Two-and-a-half years ago, turkey processing company Carolina Turkey, based in Mt. Olive, N.C., purchased the Butterball turkey brand – at that time a brand of ConAgra Foods and the most widely recognized turkey name in the United States – to form Butterball LLC, the largest turkey producer in the world, for $325 million.
Capitalizing on the brand recognition of Butterball, Carolina Turkey succeeded in rebranding itself. Previously, the company was a commodity business selling whole birds and turkey products to supermarket retailers and foodservice operators. But a year before the October, 2006 sale, Carolina Turkey began changing the focus of its business to move toward becoming a value-added and branded business.
At the time of the sale and changing its name from Carolina Turkey to Butterball LLC, the company acquired more than 3,200 employees and five processing plants. Carolina Turkey had been a joint venture of Maxwell Farms and Smithfield Foods. As a result of the sale, Maxwell Farms has a 51-percent share in Butterball, while Smithfield holds the remaining 49-percent stake. In the middle of 2008, the company moved its corporate headquarters into a $12 million, 46,000 square-foot building in Garner, N.C., just outside Raleigh.
"Needless to say, we’re very pleased with the results of the acquisition," says Keith Shoemaker, CEO of Butterball. A native of Statesville, N.C., in the Tar Heel state’s foothills, Shoemaker began working in the turkey industry at the age of 13 and has spent his entire professional life in the poultry business. Now 58 years old, the Butterball executive believes the merging of the company and the brand brought together the strengths of two different kinds of operations to form the best and most efficient kind of company possible in the poultry industry.
"When you look back now at the acquisition of the brand, the steps we took to bring these two organizations together formed something new and different," Shoemaker points out. "We combined Butterball – a top brand in the poultry world and certainly the top turkey name in the world, period – and Carolina Turkey, not a brand name at all, but a big commodity producer. Butterball was a natural product and deli-branded, and Carolina Turkey was essentially heavily involved in private labeling. So there was no crossover, but instead a brand new organization," he says. "It was a great accomplishment, and we’re very pleased with how the company is operating," Shoemaker says.
The result is a company employing 6,000 people throughout eight plants and corporate office locations, processing 1.4 billion lbs. of turkey a year, with annual sales exceeding $1.4 billion. The company also operates breeder, growing and research farms, diagnostic labs, feed mills, hatcheries and has contract growing operations.
The Butterball chief believes there is an advantage to having the company headquartered in a single corporate office in Garner. All the employees in the headquarters were brought together to be involved in what turned out to be a smooth transition. As a result, some of the most-talented people in the industry are currently working together, officials say. The company continues to grow and become even better, they believe.
Shoemaker says one of the company’s great strengths is pursuing knowledge to make the best turkey products possible, and using the talents of its employees, including management, sales people, office staff and hourly employees.
He believes the team assembled in Garner and at the company’s other plant locations work well together. "Even when we do something wrong, like making a judgment that’s not the best, we learn from it," he says.
Has that happened in the Carolina Turkey-Butterball combination? "If you’re asking me if we got payback from bringing the two organizations together, the answer is ‘yes.’ For one thing, we’re now much faster decisionmakers," Shoemaker notes. "It was taking nine months to decide about (new) products; right now the time to decide about products is five months," he says. "I’d like to get it down to 90 days."
For example, the company has what Shoemaker calls an "intervention group" for analyzing and checking such disparate areas as quality assurance, research and development and consumer expectations.
Shoemaker says the purchase of the Butterball brand also forced the company to address cultural differences, which turned out to be a rewarding and learning experience. "I was a little concerned, to be honest about it," he says. "Carolina was a fast-moving company with everyone in one location. Change could take place overnight. Butterball was accustomed to a corporate-type, multiple-tier structure. When we joined the two companies together, we found it was going to take a lot more in the way of communication skills to accomplish what we wanted to do."
Coping with the economy
The economic recession is challenging the food industry, and Butterball is not immune. What is it doing to the company’s business? "I think today, people are spending what they need to spend, not necessarily what they want to spend, like they did before," he says. "In their lives and spending habits, people are moving back to the way their parents were raised. This is different from how it’s been for a long time – needs versus wants. Now people are thinking more about living within their means. Years ago, people were thinking more about ‘keeping up with the Joneses’ than today. So we and others in the food industry have to adjust to people’s changing habits."
Shoemaker cites a good example in the poultry industry: the deli department. "We sell turkey to retailers by the case. The retailers put it in the meat case and sell it to consumers by the pound. Today, the consumer asks, ‘What will a pound cost me?’ The demand for deli products is up. So we produce our products to meet whatever the demand is. If we can sell deli products for $5.99 a pound vs. $7.99 a pound, we end up doing much better, because of the volume."
The recession’s effect on other businesses Butterball works with has also impacted the company. Butterball’s plant in Carthage, Mo., had to make adjustments when the local rendering plant filed for bankruptcy and closed its doors this past month. But Shoemaker says the rendering plant shutdown hasn’t affected the Carthage plant operations. "We already had a back-up supplier taking our rendered products, so we really didn’t have a problem. The supplier stepped in the same day. Once the bankruptcy is settled, hopefully things can return to the way they were," he said.
Beyond holiday sales
Shoemaker doesn’t mince words about the company’s steadfast dominance during one holiday in particular. "There is no doubt about this fact: Butterball owns Thanksgiving. We have a great competitive advantage. The gatherings characterizing the holiday, the presence of families together, we own the holiday. But the relationship of the turkey industry to the holidays – Thanksgiving, Christmas and New Year’s – isn’t the same as it used to be. Today, we sell approximately one-sixth of our volume of turkeys during the holidays. Meaning most of our sales are spread throughout the rest of the year. It used to be 80-85 percent was sold during the holidays."
In order to succeed recently during an era of high costs and over-production, turkey processors have had to make changes in how they operate. "The chicken placements did a much better job than turkey placements did. They’re down 11 percent, where we continued with too many birds into the market. Chickens have a six- or seven-week lifetime, but a turkey’s life is 20 or 21 weeks. So we haven’t been able to change as quickly," he admits.
In Spring 2008, Butterball and other turkey processors decided production changes needed to be made to avoid overproduction. Many of those changes have now been accomplished, he says.
Another big issue pressuring the industry is food safety. As a result of major food-safety problems – including recent outbreaks of Salmonella from peanuts and pistachios – there is renewed attention being paid to food safety by consumers and Congress, as well as industry. Butterball is playing a major role in efforts to make poultry safer for consumers.
At its plants, the company does environmental searches for Campylobacter, which can cause illness in people who eat raw or undercooked poultry. The company is also working with the government to enhance its food-safety practices, especially in relation to Salmonella, which has been particularly problematic in the poultry industry. "We are participating in the FSIS Salmonella Initiative Program, a major effort to reduce Salmonella in the poultry and meat industry," Shoemaker says.
Bernard Shire is M&P’s Washington correspondent and feature writer based in Lancaster, Pa. With a background in editing and writing for daily news publications, he also works as a food safety consultant and writer for Shire & Associates.