Smithfield looks to the future

by Bryan Salvage
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SMITHFIELD, Va. – During Smithfield Foods’ fiscal 2012 second-quarter earnings conference call on Dec. 8, Larry Pope, president and chief executive officer, discussed the company’s recent successes and improvements plus provided a sneak preview into some plans for the future.

Smithfield’s International Group, led by Joe Luter IV, is doing an excellent job of going beyond just the trading business to building customer relationships on the other side of the trade, Pope said. “This is helping us both in Asia and in North America,” he added.

When tariffs came down shortly in South Korea during the summer of 2011, Smithfield’s business in that country increased dramatically. This demonstrates the opportunity Smithfield has as the Korean Free-Trade Agreement continues to come into effect, Pope said. This company and industry can compete very well in the international markets “as [long as] we're given the opportunity to do so,” Pope said.

Pope reported that for the first time in a long time, Smithfield’s Packaged Meats segment experienced increased volume. Although that volume is only 1 percent growth overall, that’s not the story, Pope said – the story centers around the improvements made in the company’s branded business.

“Our brands and core brands are up 5 percent,” Pope added. “In many cases, the categories we compete in are not growing or are down. In retail, several of our major brands [Smithfield, Farmland Armour and Curley’s] are up double-digits in volume.

“We don’t live in the cracker, candy and cookie neighborhoods where everything’s plush and lawns are green,” he continued. “We live in the meat district. Our competition is tough. And [it has a] good cost structure. Our competition knows how to play the game.”

But Smithfield is gaining knowledge on how to better compete, Pope said. The company is in a position now where it has good brands priced at the right price throughout the marketplace. “We’re not trying to be the highest-priced guy in the grocery store,” he added. “We’re trying to be the guy who sells to the everyday consumer. We think we’ve got the brands that are priced right for our consumer, we understand now how to talk to our customers and we realize we’ve got to deliver innovative products and have a competitive cost structure.”

Pope reminded participants the company is breaking ground on a new hot dog and lunch meat plant in N. Carolina that should be up the first quarter of calendar 2013. “It’s going to be a very well positioned plant, close to raw materials [and innovative]. We’ve got the capacity and we’re going to be in the position to lower the cost of producing those products pretty dramatically.”

Smithfield Packing Company Inc., a subsidiary of Smithfield Foods, Inc., announced in early October it planned to shift production from its Portsmouth, Va., plant to Kinston, NC, and permanently close the Portsmouth facility in early 2013. The Portsmouth plant produces hot dogs and lunchmeat.

Pope said Smithfield will soon announce it has built a new innovation center in Smithfield, Va. “It’s not some Taj Mahal,” he added. “We don’t have big, big, money invested in this. We took a smaller plant, renovated it and built an innovation center around it.”

Pope teased that future company innovations won’t be just in Packaged Meats. “We’ve got some good products and new products that will [feature] packaging [innovations] and new seasonings coming out on the Fresh Meat side,” he said. “Our marinated fresh-pork program, which we count in Fresh Pork not Packaged Meats, is doing extremely well. This is a nice, consumer-oriented, consumer-ready product that has a lot of potential for further growth. I am excited.”

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