Smithfield Foods

Smithfield Foods, Inc., is an American pork producer and food-processing company based in Smithfield, Virginia, in the United States, and an independent subsidiary of WH Group. Founded in 1936 as the Smithfield Packing Company by Joseph W. Luter and his son, the company is the largest pig and pork producer in the world. In addition to owning over 500 farms in the US, Smithfield contracts with another 2,000 independent farms around the country to raise Smithfield's pigs. Outside the US, the company has facilities in Mexico, Poland, Romania, Germany, Slovakia and the United Kingdom.Subsidiaries, Smithfield Foods
U.S. Securities and Exchange Commission. Globally the company employed 50,200 in 2016 and reported an annual revenue of $14 billion. Its 973,000-square-foot meat-processing plant in Tar Heel, North Carolina, was said in 2000 to be the world's largest, killing 32,000 pigs a day.

Then known as Shuanghui Group, WH Group purchased Smithfield Foods in 2013 for $4.72 billion. It was the largest Chinese acquisition of an American company to date. The acquisition of Smithfield's 146,000 acres of land made WH Group, headquartered in Luohe, Henan province, one of the largest overseas owners of American farmland.

Smithfield Foods began its growth in 1981 with the purchase of Gwaltney of Smithfield, followed by the acquisition of nearly 40 companies between then and 2008, including:
* Eckrich;
* Farmland Foods of Kansas City;
* John Morrell;
* Murphy Family Farms of North Carolina;
* Circle Four Farms of Utah; and
* Premium Standard Farms.

The company was able to grow as a result of its highly industrialized pig production, confining thousands of pigs in large barns known as concentrated animal feeding operations, and controlling the animals' development from conception to packing.Barboza, David (April 7, 2000)
"Goliath of the Hog World; Fast Rise of Smithfield Foods Makes Regulators Wary"
''The New York Times''.

As of 2006 Smithfield raised 15 million pigs a year and processed 27 million, producing over six billion pounds of pork and, in 2012, 4.7 billion gallons of manure. Killing 114,300 pigs a day, it was the top pig-slaughter operation in the United States in 2007; along with three other companies, it also slaughtered 56 percent of the cattle processed there until it sold its beef group in 2008.Seward, Robert A. (2009). "Regulations on Meat Hygiene in the USA," in Fidel Toldrá (ed.), ''Safety of Meat and Processed Meat''. Springer, p.&nbs
650
The company has sold its products under several brand names, including Cook's, Eckrich, Gwaltney, John Morrell, Krakus, and Smithfield. Shane Smith has been the president and chief executive officer of Smithfield Foods since July 2021.

History

Founding and early history

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 men were working for the meatpacker P. D. Gwaltney, Jr. & Co. when they set up the company; Joseph W. Luter Sr. was a salesman and Joseph W. Luter Jr. the general manager. Financing for the new company came from Peter Pruden of Suffolk and John S. Martin of Richmond. In an interview in 2009, Joseph W. Luter III described how the Luters would buy 15 hog carcasses a day, cut them up, box them, and sell them to small stores in Newport News and Norfolk. They built the Smithfield Packing Company plant in 1946 on Highway 10. By 1959 they had a workforce of 650.

Joseph W. Luter Jr. served as Smithfield's chief executive officer (CEO) until his death in 1962. He owned 42 percent of the company when he died. His son, Joseph W. Luter III, was at Wake Forest University at the time and joined Smithfield that year. Working in sales, he borrowed enough to buy a further eight-and-a-half percent of the shares, and in 1966 he became chairman and CEO. He told ''Virginia Living'' that the company was killing around 3,000 hogs a day when he took over, and 5,000 by the time he left in January 1970, while the number of employees rose from 800 to 1,400. In July 1969 he sold Smithfield to Liberty Equities for $20 million; they asked him to stay on, but in January 1970 they fired him. From then until 1975 he developed a ski resort, Bryce Mountain, in Virginia.

At the recommendation of its banks, Smithfield re-hired Joseph W. Luter III as CEO in April 1975 when it found itself in financial difficulties. At the time, according to Luter, the company had a net worth of under $1 million, debt of $17 million, and losses of $2 million a year. He said it even lost money in December 1974—holiday-ham season—which was "like Budweiser losing money in July". Luter's restructuring of the company is credited with its improved performance. He remained as CEO until 2006 and as chairman until the company was sold to WH Group in 2013. His son, Joseph W. Luter IV, became an executive vice-president of Smithfield Foods in 2008 and president of the Smithfield Packing Company, by then the parent company's largest subsidiary. He resigned in October 2013. At that point his stock was valued at $21.1 million and Joseph W. Luter III's at $30 million.

