchers, the company's 12 core brands are Armour, Carando, Cook's Ham, Curly's Foods, Eckrich, Farmland, Gwaltney, Healthy Ones, John Morrell, Kretschmar, Margherita, and Smithfield. The company also operates The Genuine Smithfield Ham Shoppe and a restaurant, Taste of Smithfield, both in Smithfield, Virginia.

On 29 May 2013, Shuanghui Group, also known as the Shineway Group, the largest meat producer in China, announced a purchase of all of the stock of Smithfield Foods, Inc. for approximately $4.72 billion. It was also announced by Shuanghui that it would list Smithfield on the Hong Kong Stock Exchange after completing the takeover. On 6 September 2013 the U.S. government approved Shuanghui International Holding’s purchase of Smithfield Food, Inc. The deal was valued approximately $7.1 billion. It since has been the largest stock acquisition by a Chinese company of an American company to date.

Vertical integration

In 1990, the company bought hog farming operations, making it a vertically-integrated company. The system allows Smithfield to control every stage of pig production, from conception and birth to slaughter, processing and packing – known as "from squeal to meal" or "from birth to bacon."

Luter has said that "vertical integration gives you high quality, consistent products with consistent genetics. And the only way to do that is to control the process from the farm to the packing plant." Tyya N. Turner writes that in 1990 the company obtained 2,000 pigs and the exclusive right to their genetic lines from Britain's National Pig Development Company, and used them to create Smithfield Lean Generation Pork, which was certified by the American Heart Association for its low fat, salt, and cholesterol content. According to Luter, it was vertical integration that enabled this.

Housing and lagoons

The pigs are housed together in their thousands in identical barns with metal roofs, known as CAFOs (concentrated animal feeding operations). The floors of the buildings are slatted, allowing waste to be flushed into 30-feet-deep open-air pits the size of two football fields, referred to within the industry as lagoons. Smithfield says the lagoons contain an impervious liner made to withstand leakage. According to Jeff Tietz writing for Rolling Stone magazine, the waste – a mixture of excrement, urine, blood, afterbirths, stillborn pigs, drugs and other chemicals – overflows when it rains and the liners can be punctured by rocks. Smithfield attributes the pink color of the waste to the health of the lagoons, writing that the color is "a sign of bacteria doing what it should be doing. It's indicative of lower odor and lower nutrient content."

Pregnant sows

Smithfield said in December 2011 that it would phase out the use of gestation crates on its company-owned farms by 2017 in the United States, and by 2022 in Europe and Mexico. Pregnant sows spend most of their lives in these individual stalls, which are too small to allow them to turn around. When they give birth, they are moved to a farrowing crate for about three weeks, then artificially inseminated and placed back into a gestation crate. The practice has led to criticism from animal welfare groups, supermarket chains and McDonald's. Smithfield said in 2007 that it would phase out gestation crates by 2017, but in 2009 said it would not meet the projected timeline because of operating losses caused by the recession. In January 2013, it said that 38 percent of pregnant sows on its company-owned farms had been moved out of the crates. It would not commit to requiring its contract farms to phase them out.

Emissions

Smithfield has come under criticism for the millions of gallons of untreated fecal matter it produces and stores in the lagoons. In a four-year period in North Carolina alone, 4.7 million gallons of hog fecal matter were released into the state's rivers. Workers and residents near Smithfield plants have reported health problems, and have complained about the constant, overpowering stenches of hog feces.

The company was fined $12.6 million in 1997 by the Environmental Protection Agency (EPA) for 6,900 violations of the Clean Water Act after discharging illegal levels of slaughterhouse waste into the Pagan River in Virginia. Its facilities in North Carolina came under scrutiny again in 1999 when Hurricane Floyd flooded a number of lagoons holding fecal matter, and many of the hog farms that contracted with Smithfield were accused of polluting the state's rivers. Smithfield reached a settlement in March 2000 with the state of North Carolina, agreeing to pay the state $50 million over 25 years. The company agreed to donate $1.3 million to clean up, North Carolina State University would receive $15 million to research the treatment of pig waste, and the North Carolina Foundation for Soil and Water Conservation, Ducks Unlimited and the North Carolina Coastal Federation would receive grants.

Company response

Ralph Deptolla writes that the company responded to the criticism by creating new executive positions to monitor the environmental issues, and hired Dennis Treacy, a former director of the Virginia Department of Environmental Quality, as Executive Vice President and Chief Sustainability Officer. Treacy had previously been involved in the enforcement efforts against Smithfield. Deptolla writes that Smithfield also created an environmental management system (ESM), launching it in 2001 at its Murphy-Brown facilities.

