Perdue Farms

How Perdue Farms became the number-one premium chicken product brand in the U.S.

By Linda Strowbridge

Photography by Rachel Smith

Randy Day clearly remembers the day in 1968 when his father pulled the family car onto Woodland Road in Salisbury, MD, pointed to a house and declared, “Frank Perdue lives here.”

Day, who was in junior high school at the time, was perplexed.

“Who’s Frank Perdue?” he asked.

“Well, he runs this chicken company,” his father, a minister, replied. “And he is trying to brand chicken! We have got to watch this, son. It is going to be so fascinating.”

Although he didn’t plan to, Randy Day — now president of Perdue Foods LLC and a 35-year employee of the company — has been watching ever since.

For more than four decades now, family-owned Perdue Farms Inc. has pursued a dicey branding mission: Take probably the most common protein in America and a ubiquitous product throughout American markets, and turn it into a sufficiently distinctive brand to claim a hefty market share and even command price premiums.

It has required the company to invest heavily in research and development, launch numerous product lines and entirely new subsidiaries, make daunting investments in vertical integration, tackle priorities never imagined by company founders, and occasionally weather strident criticism from competitors, farmers and animal rights activists.

Yet today, Perdue Farms is the number-one premium chicken products brand in the U.S., with customers across the nation and in 100 other countries and annual sales topping $4.6 billion. Furthermore, company executives say Perdue is poised to claim the leadership position in the biggest trend — and market opportunity — in the animal protein industry.

THE UPS AND DOWNS OF BRANDING

Jim Perdue says branding was probably the single most important thing that his father, Frank, did to drive the growth of Perdue Farms.

“It took a lot of foresight, a lot of risk-taking, and it changed this industry,” says Jim Perdue, now chairman of Perdue Farms.

Born from the family farm in 1920, the company evolved from a supplier of eggs to a supplier of layer chicks, then meat chicks, under its founder, Arthur Perdue. When Frank Perdue took over in the 1950s, the company evolved once more and began contracting local farmers to raise its chicks, then selling the full-grown birds to processors at auctions. Passionate about product quality, Frank Perdue began making investments in grain reserves, feed mixing and soybean processing. In one of his iconic commercials, Perdue later claimed that a diet of custom grains and spring water ensured that his chickens ate better than most people did.

The financial realities of chicken auctions, however, began to challenge Perdue’s business plan. Competition got greater, prices slipped lower and profit margins shrank. So in 1968, Perdue embarked on the huge task of completing its vertical integration, opening its first chicken processing plant and plunging headlong into the mission to brand the Perdue chicken.

Frank Perdue’s efforts to craft the brand were meticulous.

“Before he opened that first processing plant, he spent six months in New York City. He visited mainly butcher shops because he felt butchers were probably the best purveyors of chicken and he wanted to know what was important to them,” Jim Perdue says.

Returning with a notebook packed with observations, Frank Perdue drafted a 25-item list that would define the nature and quality of a signature Perdue chicken, including standards for feather removal, skin quality, accurate weights, ice coverage and box labeling.

“Quality became a mantra in the company,” Perdue says. “Every worker in every plant would know their quality score for the day. It was an incredibly intricate system of measures by department, by plant, by shift.”

The company analyzed its performance in the market, regularly measuring its percentage of bruises, cuts, feathers and other imperfections compared to its competitors. It conducted weekly tracking studies of consumer behavior and opinions. Frank Perdue, who ended up in Tom Peters’ In Search of Excellence because of his “customer intimacy,” steadily solicited feedback from clients about Perdue products and even filmed a commercial urging customers to send him their complaints.

“To this day, we have a meeting once a month where the recordings of complaints are played” and where relevant Perdue employees are expected to explain how the problem occurred and how it is being permanently corrected, Perdue says.

Quality benchmarking, however, was just the beginning of Perdue’s branding efforts. Realizing that consumers preferred their chickens to have yellow skin (a natural result of chicken feed that includes corn), Perdue modified the diet of its chickens, preserving the existing corn feed and supplementing it with marigold flower from Mexico to enhance the natural yellow coloring.

Perdue became the first company in the industry to place nutritional labeling on its products and get its chickens certified as USDA Grade A. The company’s quest for unique selling features occasionally led it down an ill-advised path, such as the hurried effort to create the lowest-fat chicken on the market in order to best a competitor with a similar plan. To achieve the low-fat rating, Perdue had to increase the protein content of the feed and remove the “fat pads” at the back of each chicken — the latter a tricky feat that required assorted experiments by hand and with automation.