Mergers and acquisitions (1981–2007)

Joseph W. Luter III began his expansion of Smithfield in 1981 with the purchase of its main competitor, Gwaltney of Smithfield, for $42 million. This was followed by the acquisition of almost 40 companies in the pork, beef, and livestock industries between 1981 and around 2008,Calamuci, Daniel (Spring 2008). "Return to the Jungle: The Rise and Fall of Meatpacking Work", ''New Labor Forum'', 17(1) (pp. 66–77), p. 73. including Esskay Meats/Schluderberg-Kurdle in Baltimore, Valley Dale in Roanoke, and Patrick Cudahy in Milwaukee in 1984.

In 1992, Smithfield opened the world's largest processing plant, a 973,000-square-foot facility in Tar Heel, North Carolina, which by 2000 could process 32,000 pigs a day. Smithfield purchased John Morrell & Co in Sioux Falls, SD, in 1995 and Circle Four Farms in 1998. In 1999 it bought two of the largest pig producers in the United States: Carroll's Foods for around $500 million and Murphy Family Farms of North Carolina; the latter was at that point the largest producer. Smithfield settled the acquisition with 3.3 million shares of Smithfield Foods stock, $178 million in cash, and the assumption of about $216 million of debt.

Farmland Foods of Kansas City was added in 2003, as were Sara Lee's European Meats, ConAgra Foods Refrigerated Meats, Butterball (the poultry producer), Brown’s of Carolina, and Premium Standard Farms in 2007.

Smithfield sold its 49 percent share in Butterball in 2008 for an estimated $175 million. In 2009 Smithfield was assessed a $900,000 penalty by the U.S. Justice Department to settle charges that the company had engaged in illegal merger activity during its takeover of Premium Standard Farms.

The acquisitions 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 in 1999, the Agriculture Department described it as "absurdly big". According to agricultural researchers Jill Hobbs and Linda Young, writing in 2001, the acquisitions constituted a "major structural change" in the hog industry in the United States, leaving Smithfield in control of 10–15 percent of the country's hog production.Hobbs, Jill E.; Young, Linda M. (June 2001)
"Vertical Linkages in Agri-Food Supply Chains in Canada and the United States"
Research and Analysis Directorate, Strategic Policy Branch, Agriculture and Agri-Food Canada, p. 17. As of 2006 four companies—Smithfield, Tyson Foods, Swift & Company, and Cargill—were responsible for the production of 70 percent of pork in the United States.

2013 purchase by Shuanghui Group

On May 29, 2013, WH Group, then known as Shuanghui Group and sometimes also Shineway Group, the largest meat producer in China, announced the purchase of Smithfield Foods for $4.72 billion, a sale first suggested in 2009. At the time of the deal, China was one of the US's largest pork importers, although it had 475 million pigs of its own, roughly 60 percent of the global total. According to Lynn Waltz, the Chinese ate 85.3 pounds of pork per person in 2012, compared to 59.3 in the US.

Shuanghui said it would list Smithfield on the Hong Kong Stock Exchange after completing the takeover. On September 6, 2013, the US government approved Shuanghui International Holding's purchase of Smithfield Food, Inc. The deal was valued at approximately $7.1 billion, which included debt. It was the largest stock acquisition by a Chinese company of an American company.Woodruff, Judy (September 12, 2014)
"Who’s behind the Chinese takeover of world’s biggest pork producer?"
PBC Newshour. The deal included Smithfield's 146,000 acres of land, which made WH Group one of the largest overseas owners of American farmland.

For decades Smithfield had run its acquisitions as independent operating companies, but in 2015 it set up the "One Smithfield" initiative to unify them; Circle Four Farms in Milford, Utah, for example, became Smithfield Hog Production-Rocky Mountain Region. Ken Sullivan said in 2017 that he saw the company's future as a "consumer-packaged goods business".Hanacek, Andy (February 13, 2017)
"Smithfield Foods: Dawn of a golden age"
''The National Provisioner''.

