Perdue Farms

Justin Starnes

MAR 4803

September 28, 2006

Perdue Farms, Inc.

Perdue Farms, Inc. has been a privately held family owned company since 1920. Over the years Perdue has become vertically integrated in order to be more competitive and maintain financial stability. Perdue's objective is to be the leader in broiler and related poultry products in the industry. They strive to maintain quality and constantly improve efficiency and service. Perdue Farms Inc. has a mission to provide the highest quality poultry and poultry related products to retail and food service customers. They want to be the recognized industry leader in quality and service, providing more than expected from their customers, associates, and owners.

1) Perdue Farms Target Market -consumers who are relatively price-in-sensitive and demand a good quality product.

2) SWOT

a. Competition - 53 integrated chicken broiler companies account for 99% of the ready-to-cook chicken. Among these 53, 20 of the companies make up 80% of production. Concentration has been fastest growing among the Nation's top four producers which account for 42% of the market share

i. Tyson Foods, Inc., ranked #1, sold 88.25 million pounds of chicken in 1995

ii. Gold Kist, Inc., ranked #2, sold 44 million pounds of chicken in 1995

iii. ConAgra, Inc., ranked #4, sold about 38 million pounds of chicken in 1995

iv. Perdue Farms, Inc., ranked #3, sold about 43 million pounds of chicken in 1995

b. Nature, extent of demand - high

i. The U.S annual per capita consumption of poultry has risen dramatically during the past 40 years from 26.3 pounds to almost 80 pounds in 1990.

ii. Analysts say that the growth is largely the result of consumers moving away from red meat due to health concerns and the industry's continued development of increased-value products.

c. Stage of product life cycle - maturity

i. Continue to defend market share and maximize profits.

d. Skills of the firm (Strengths)

i. Technologically advanced, chickens have 20% more breast meat.

ii. Environmentally concerned about waste and prevention

iii. Great social responsibility, code of ethics

iv. Birds are fed organically with no additives.

v. Management Information System (MIS) is efficient and eliminates future problems.

vi. Diverse product line including chickens, hens, turkeys.

vii. Excellent research and development department that includes 25 employees and specialists ranging from avian science, microbiology, genetics, and nutrition.

1. As a result, Perdue growers have the best vaccination program and more diseases resistant chickens than competitors.

e. Financial Resources (strength)

i. Perdue Farms revenues for 1994 was estimated to about $1.5 billion, net profits at $50 million, and the number of associates at 13,800.

ii. They bought Showell Farms, Inc. in January 1995 which should boost revenue to $2 billion and the number of associates to about 20,000

iii. The firms' compound sales growth rate has been slowly decreasing during the past 20 years, mirroring the industry, because of market saturation and overproduction.

1. Perdue has compensated by getting more efficiency from its associates; for example, 20 years ago, a 1% increase in associates result in a 1.3% increase in revenue. Today, a 1% increase in associates results in a 2.5% increase in revenues.

f. Distribution Structure (Strength in terms of Quality)

i. From the beginning, Frank Perdue refused to permit his broilers to be frozen for shipping, a process that results in loss of flavor when cooked. Instead, Perdue chickens were (and some still are) shipped to market packed in ice.

1. Because of this, Perdue chose its primary markets to be those that were densely populated towns and cities on the East Coast.

ii. Since they are vertically integrated, they manage every detail from breeding, hatching, feeding, caring and processing. They also distribute via their own trucking fleet.

g. Threats

i. The price of chicken is at an all time low and several companies have started to experiment with other kinds of meat and to focus on boneless parts of chickens.

1. This is a threat because other companies could develop something first and gain more market share over Perdue.

ii. Competitors sell frozen chickens for less money

iii. Their cost to raise chickens is higher

iv. Can they gain market share in other areas of the United States before other companies?

h. Other weaknesses

i. Only ship by truck so their shipping radius is limited

ii. Lack of long term planning for future changes

iii. Only sell fresh chickens (their strategy for quality)

i. Opportunities

i. Consider other densely populated areas to move into and attempt to steal market share.

ii. Research and Develop new product lines.

iii. Increase in healthier eating habits

iv. Increase sales