In Meat We Trust

by Maureen Ogle

  He built one hog facility in Arkansas not far from company headquarters, but in 1977 he forayed into North Carolina. The facility he bought there had been built by another investor hoping to cash in on the famine, Malcolm McLean, a multimillionaire and North Carolina native who’d made a fortune from his trucking business. In 1974, McLean shelled out $60 million for 375,000 acres of land in eastern North Carolina where he planned to grow corn and feed a million hogs a year. “It’s a question of supply and demand,” explained one of McLean’s employees. “People are starving. It’s just like the energy crisis except that people are going to find it difficult to wait in line for food.” McLean’s First Colony Farm (named for its proximity to the settlement established by Sir Walter Raleigh nearly four centuries earlier) bore “the same relation to a farm that a computer does to an abacus,” observed a newspaper reporter. This being the early 1970s, environmentalists pounced, and rightly so. First Colony occupied a large chunk of North Carolina’s Dismal Swamp, an environmentally complex area that lay between the Pamlico and Albemarle sounds. But no one in state government was inclined to stop the project, because, explained an official with the state’s Department of Natural and Economic Resources, “the food crisis is up and coming, and I guess the feeling is that it’s just not good to stop and do an environmental study when it will take so long and cost so much.” McLean proceeded with his project, but when Tyson came along with an offer, he sold the hog facility and ten thousand acres to the Arkansas broiler king.

  Satisfied that hogs would pay off, Tyson expanded his porcine empire. By 1980, he was also operating a breeding facility in Nebraska, selling the piglets born there to another corporate hog farmer, National Farms, Inc. NF was owned by the Bass family of Texas, whose immense fortune was dispersed among global corporations, huge chunks of Fort Worth, horse ranches, apartments and hotels, and oil wells, to name just a few. During the 1970s, NF owned and farmed (or leased to other farmers) forty thousand acres scattered across Texas, Nebraska, and Kansas, raising grain and processing alfalfa-based feeds for its cattle operations, all of it fueled, explained NF’s president, Bill Haw, by the belief that food producers and farmers had “a God-given mission to feed the world.” As part of that “mission,” Haw built a couple of small experimental hog farms to assess the profit potential of converting part of National’s corn crop to pork. Satisfied with the results, he announced that NF would join the “leading edge” of modern hog farming. By 1984, employees at National’s Nebraska facility were feeding 350,000 hogs a year—purchasing the pigs from Tyson—an output then worth about $40 million.

  Tyson and National Farms weren’t the only big companies hunting for gold buried in the turmoil of meatpacking and livestock production. “We think the basic food industry is a hell of a place to be,” Mike Harper told a reporter in 1981. Harper, an imposing hulk of a man (between his height—six-six—and his “booming voice,” noted one observer, he “looks like a truck coming at you”), had recently embarked on a buying spree, his goal being to transform ConAgra, the company over which he presided, into a farm-to-table powerhouse. ConAgra had begun life in 1919 as Nebraska Consolidated Mills Co., a collection of formerly independent grain mills that joined forces to go public. Over the years, Nebraska’s managers tried, with little success, to move into other food-related businesses, most notably with Duncan Hines cake mixes (which it sold to Procter & Gamble in the 1950s). By the early 1970s, ConAgra, as it was then named, teetered on the verge of bankruptcy. Harper was hired to salvage what he described as an “awful, awful disaster.”

  He dumped assets and streamlined management, but he calculated that global grain shortages, rising energy prices, and inflation would crush ConAgra unless the company reduced costs through integration and diversification. Harper decided that the company’s survival depended on control of assets, whether cattle, corn, or chicken Kiev (frozen and ready to eat, of course). Harper bought river barges and terminals as well as grain elevators (the better to move raw materials from farm to factory to overseas port) and a grain-processing outfit (the better to keep prices low on the feed needed for the livestock in his portfolio). Harper also loaded his shopping cart with food manufacturers, including Chun King and Patio Mexican, often buying at rock-bottom prices because their owners didn’t know what to do with them. “The guy buys things you wouldn’t get a wooden nickel for and gets change back,” one observer marveled. Consider one of his first major acquisitions: Banquet Foods, Inc., then the country’s largest purveyor of frozen processed foods and owned by RCA, which specialized in electronics and media equipment and content. RCA’s leaders had no idea what to do with food, frozen or otherwise. (“They were thinking of Skylab when Banquet was talking chicken pot pies,” said one amused onlooker.) At the time, financial analysts predicted that rising energy costs spelled the end of the frozen-food market; grocery chains would balk at spending money keeping the cases cold. Harper believed otherwise: consumer demand for convenience would keep the lights on and the temperature low.

