Wayne Farms--Building on a Successful Strategy
Like most of the poultry
industry, Wayne Farms has faced many challenges this year, including
continued overproduction in the U.S., ongoing trade disputes, and
increased competition abroad. These developments have forced market
prices down and made for a very tough 2003.
Nevertheless, the company has also made significant progress, even in this difficult environment.
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| Wayne Farms CEO Elton Maddox |
It has expanded further
processing operations, thanks to the new line at Decatur, and extended
several major contracts. It has also acquired both an additional plant,
at College Park, and a number of important, high-potential customers.
As Wayne Farms CEO Elton
Maddox explains, College Park will help the company to increase
value-added production and reach its target of 10% annual sales growth.
It also provides the chance to work with three highly successful
companies in the national accounts segment, a growing $5.5 billion
market for U.S. poultry.
This is also an area in
which Wayne Farms has low market share; it thus offers a particularly
strong opportunity for growth and expansion. "There are companies in
this segment that are growing at close to 15% a year--Chick-fil-A is
one example," says Elton, "and these are clearly the kinds of companies
we'd like to work with."
In addition to building its
national accounts business, Wayne Farms will continue to focus on
customers in the food-service and industrial segments.
In the latter, Elton notes
that the company sees new opportunities in refrigerated foods, such as
Oscar Mayer's "Carving Board" line, an area that has become
increasingly popular with today's consumers. At the same time, the
company will continue to develop its relationships with Campbell's,
Heinz, and other large industrial accounts--which have long been the mainstay of Wayne Farms' business.
photo courtesy Chick-fil-A |
A new Wayne Farms customer,
Chick-fil-A today has more than 1000 locations and is one of the fastest-growing restaurant chains in the U.S. |
This type of relationship obviously
requires certain kinds of customers, and for this reason, Wayne Farms
focuses on those with high volume and strong potential. At the same
time, the company limits its dependence on individual accounts by
adopting a portfolio approach.
It also reduces risk, and
gains experience in new areas of business, through the use of pilot
projects. Through a 1999 project with Gordon Food Service, for example,
Wayne Farms developed expertise that it was later able to apply to
other food service accounts. It also significantly expanded its work
with Gordon's, and last year became the first poultry supplier to
receive the VIP (Vendor Involvement Process) Award in Gordon's
top-rated Master's Category.
Over time, such efforts
have helped the company to add new capabilities and develop strong,
long-term relationships with a wide range of customers.
This approach is especially
well suited to current industry conditions, both in the United States
and abroad. As Elton notes, trade disputes are likely to continue,
despite the resolution of the Russian boycott, while per-capita
consumption in the U.S. has leveled off at about 220 lbs. of meat,
including 80 lbs. of poultry, per year--that is, more than 4 lbs. of
meat and 1.5 lbs. of chicken per week.
Further increases thus appear unlikely, especially when many people eat smaller amounts or none at all.
In this environment, the
solution for Wayne Farms, as for other poultry companies, is not simply
to move beyond commodity production. "This is a bit of a
misconception," says Elton, noting that most products--including any type of further-processed chicken--inevitably become commoditized over time.
Instead, the goal must be
continuous improvement, an ongoing effort to break parity. "We have to
make sure we're adding value in any way we can, not just in products,
but also in services," he says.
To do so, the company must
partner along the value chain and work closely with companies that have
brand presence and customer loyalty.
"These partnerships are
absolutely critical to our business," he notes. "When we just stay at
the buy-sell level, we never get to prove our worth or show the
customer what we can do. It's always overridden by price." On the other
hand, by establishing partnerships, the company gains a better
understanding of its customers, and is able to provide them with
superior service and quality. In this way, it is also able to share in
their success.
Of course, this type of
customer focus also places significant demands on the organization.
This is especially true when markets are down. "The company is under
more pressure this year and we do have to be more cost-conscious on a
day-to-day level," says Elton, "but we also have to provide the right
motivation and keep people looking toward the future."
For this reason, the
College Park facility is a particularly important step, not only as an
additional plant, but also as a sign of the company's progress and
future direction.
"This really says 'we're
going to grow and move forward'" says Elton, adding that it's also a
strong indication of support from ContiGroup and its shareholders.
"There's nothing that the company could have done that would have sent
a stronger, more important message to our ten thousand people."
Ultimately, Elton sees a
long-term approach as the key both to shareholder value and to the
development of a vibrant, innovative business. On the one hand, this
means choosing the right business partners, and making sure that they
are leaders in their segments.
It also means having the
capacity (and the capital) to take on new business--an often
challenging requirement given that many customers expect the company to
have the required capacity on hand before signing a long-term agreement.
Finally, and perhaps most
importantly, the strategy requires the right people--people with strong
skills who are also ready to take the initiative and try new
approaches.
"We've come a long way in
all these areas," says Elton, "but we can go much further. We have to
move faster than in the past and become a better learning organization.
We also need everyone, not just top management, to think every day
about how they can add more value to this organization--that's the
bottom line."