In 2005, the company received ISO 14001 certification from the International Organization for Standardization for its hog production and processing facilities in the United States, with the exception of new acquisitions, and, in 2009, 14 plants in the United States and 21 in Romania received certification. Deptolla writes that 578 Smithfield facilities were ISO 14001-certified as of 2011. In 2006 its hog-production subsidiary Murphy-Brown reached an agreement with the Waterkeeper Alliance, once one of Smithfield's biggest critics, to adopt new measures to enhance environmental protection at the former's facilities in North Carolina. In 2009 the company said it had reduced greenhouse gas emissions at its plants by four percent since 2007, its processing emissions per 100 pounds of production by 62 percent, and its first-processing emissions per animal by 41 percent. Smithfield attributed the improvements to the divestiture of the beef group. In 2010 it released its ninth annual Corporate Social Responsibility report, and announced its appointment of a chief sustainability officer and two sustainability committees.

Use of antibiotics

Concerns were raised about the use by the company and its contractors of low doses of antibiotics to promote the pigs' growth, in addition to using antibiotics as part of a treatment regime. The concern was that the antibiotics were harmful to the animals and were contributing to the rise of antibiotic-resistant strains of bacteria. Smithfield said in 2005 that it would administer antibiotics only to animals who were sick themselves, or who were in close proximity to sick animals; however, in Concentrated Animal Feeding Operations all pigs are in close proximity to each other.

Operations in Mexico

The earliest confirmed case of the H1N1 virus (swine flu) during the 2009 flu pandemic was in a five-year-old boy in La Gloria, Mexico, near several facilities operated by Granjas Carroll de Mexico, a Smithfield Foods subsidiary that processes 1.2 million pigs a year and employs 907 people. This, together with tension between the company and the local community over Smithfield's environmental record, prompted several newspapers to link the outbreak to Smithfield's farming practices. According to The Washington Post, over 600 other residents of La Gloria became ill from a respiratory disease in March that year (later thought to be seasonal flu). The Post writes that health officials found no link between the farms and the H1N1 outbreak. Smithfield said that it had found no clinical signs of swine flu in its pigs or employees in Mexico, and had no reason to believe that the outbreak was connected to its Mexican facilities. The company said it routinely administers flu virus vaccine to its swine herds in Mexico and conducts monthly tests to detect the virus.

Residents alleged that the company regularly violates local environmental regulations. According to the Post, local farmers had complained for years about headaches from the smell of the pig farms, and said that wild dogs had been eating discarded pig carcasses left lying in the open. Smithfield uses biodigesters to convert dead pigs into renewable energy, but residents allege that they regularly overflow. Residents also feared that the waste stored in the lagoons would leak into the groundwater.

Packaging reduction

In 2009, Armour-Eckrich replaced an oversized rectangular package for smoked sausage with crescent-style packaging. The new design reduced the amount of plastic film and corrugated cardboard the company used by more than 840,000 pounds per year. In addition, several plants are switching to or testing a new bagging system that helps reduce plastic use. The John Morrell plant in Sioux Falls, South Dakota, piloted the system for Smithfield in 2010, reducing the amount of plastic required by about 40,600 pounds a year. Farmland Foods reduced the amount of corrugated packaging entering waste streams by more than five million pounds per year. Smithfield Packing reduced the size of its tubs for deli meat, using 17 percent less plastic for each one. The company also cut the size of the boxes that transport chicken frankfurters to its largest customer, eliminating about 20,000 pounds of corrugated material a year.

2010 Humane Society investigation

In December 2010, the Humane Society of the United States (HSUS) released an undercover video taken by one of its investigators inside a Smithfield Foods facility. The investigator worked for a month at Murphy-Brown, a Smithfield subsidiary in Waverly, Virginia. The Associated Press (AP) reported that the investigator videotaped 1,000 sows living in gestation crates. According to the AP, the material shows a pig being pulled by the snout, shot in the head with a stun gun, and thrown into a bin while trying to wriggle free. The investigator said he saw sows biting their crates and bleeding; staff jabbing them to make them move; staff tossing piglets into carts; and piglets born prematurely in gestation crates falling through the slats into the manure pits. The video was a 2012 Webby Awards winner in the "Public Service and Activism" category.