  Harper was less interested in Banquet’s packaged foods than in its integrated poultry divisions, which supplied the protein for many of the company’s frozen-food products (processed, of course, in Banquet-owned factories). Harper had cut his corporate teeth on broilers—he’d headed Pillsbury’s broiler operations before moving to ConAgra—but he also believed that even beef and pork could return a profit as long as he sliced production costs to the bone and turned basic carcasses into convenience foods. So he set out to conquer meatpacking. In 1978, he went after MBPXL, a beef-packing behemoth born of the merger of two Monfort/IBP-style clones. He shook hands on the deal, which would have given him a company whose sales outnumbered ConAgra’s by two to one. But Cargill, a privately held, fabulously rich dealer in, among other things, global grains (it had made millions on the Russian grain deal), swooped in, snatching it from Harper’s grasp and renaming it Excel. The acquisition transformed Cargill into the nation’s second-largest meatpacker. (Cargill’s maneuver was not as out-of-the-blue as it appeared: it already owned Caprock Industries, a giant cattle-feeding operation that existed primarily to sell livestock to what had been MBPXL.)

  Mike Harper wasted no time bemoaning his failure. There were plenty more packers to choose from; the upheaval of the 1970s had pushed dozens of small ones into bankruptcy and Armour, Swift, and Wilson to the edge of collapse. A Swift executive conceded that management had stumbled—or, more accurately, slumbered: “We should have moved quickly to match” Monfort, IBP, and other new packers, he conceded. “Instead, we sat back and read the 1913 annual report and didn’t change anything.” Executives at the three ailing giants embraced the same survival strategy. They shut down their hog-slaughtering operations and dumped their dwindling capital into processed convenience foods. But that move put each of them in direct competition with Oscar Mayer and Hormel, both of which were financially stable and boasted decades-long track records selling processed pork products. To no one’s surprise, the tactic failed to save any of the three, in part because their corporate owners had no idea how to make food.

  Their failure opened the door for Harper, who went after Armour. Since 1969, it had been owned by Greyhound Corporation, a company more accustomed to operating buses than packing plants, and whose managers floundered in the turbulent world of food making and especially meatpacking. Greyhound’s chairman groused that he never had a chance with Armour because Monfort and IBP, with their highly efficient plants and nonunion employees, were “like a bunch of piranhas cutting away at [Armour’s] base.” Once Armour’s managers realized that they could not compete in processed foods, they pivoted back to basic slaughter—only to find that their former customers were swimming with the piranhas. “Armour’s dead in the water,” said an onlooker. Harper swooped in with an offer. The purchase provided ConAgra with two slaughtering plants, one each for pork and beef, and, more important, nineteen facilities primarily devoted to the manufacture of value-added foods like hot dogs and frozen entrée
s. A few weeks later, ConAgra reopened what had been Armour’s doors with a nonunion workforce.

  Harper wasn’t finished. Four years later, he flew to Greeley, Colorado, and persuaded Ken Monfort to sell him the feedlots, the packing plants, and the brand. Monfort needed little persuasion. He had never recovered from the bloodbath of the 1970s, and by the end of that decade, production costs at his Greeley plant were 50 percent higher than those at IBP, thanks to Monfort’s desire to play fair with unions. When he finally asked his employees for concessions, workers struck. The confrontation was ugly and painful for both sides. Monfort argued that in the age of IBP, union work rules and high wages were driving the company toward ruin. Nonsense, replied union leaders. “Monfort wants to return to the industrial dark ages of starvation wages and destructive working conditions.” Employees vowed they would “not surrender to Monfort’s selfish demands.” The strike ended after seventy-three days, but the plant did not reopen. Ken Monfort closed it and one of his feedlots and began carving the fat from his operations, laying off management, dumping assets, and revamping the packing plant. In 1982, he reopened the slaughterhouse, minus a union contract, but he never caught up with his competitors. So when Mike Harper presented his offer, Ken grabbed the lifeline. Harper, he said, was “the ‘big friend’ I was looking for.” Monfort of Colorado, Inc., would remain a separate entity within ConAgra, and Ken would stay on as its head.

  Monfort’s fellow meatpacking pioneer, IBP, also changed hands, not because it was struggling but because that company wanted to move into hog slaughter and pork processing. “Pork has been there for 25 years waiting for someone to automate and upgrade,” said IBP’s president, Robert Peterson, in 1980, and grocery chain executives were pressuring him to give them an IBP version of pork. If anyone could reinvent hog slaughter, it was Peterson, an Andy Anderson protégé, but he, too, needed a big friend to foot the bill. Peterson found his partner in Occidental Petroleum Corp., a global behemoth with holdings in, among other things, oil, ammonia, pesticides, fertilizer, and cattle. Oxy’s chair, Armand Hammer, explained that his corporate strategy for the 1980s was to “increase world food production ‘to see that all people are fed.’” Or, as an Oxy vice president put it, “We think food will be in the 1990’s what energy has been to the 1970’s and 1980’s.” What better way to pursue that strategy than by owning the biggest beef processor in the world? The folks at IBP wasted no time marching into the disarray that was hog slaughtering in the early 1980s. The plan was to produce boxed pork and sell it to the IBP customers who relied on its boxed beef. IBP executives outfitted the venture with pork-related expertise by wooing top managers from Wilson and Oscar Mayer. As for packing plants, those were (almost) a dime a dozen, thanks to the turmoil of the previous decade; Iowa, still the national leader in hog production, boasted a bouquet of idle slaughterhouses. IBP bought a shuttered Hygrade plant in northern Iowa, gutted it, and renovated it into a marvel of streamlined efficiency. Capacity: 3.5 million hogs a year. Within months, IBP announced plans to build the world’s largest hog slaughter plant in either western Illinois or eastern Iowa. (Two small towns—one with a population of 1,100 and the other 600—duked it out for the honor. Stanwood, Iowa, won.)