Mergers and acquisitions (2016-)

In 2016, Smithfield purchased the Californian pork processor Clougherty Packing PLC for $145 million, along with its Farmer John and Saag's Specialty Meats brands. Smithfield also acquired PFFJ (Pigs for Farmer John) LLC and three of its farms from Hormel Foods Corporation. In August 2017 Smithfield acquired Pini Polska, Hamburger Pini, and Royal Chicken of Poland, and in September that year it announced that it would purchase two Romanian packaged-meat suppliers, Elit and Vericom. In 2019 it acquired Maier Com in Romania.

Operations

Employees, brands

In 2016, Smithfield had 50,200 employees in the United States, Mexico and Europe, and an annual revenue of $14 billion. In 2012 it opened a restaurant, Taste of Smithfield, in Smithfield, Virginia, located in the same Main Street building as its retail store, The Genuine Smithfield Ham Shoppe. As of July 2017, the company's brands included Armour, Berlinki, Carando, Cook's, Curly's, Eckrich, Farmland, Gwaltney, Healthy Ones, John Morrell, Krakus, Kretschmar, Margherita, Morliny, Nathan's Famous, and Smithfield."Smithfield Foods’ Saratoga Food Specialties Recognized as Yum! Brands’ Supplier of the Year"
GlobeNewsWire, July 20, 2017. In 2019 it introduced Pure Farmland, a plant-based brand of soy burgers and meatballs.Watrous, Monica (August 13, 2019)
"Smithfield Foods launching plant-based brand"
''Food Business News''.

In early 2019 Smithfield re-branded its food-service business, Smithfield Farmland, as "Smithfield Culinary." The company created advisory boards composed of chefs, established partnerships with culinary schools, and engaged in substantial research and development to improve its products. Smithfield Culinary uses the Carando, Curly's, Eckrich, Farmland, Margherita, and Smithfield brand names.

Vertical integration, contract farms

Smithfield began buying hog-farming operations in 1990, making it a vertically integrated company. As a result, it was able to expand by over 1,000 percent between 1990 and 2005. Vertical integration allows Smithfield to control every stage of pig production, from conception and birth, to slaughter, processing and packing, a system known as "from squeal to meal" or "from birth to bacon".

The company contracted farmers who had moved out of tobacco farming, and sent them piglets between eight and ten weeks old to be brought to market weights on diets controlled by Smithfield.Horowitz, Roger (2005). ''Putting Meat on the American Table: Taste, Technology, Transformation''. Baltimore: Johns Hopkins University Press, p. 134. Smithfield retained ownership of the pigs. Only farmers able to handle thousands of pigs were contracted, which meant that smaller farms went out of business. In North Carolina, Smithfield's expansion mirrored hog farmers' decline; there were 667,000 hog farms there in 1980 and 67,000 in 2005. When the US government placed restrictions on the company, it moved into Eastern Europe. As a result, in Romania there were 477,030 hog farms in 2003 and 52,100 in 2007. There was a similar decline, by 56 percent between 1996 and 2008, in Poland.

Joseph W. Luter III said that vertical integration produces "high quality, consistent products with consistent genetics". The company obtained 2,000 pigs and the rights to their genetic lines from Britain's National Pig Development Company in 1990, and used them to create Smithfield Lean Generation Pork, which the American Heart Association certified 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 Concentrated animal feeding operations (CAFOs). 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", according to ''The Washington Post''. These are referred to within the industry as anaerobic lagoons. They dispose of effluent at a low cost, but they require large areas and release odors and methane, a greenhouse gas.

Smithfield Foods states that the lagoons contain an impervious liner made to withstand leakage.Fainaru, Steve
"Mexicans Blame Industrial Hog Farms"
''The Washington Post'', May 10, 2009, p. 2. According to Jeff Tietz in ''Rolling Stone'', 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, and states that the color is "a sign of bacteria doing what it should be doing. It's indicative of lower odor and lower nutrient content." In 2018 it announced an "animal waste-to-energy" plan; the company said it would spend $125 million over ten years, along with Dominion Energy, to cover the lagoons in North Carolina, Utah and Virginia with "high-density plastic and digesters" to capture the methane gas and direct it into a local pipeline.

Pregnant sows

Smithfield said in 2007 that it would phase out its use of gestation crates by 2017. Pregnant sows spend most of their lives in these stalls, which are too small to allow them to turn around.Strom, Stephanie (February 13, 2012)
"McDonald's Set to Phase Out Suppliers’ Use of Sow Crates"
''The New York Times''. Pregnancies last about 115 days; the average life span of a sow in the United States is 4.2 litters. When they give birth, they are moved to a farrowing crate for three weeks, then artificially inseminated again and moved back to a gestation crate. The practice has been criticized by animal-welfare groups, supermarket chains, and McDonald's. Smithfield did not commit to requiring its contract farms to phase out the crates. Almost half the company's sows in the United States live on its roughly 2,000 contract farms.

