A Conversation With Joe Luter IV President, Smithfield Packing Company
The building housing the Smithfield Packing plant and its corporate offices is seasoned with the footprints of four generations of Luter men named Joseph. Now comes Joseph IV, the latest Luter to shepherd Smithfield Packing, the pork-processing business founded by his grandfather and great-grandfather. His appointment as president coincides with an operating realignment governing Smithfield Packing and Gwaltney of Smithfield Ltd, Smithfield Foods’ two Smithfield, VA, facilities in walking distance of each other. Corporately, the two operations merged two years ago only to return to their previous status as independent operating companies.
Smithfield Packing satellite facilities operate in North Carolina at Tar Heel, Benson, Clayton, Kinston, and Wilson; Landover, MD; Plant City, FL; and Virginia at Smithfield and Bedford.
Q: Explain the recent restructuring that placed you at the helm of Smithfield Packing.
Luter IV: After reviewing progress and results for the combined organization, it was determined that it was too complex and too big for one individual to manage. The determination was then made to segregate the sales and operations back into two entities. We are still looking at this organization as one even though they have separate presidents. They are two operations that financially report one number to the corporation.
Q: Explain the benefits.
Luter IV: We have to fully utilize all our facilities and run them efficiently to be profitable. We are moving production between our two facilities based upon the lowest cost. To put it in perspective, 50 percent of the hot dog and lunchmeat capacity in Plant City, FL, a Smithfield facility, is actually from Gwaltney. And 30 percent of bacon produced in Wilson, NC, another Smithfield Packing facility, is actually product for Gwaltney. The sales organizations are clearly different, and the responsibilities for the facilities in terms of day-to-day operations are completely autonomous, but we produce product for one another based upon the goal of operating low-cost facilities to realize the synergies we originally envisioned. It is not changing how we go to market with our customers, however.
Q: What exactly is the challenge in this responsibility?
Luter IV: The company was not performing up to the corporation’s financial expectations. We have a defined strategy and we are moving to execute that strategy.
Q: What is the strategy?
Luter IV: The current strategy remains consistent with our focus for a number of years. We use our point of difference, which is vertical integration, to value add our genetic specifics to traceable raw materials to produce the most value-added products we can. We continue to sell raw materials to competitors, like hams, trimmings, and bellies. Our objective is to process those raw materials ourselves into value-added products.
Q: Where are you in this pursuit?
Luter IV: We are at the 50-yard line. We are very close to being able to fully use all our bellies. And with the new ham plant opening in June 2006 in Kinston, NC, we will process all our own hams. The plant creates 250-300 new jobs.
Q: Are there other new initiatives?
Luter IV: We have outgrown our distribution center and just opened a new one in June in Clayton, NC, near Raleigh. This facility gives us room to grow, enables us to improve our efficiencies, and improve our service to our customers. It is an existing facility pretty much in move-in condition. We will spend some money on hardware and software for IT purposes. It doubles our capacity and is centrally located to the majority of our processing facilities.
Q: How has the vertical integration foundation enhanced raw material capability?
Luter IV: We believe that a supply of traceable raw material gives us an inherent advantage relative to our competition and will be a key distinguishing factor as we grow our foodservice business.
Q: What are some near-term goals?
Luter IV: We are focused on being an employer of choice and are increasing our employee-recognition programs. One of our goals is reducing turnover in our facilities. Another is being a vendor of choice, which obviously is tied to our sales and marketing, but in addition to that is servicing our customers. It sounds mundane, but it is a critical issue. As a result of our branding strategy, there will be more innovative new products to help us develop the presence of our brand. It will be value-adding pork raw materials into innovative products for truly new products with new flavors, or similar products in new packaging, or a combination of the two.
Q: What about the facilities?
Luter IV: The new facility is a sign of our commitment to maintaining low-cost, food-safe facilities. We don’t pay dividends. We take the money and reinvent in our organization, and will spend more than $100 million next year in capital improvements. We are committed to the pork business, even though the industry is in true transition right now. NP