Processor to focus on packaged meat segment

By staff reporter

- Last updated on GMT

Related tags: Food industry, Meat, Industrial agriculture, Livestock

Pork processor Smithfield Foods is closing six plants and transferring production to other facilities in a move it claims will enable it to concentrate on growing its higher-margin packaged meat business.

The pork group said it hopes to improve operating efficiencies through the restructuring move, and it said that it expects the plan will result in annual cost savings of approximately $125m by 2011.

“Combined with the several plant closures we have made over the last three years, this restructuring should improve operating rates dramatically, allowing us to shed low-margin business,"​ said the company’s CEO, Larry Pope.

Smithfield, like other US meat processors, has already seen its profits fall due to a slump in demand and an oversupply of meat on the market, following on from the hike in raw material and energy costs last year.

Last month, in a move reflecting these meat industry trends, Tyson Foods announced the departure of its chief executive, Dick Bond.

The resignation followed the decision in December by the chief executive of Pilgrim's Pride, the largest US poultry producer, to step down under pressure from board members days after the company filed for bankruptcy.

And Moody’s predict that the US food industry as a whole faces a negative and worsening outlook, with falling demand for key brands and bankruptcies.

The credit ratings, research and risk analysis company reports in its US Food Industry: Six-Month Update​ that the significant fixed costs of packaged-food companies and falling sales volume are likely to put a dent in companies’ cash flow and profitability, according to seekingalpha.com.

The company considers the US food industry as a combination of two segments: the packaged-food companies and the meat processors.

Of the 34 companies listed by seekingalpha.com, 10 have negative outlooks, including Hershey, Sara Lee, Tyson, Smithfield, Advance Food Company, Wm. Bolthouse Farms, Dole, Chiquita, Eurofresh, and Best Brands.

Related topics: Processing & Packaging

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