In response, Smithfield told the AP that it has "zero tolerance for any behavior that does not conform to our established animal well-being procedures." The company asked Temple Grandin, a professor of animal husbandry, to review the footage; she recommended an inspection by animal welfare expert Jennifer Woods. Smithfield announced on December 21 that it had fired two workers and their supervisor. At the company's invitation, the Virginia state veterinarian Richard Wilkes visited the facility on December 22. He told The Virginian-Pilot that Smithfield had been "very responsive and very responsible in how they've addressed the issues," and said he had not seen "any indication of abuse" of the pigs and was impressed by their demeanor. A Humane Society spokesman said that Smithfield had provided the vet "with a pre-announced, white glove tour."

Working conditions

Human Rights Watch (HRW) issued a 175-page report in 2005 documenting what it said were unsafe work conditions in the U.S. meat and poultry industry. In particular, the report said, workers make thousands of repetitive motions with knives during each shift, leading to lacerations and repetitive strain injuries. According to HRW, the workers' immigrant status may be exploited to prevent them from making complaints or forming unions. The report cited working conditions in Smithfield Foods as an example. According to the report, the speed at which the pigs are killed and processed makes the job inherently dangerous for workers. A Smithfield manager testified in 1998, during an unfair labor practices trial, that at the Tar Heel plant in North Carolina it takes between five and ten minutes to slaughter and complete the process of "disassembly" of an animal, including draining, cleaning, and cleaving. One worker told HRW that the disassembly line moves so fast that there is no time to sharpen the knives, which means harder cuts have to be made, with the resultant injuries to workers. Similar criticism has been made by other groups regarding Smithfield facilities in Poland and Romania.

Union dispute

The Smithfield Packing plant in Tar Heel, North Carolina, was the site of a long dispute between the company and the United Food and Commercial Workers Union (UFCW), which had tried since the early 1990s to organize the plant's roughly 5,000 hourly workers. Workers voted against the union in 1994 and 1997, but the National Labor Relations Board (NLRB) alleged that unfair election conduct had occurred and ordered a new election. During the 1997 election the company is alleged to have fired workers who supported the union, stationed police at the plant gates, and threatened plant closures. In 2000, according to Human Rights Watch, Smithfield set up its own security force with "special police agency" status under North Carolina law, and in 2003 arrested workers who supported the union.

Smithfield appealed the NLRB's ruling that the 1997 election was invalid, and, in 2006, the U.S. Circuit Court of Appeals found in favor of the NLRB. Smithfield and the workers at Tar Heel called on the UFCW to hold a new election, and the company agreed to pay half the cost of an independent observer, but the union argued that Smithfield would not allow a fair election and should have recognized card-check organizing. After a year-long series of public demonstrations, several lockouts, and a shareholder meeting that was disrupted by shareholders supporting the union, the UFCW called for a boycott of Smithfield products. In October 2007, Smithfield countered by filing a federal RICO Act lawsuit against UFCW. In October 2008, the UFCW and Smithfield reached an agreement, under which the union agreed to suspend its boycott campaign in return for the company dropping its RICO lawsuit and allowing another election. In December 2008, workers voted 2,041 to 1,879 in favor of joining the UFCW, bringing the 15-year fight to an end.

Justice Department penalty

In January 2009, Smithfield was assessed a $900,000 penalty by the U.S. Justice Department to settle charges that the company engaged in illegal merger activity during its takeover of Premium Standard Farms LLC in 2006.

Philanthropy

The Smithfield-Luter Foundation, established in 2002, is a non-profit organization that acts as the philanthropic wing of Smithfield Foods, dedicated primarily to providing scholarship opportunities to the children and grandchildren of Smithfield employees. It has given $5 million to Christopher Newport University in Newport News, Virginia, to establish the Luter School of Business, and $5 million to the University of Virginia Cancer Center in Charlottesville, Virginia. The Foundation also provides support for its "learners to leaders" programs, begun in 2006, in Sioux Falls, South Dakota; Green Bay, Wisconsin; Denison, Iowa; and Norfolk, Virginia.

Sports sponsorships

In 2012, Smithfield announced a 15-race sponsorship with Richard Petty Motorsports and driver Aric Almirola driving the #43 Ford in the NASCAR Sprint Cup Series. The sponsorship was then increased to 30 races beginning in 2014. Smithfield rotates its brands on the car, featuring Smithfield, Eckrich, Farmland, Gwaltney, and Nathan's Famous. It is also the official food of Richmond International Raceway in Henrico County, Virginia about an hour northwest of Smithfield HQ.

Governance