The company, however, achieved the fat rating, hurriedly produced an advertising campaign and, without ever conducting any consumer research, rushed its first super-low-fat chickens to market.

“At the end of the day, the consumer wasn’t willing to pay a penny more for it,” Perdue says. “They looked at chicken as low-fat to start with. One consumer said in a letter that it would be like my string bean company coming out with string beans that are lower fat than the competitor’s.”

Perdue, however, met one other large and highly relevant consumer preference, namely Americans’ love of breast meat.

“The chicken of the day had a very poorly filled-out breast, so Frank Perdue developed his own breed back in the 70s,” Perdue says, which included selective breeding to get chickens to grow bigger breasts over many generations and several years. “We advertised 15 percent more breast meat than our competition and they hated that. They would take us to task with the Federal Trade Commission and they would have our chicken tested and, usually, we were 17 to 22 percent more breast meat.”

CHANGE IN A NEW ERA

While putting out a quality product was crucial to establishing a successful brand, it wasn’t Perdue’s only effort to distinguish itself as a company people would want to buy from.

When Jim Perdue joined the company in 1983 after a decade working as a marine biologist, he began broadening efforts to refine company operations to closely reflect Perdue’s corporate culture and further strengthen the Perdue brand.

Perdue, he says, was “somewhat old school” in how it managed people. “But when you work in a [processing] plant, you realize you are not really in the chicken business. You are in the people business.”

Company leadership dug into new efforts to modernize management styles to optimize productivity, morale and implementation of company values. Even little initiatives, he says, began to have impressive results.

Perdue, for example, created the Good Egg award. Designed to reward great work and also push managers to focus more on excellent employees than problem employees, the program required each facility manager to catch an employee doing some particularly good task each week. As recognition, employees would receive a Good Egg plaque, which they could later redeem for a free lunch. As hoped, the program began to change management styles and bolster employee morale and performance. The problem was the free lunches. Eager to show off their awards to their families, employees
took the Good Eggs home and kept them rather than redeem them for food. Perdue soon changed the program to ensure employees could keep their awards and dine free too.

Embracing a 3-P statement of corporate goals — People, Products and Profitability — Perdue implemented worker safety programs that became national models. It also opened wellness centers beside its processing plants, where employees could see a wide range of physicians during shifts without being docked for any time away from work.

“We were also sustainable before sustainability was cool,” says Steve Schwalb, vice president of environmental sustainability and a 32-year employee with Perdue.

The company — whose corporate culture includes the statement “We believe in responsible food and agriculture” — had long tracked and sought ways to minimize its water use, energy use and environmental impact, Schwalb says.

But in recent years, Perdue Farms made public steps to beef up its sustainability efforts. In 2012, it released its first corporate responsibility report. In 2013, Perdue expanded its bedrock 3P goals to include a fourth P, namely Planet. The company created environmental scorecards to assess the performance of each facility, set annual goals for improvements and track progress. It made environmental improvements a core part of its bonus program. And in 2015, Perdue plans to expand the environmental scorecard program from the current 19 facilities to a total of 40.

The efforts, Schwalb says, are generating substantial results. “In general, we have seen 3- to 4-percent water use reductions and we have reduced greenhouse gases 9.5 percent compared to [the 2008] baseline.”

The company has also implemented green technologies, including LEED building systems at its Salisbury headquarters, two solar photo-voltaic fields and a methane-to-energy system at a Kentucky facility. The company has also invested over $50 million in a waste facility in Delaware, known as Perdue Agri-Recycle, that converts poultry litter to pelletized, organic fertilizer.

While most would think that chicken litter is a good fertilizer for the planet, the raw manure is a major source of nutrient loading in the Chesapeake Bay, which is harmful to water quality and the bay’s wildlife. Perdue’s plant provides farmers a place where they can safely get rid of their excess chicken litter.

“Our sustainability program supports Perdue as a company … I am a true believer that there isn’t anything in sustainability that you can’t find good economic value in,” Schwalb says. “I think it also helps give credence to our statement that we produce great products for you. The definition of great includes a lot more than just it tastes good and it is safe. It also includes the fact that it is produced in a way that’s sustainable and responsible.”

