Perdue

Executive Summary

Purpose of the Report

The purpose of this report is to 1) analyze Perdue Farms as a poultry producer, 2) to make an analysis of the industry and Perdue's competitors, 3) to perform a SWOT analysis of Perdue Farms, 4) to identify key issues, and 5) to make recommendations.

Analysis Summary

Our analysis shows that Perdue Farms is performing well in the poultry industry. They have a brand name that many people recognize as a seal of quality. They lead the industry in research and development, in the area of environmental, biological, and genetic research. Perdue Farms lacks market coverage because they only cover the eastern half of the United States, and a few foreign countries. They also lack market share in the foodservice segment of the market. Their information and distribution system was recently upgraded and it created a source of competitive advantage for them.

Key Issues and Recommendations

We recommend that Perdue Farms implement the following actions:

* Maintain and improve the current market share in the consumer retail segment. They will need to expand their market coverage into the western half of the United States. They also need to create more meal replacement items.

* Expand in the foodservice sector. Perdue's market share in the foodservice sector is not proportional to its overall market share. Foodservice market is important because it is where all the growth will come from.

* Environmental problems should be solved. This will eventually hurt them if it is not taken care of soon.

* International expansion should be pursued, but it should be done with caution, as there are many uncertainties in the international market.

History

Perdue was first started by Arthur W. Perdue in 1920, when he left his job with Railway Express and entered the egg business full-time near the small town of Salisbury, Maryland. Even as a small business, the emphasis was put on quality. By the 1940s, Perdue Farms was already known for quality product and fair dealing in a tough, highly competitive market. The company began offering chickens for sale when Arthur saw that the future lay in selling chickens, not eggs.1

In 1950, Frank Perdue took over leadership of the company. He started implementing vertical integration, operating his own hatchery, starting to mix his own feed formulations and operating his own feed mill. Also in the 1950s, they started to contract with others to grow chickens for them. By furnishing the baby chickens and the feed, they could better control the quality. In the 1960s, Perdue Farms continued to vertically integrate. They built their first grain receiving and storage facilities, and Maryland's first soybean processing plant. The company entered the poultry processing business when they bought a Swift and Company processing plant in Salisbury. Quality continues to be the focus point. Frank Perdue actually tossed out chickens that state graders passed as grade A and which he didn't think had sufficient quality. At one point, Perdue chickens were shipped to the market packed in ice, justifying the company's advertisement at that time that it sold only fresh, young broilers. In the 1980s, Perdue Farms expanded southward into Virginia, North Carolina, and Georgia. It also began to diversify by acquiring other producers such as Carroll's Foods, Purvis Farms, Shenandoah Valley Poultry Company and Shenandoah Farms. During the 1980s, the firm decentralized under a consulting firm's recommendation. But the decentralization had created duplication and enormous administrative costs. In 1988, the firm experienced its first year in the red. The company refocused, concentrating on efficiency of operations, improving communications throughout the company, and paying close attention to detail to pull the company together.1

Jim Perdue, Frank's son, took the leadership role in 1991. More formally educated, Jim focused on operation, infusing the company with an even stronger devotion to quality control and a bigger commitment to strategic planning. Under Jim Perdue's leadership, Perdue Farms expanded into Florida, Michigan and Missouri. The international business segment was formalized serving customers in Puerto Rico, South America, Europe, Japan and China.1

Goals and Implementation

Perdue's vision of the future is to be the leading quality food company with $20 billion in sales in 2020. They have several goals to help them realize their vision. Perdue's several goals are to: provide a superior quality product, offer their consumers a portfolio of trusted food and agricultural products, rank Perdue Farms Inc. among the best places to work, expand in the domestic retail and food service area, and expand internationally.

Superior Quality Product

Penned by and unchanged from Frank Perdue Farms Inc.'s original wording, the Perdue Farms Inc. Quality Policy is, "We shall not be content to be of equal quality to our competitors. Our commitment is to be increasingly superior. Contribution to quality is a responsibility shared by everyone in the Perdue organization."2

From the first batch of chickens that it processed, Perdue's standards were higher than those of the federal government. One anecdote that proves this is that told by one of the state graders who was concerned that he had rejected too many chickens as not being Grade A. Upon finishing his inspections the first day, he turned to see Frank inspecting the birds that the inspector had previously approved. To his astonishment, Frank placed them all in the reject pile. 1

Frank had refused to have his broilers frozen for shipping. He made sure that they were packed in ice for shipping to maintain freshness. Today some still are shipped that way, when possible. 1

Frank used selective breeding to produce a chicken with more white breast meat than the typical chicken.(Rumor has it that his chickens were so envied by the competition that they have been stolen on occasion to improve competitor flocks.) 1

One of Perdue's first strategies was implemented when he saw that Maine chicken growers could charge more "because their birds' skin had a yellow hue," so "he added marigold petals and corn gluten to his flocks' diets, and pitched them as more tender and well-fed than his competitors' chickens." Perdue thought that if he could emulate the competition in Maine by making a more yellow chicken, he could