In 2009, Smithfield said it would not meet the deadline because of the recession, but in 2011 it returned to its commitment, and to doing the same in Europe and Mexico by 2022. In January 2017 the company said that 87 percent of sows on company-owned farms were no longer in crates, and that it would require its contract farms to phase out crates by 2022.Murphy, Ryan (January 7, 2015)
"Smithfield Foods moves to end use of breeding crates on company farms"
''Daily Press''. As of January 2018, on company-owned farms in the United States, Smithfield confines pregnant sows in gestation crates for six weeks during the impregnation process. When pregnancy is confirmed, they are moved to pens within a group-housing system for about 10 weeks, then to a farrowing crate, then back to a gestation crate to be impregnated again. It uses two forms of group housing: in one system, 30–40 sows are kept in a pen with access to individual gestation crates; in the other system, five or six sows are housed together in a pen. In July 2017 Direct Action Everywhere filmed the gestation crates at Smithfield's Circle Four Farms in Milford, Utah. The FBI subsequently raided two animal sanctuaries searching for two piglets removed by the activists. In January 2018 Smithfield released a video of the gestation and farrowing areas on one of its farms.

San Jose, California plant

In 2020, Smithfield announced the closure of its plant in San Jose, California and the layoff of 139 workers from the site. Smithfield says it closed the plant due to the expiration of its lease and the decision of its landlord to sell. The local union that represented the plant's workers publicly questioned Smithfield's explanation.

California operations closure

In June of 2022, Smithfield announced the closure of its plant in Vernon, California, by early 2023, and also stated that it is "exploring strategic options to exit its farms in Arizona and California". The company cited the high costs for the company to conduct business within the state of California.

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.Lacey, Marc (April 28, 2009)
"From Édgar, 5, Coughs Heard Round the World"
''The New York Times''.Foley, Stephen (April 29, 2009)

''The Independent''. This, together with tension between the company and 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.Tuckman, Jo (April 29, 2009)
"Attention turns to La Gloria in search to determine swine flu source"
''The Guardian''. According to ''The Washington 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. Smithfield was using biodigesters to convert dead pigs into renewable energy, but residents alleged that they regularly overflowed. Residents also feared that the waste stored in the lagoons would leak into the groundwater.

Exports

Since its acquisition by what would become WH Group, Smithfield has partially retooled its plants to export meat for consumption in China. This effort has been at least partially driven by the epidemic of swine fever in China that has resulted in massive reductions in that country's pig population and pork production. One plant in Smithfield, Virginia slaughters about 10,000 pigs per day for export. Smithfield's ramp up of exports to China has occurred in the face of headwinds in the form of 62% tariffs designed to protect China's hog farmers, who largely have small operations. Pork industry trade groups claim that the United States could export twice as much pork to China if the tariffs were lifted.

Production volume

As of 2006 Smithfield raised 15 million pigs a year and processed 27 million, producing over six billion pounds of pork and, in 2012, 4.7 billion gallons of manure. Killing 114,300 pigs a day, it was the top pig-slaughter operation in the United States in 2007; along with three other companies, it also slaughtered 56 percent of the cattle processed there until it sold its beef group in 2008.

Lawsuits

In 2010, a jury in Jackson County, Missouri, awarded 13 plaintiffs $825,000 each against a Smithfield subsidiary, Premium Standard, and two other plaintiffs $250,000 and $75,000. The plaintiffs argued that they were unable to enjoy their property because of the smell coming from the Smithfield facilities.

In 2017, in Wake County, North Carolina, nearly 500 residents sued a Smithfield subsidiary, Murphy-Brown, in 26 lawsuits, alleging nuisance and ill health caused by smells, open-air lagoons, and pig carcasses. Residents said their outdoor activities were limited as a consequence, and that they were unable to invite visitors to their homes. Smithfield said the complaints were without merit. On August 3, 2018, a federal jury awarded six North Carolina residents $470 million in damages against Murphy-Brown LLC. The verdict included $75 million each in punitive damages, plus $3–5 million in compensatory damages for loss of enjoyment in their properties. A state law capping punitive damages lowered that amount to $94 million. The plaintiffs had filed suit for "stench odor, truck noise and flies generated near their homes on Kinlaw Farm in Bladen County