FOCUS ON THE FUTURE

Every now and again, however, a great product would surprise even Perdue’s veteran leaders.

Reacting to growing consumer interest in no-antibiotics-ever (NAE) chicken, Perdue embarked on research efforts to see if it could mass-produce the kinds of chickens that were coming almost exclusively from small, specialized farms. In 2007, with no fanfare and not even a Perdue label, the company introduced a whole new brand. Centered around family farms in western Kentucky, Harvestland offered a line of NAE, veggie-fed chicken that today promises to let consumers “eat like your ancestors.”

“It took off with no advertising,” Jim Perdue says. “It went nationwide with Walmart initially and now it is a $200-million brand” that also includes NAE turkey and pork products.

Furthermore, Harvestland started besting Perdue. During blind taste tests at Perdue’s Innovation Center, consumers expressed a strong preference for the flavor of Harvestland chicken breasts over the signature, branded Perdue breasts. Further research suggested that the vegetarian diet was producing a superior flavor profile in the chicken.

“We want to be a learning organization … so we started learning more about how to grow chickens antibiotic-free and veggie-fed,” Perdue says, adding that the majority of what it feeds its chickens is made from locally sourced corn and soybeans. However, the reality of American agriculture is that 80 to 90 percent of crops are grown from genetically modified seed, making it an uphill battle to feed its chickens non-GMO products.

In total, the NAE initiative took 12 years to complete, but by 2014 Perdue converted its own products to veggie-fed and reduced the number of chickens exposed to antibiotics from 100 percent to less than 5 percent — a move that garnered new interest among American consumers and the food service industry.

“This is exactly the kind of thing that Frank would have done,” says Randy Day. “Frank was always passionate about how are we going to separate ourselves from the rest of the pack … The most success we are having today in the food service industry is due to this company commitment to go antibiotic-free. There is a huge, emerging market demand and we have found our niche.”

Reflecting on the wave of change being implemented at Perdue, including the NAE, organic and sustainability efforts, Jim Perdue concedes, “We probably should have made it 10 years ago. I think we rested on our laurels, on Dad’s laurels, a little too long. We weren’t changing quickly enough, so I feel really good about the changes we are making now.”

In 2011, Perdue heightened that commitment to change when it acquired Coleman Natural Foods. A pioneer and leading producer in NAE and organic proteins, Coleman brought additional expertise and market niches to Perdue Farms. It also infused new energy and a new edge into an established company.

Mark McKay, formerly the CEO of Coleman Natural Foods and now the executive vice president of sales and marketing for Perdue Foods LLC, describes Coleman’s business style as “more aggressive in the marketplace” than Perdue. The merger with Perdue, McKay says, has given Coleman an opportunity to become more sophisticated, more strategic and a stronger market presence. In return, the merger has given Perdue an infusion of “entrepreneurial spirit and take-no-prisoners, get-it-done kind of attitude.”

“The challenge for us now is to rev the engine back up and get back [to being] aggressive in the marketplace,” he says.

But Perdue, he insists, has all the tools needed to hone its brand further and claim even greater market share.

Perdue’s commitment to innovation, he added, has already made the company an industry leader in NAE processes. It has become “the first call” for food service providers, and some public school systems, who want to switch to NAE proteins. That, he says, is opening up huge growth opportunities for the family chicken business that started in a Salisbury farmhouse. CEO

 

Linda Strowbridge is a freelance writer based in Owings Mills, MD. Contact us at editorial@smartceo.com.

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BUILDING A BRAND

Growing a company entails countless challenges, including operations, financing and sales, but often the hardest to overcome are those presented by industry peers.

Perdue periodically felt the wrath of the chicken industry. When Jim Perdue was 19, he accompanied his father Frank Perdue to an industry convention in New Jersey. Entering a meeting room, Frank Perdue was quickly set upon by half a dozen men, who accused him of degrading and jeopardizing the industry through his advertising campaigns and other unconventional initiatives.

“I was startled,” Perdue recalls. “After we left, I said to him, ‘That was pretty bad.’ He said, ‘No, that was fun. That’s how you lead. That reinforces that whatever we are doing is the right thing. We are under their skin and that’s good.’ The truth of the matter is, I think what he did was raise the bar for the entire industry on quality and on service.”

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