Atlanta-based Gold Kist Inc., the nation’s third-largest chicken processor, and until October 2004 a farm cooperative — now belongs to anyone willing to buy a piece of the company on the open market. D.W. Brooks, a young agronomy instructor at the University of Georgia who conceived the idea of a farmer-owned cooperative, might question the wisdom of the pivotal change. Then again, maybe not, as the architects of the new public company — trading on the NASDAQ market — face modern times and modern issues. Their answers to any questions from a Great-Depression-era visionary would certainly suffice, given that Gold Kist needed an infusion of capital to keep the business moving forward profitably. Although not in a do-or-die situation, Gold Kist, nonetheless, had reached the proverbial crossroads concerning its financial future.
“Our access to capital was limited as a cooperative,” confirms John Bekkers, president and chief executive officer. “Cooperative’s main source of borrowing is from banks, which was limiting. The other issue is there was always the demand from farmers to revolve their equity in the cooperative. It was always a challenge to revolve equity, yet retain capital to grow.”
So it was that Bekkers received authority to explore taking the company public in June 2004. Meanwhile, the company generated record earnings for fiscal 2004 ending June 30 with a net income of $110.9 million on $2.3 billion in sales, compared with a net loss of $51.5 million on $1.9 billion in sales in 2003. As Bekkers explains, the company leveraged an approximate 22-percent increase in the average selling prices for broilers, along with a “slight” decrease in broiler pounds to gain net sales increases. The record profitability resulted from efficient operating performance and higher broiler selling prices, which more than offset higher feed-ingredient prices, primarily for soybean meal that priced 29.2-percent higher per ton in fiscal 2004 over fiscal 2003.
Based on 2003 data, Gold Kist, defined as an agricultural cooperative association with 2,500 farmer members, operated with 11 plants in nine divisions in Alabama, Florida, Georgia, North Carolina, and South Carolina. The company profile also included 16,272 employees on the processing side of the business and $1.8 billion in annual sales.
As the third-largest U.S. vertically integrated chicken company, Gold Kist accounts for more than 9 percent of chicken produced in the country in 2003. Meanwhile, Gold Kist, positioned as the largest producer of private-label chicken products in the nation, continues with its value-added product development strategy with such products as Buffalo wings and strips to push its foodservice marketshare. Its product portfolio includes fresh, IQF (individually quick-frozen), partially cooked, and fully cooked applications. Products range from small filets from boneless meat, rubbed rotisserie chicken, and fully cooked and diced product. Distribution channels include fastfood, national accounts, retail, supercenters, and club stores.
Thanks to new access to capital markets, Gold Kist is poised to grow stronger on a level playing field with its major competitors. “We are not looking for a magic bullet,” Bekkers says. “Our business is still about being a low-cost producer, exceeding customer expectations, focusing on worker safety, environmental concerns, and community services. The difference is now we have access to capital. We already had a strong balance sheet positioning us for internal and external growth.”
Although he declined to share specifics, Bekkers reports that the growth plan includes 40 company-wide capital projects with a five-year execution timetable. The company does intend to continue shifting its product mix “to keep up with fast-growing customer demand,” focusing on further-processed, value added selections. Earlier cost-saving initiatives included investments in technology designed to increase operational efficiency and reduce water use, now at 350,000 gallons a day at production sites.
“We must be more efficient and profitable,” Bekkers says. “Yes, we have to report to market analysts and they have opinions. Ultimately, we must manage our business for shareholders. But, we’ll do it with a long-term plan.” NP
Check out the October 2019 issue of The National Provisioner, featuring our cover story on the partnership between Coleman Natural Foods and Budweiser, along with our annual State of the Industry Report on various sectors of the meat and poultry industry.