  IBP’s invasion of the pork industry pushed the remaining member of the old Beef Trust, Wilson Foods, as it was then called, over the edge. In the late 1960s, a corporate conglomerate with holdings in electronics had bought Wilson, but no good had come of it, and a decade later, the meatpacker was gasping for air. The firm’s president placed the company’s last bet on pork and “branded” fresh pork cuts, but that plan unraveled once IBP entered the pork market. In 1983, bleeding a million dollars a week, Wilson’s executives filed for bankruptcy and used that protection to cancel its labor contracts. (The union sued, but the Supreme Court sided with Wilson.) Wilson unloaded plants, laid off workers, and dumped its employee retirement plan. It wasn’t enough. “I just don’t see how they can stay in business,” said one analyst. They couldn’t. In 1985, Wilson put itself up for sale. Tyson, ConAgra, Cargill, and Swift all looked—and passed. IBP wanted it, but the bankruptcy judge refused that offer. In the end, Wilson found a buyer in Doskocil, a Kansas sausage manufacturer whose major customer was Pizza Hut.

  It was inevitable that the new titans would test their prowess and collide in the process. In 1988, ConAgra and Tyson Foods battled for ownership of Holly Farms, one of the oldest and most solid of the broiler companies. Tyson made the first move, announcing it planned to spend $900 million in stocks and cash to acquire Holly. Most analysts assumed that Tyson was after the chickens. Those were attractive, but they weren’t Tyson’s primary target. A few years earlier, the Arkansas giant had moved into processed pork products, a natural move given its investment in hog farming, and Holly owned a subsidiary that manufactured hot dogs, ham, and other pork-based foods. “We are confident that this proposal will be extremely attractive to your stockholders,” Don Tyson wrote in a letter to R. Lee Taylor, Holly’s president. Nothing doing, replied Taylor. According to analysts who knew both men, the refusal stemmed from personal relations or, more accurately, lack of them: Taylor did not like Tyson and had rejected a similar offer three years earlier. Don Tyson wanted what he wanted, however, and he marched forward; indeed, Taylor’s recalcitrance likely whetted his appetite for battle. (A year earlier, he’d introduced a meeting with a poster of Rambo-chicken, a bird outfitted with “battle helmet, grenades and machine gun.”) After weeks of Tyson’s pestering, Holly’s board informed Don that it had agreed to a “friendly” takeover by Mike Harper and ConAgra. Tyson responded with a sweeter deal. Months of warfare ensued, but in the end, Tyson, the nation’s biggest poultry processor, snatched Holly, the number-three, away from Harper, the number-two man on the chicken totem pole, for a final price of $1.29 billion, well above his original offer of $900 million. “This is a very tasty morsel for us,” cackled Tyson’s general counsel.

  By the late 1980s, the new food powerhouses dominated meatpacking, but their gigantic operations required massive quantities of raw materials: cattle and hogs. The beef packers formed partnerships with big cattle feedlots or bought them outright because those feeders could provide not just large quantities of cattle, but, as custom feeders, the precise kinds of livestock that ConAgra or IBP wanted. Paul Engler, the man who’d opened a feedlot near Amarillo, Texas, back in the early 1960s, enjoyed personal connections to IBP’s leaders and those links led to profit. Cargill owned Excel as well as a collection of feedlots.

  Hogs, however, posed a more complicated problem because companies like ConAgra, IBP, and Tyson had to satisfy two different markets. First were the global buyers, especially in Asia, where pork was the most popular meat and where local farmers couldn’t supply enough to feed rapidly growing urban populations. American hog producers dominated that export market, but there was a catch. “[I]nternational customers,” explained an agricultural economist at Oklahoma State University, “don’t buy and view meat the same way we do domestically. It’s not a commodity to them. It’s a very specific quality, value-added product to them and they will force us to market it that way.” Japanese customers, for example, demanded marbled pork that oozed flavor and fat. But Tyson and other hog growers also supplied the U.S. market, and Americans wanted lean, fat-free, low-cholesterol pork. If Tyson, for example, hoped to sell ham to McDonald’s for its McMuffins, it had to give the fast-food chain precisely the lean meat it wanted. Food processors and grocery chains also demanded low-everything pork that could be used to manufacture low-fat, microwaveable, processed pork products, whether sausage, bacon, or frozen, low-calorie entrées.

  As a result food processors, meatpackers, and farmers—and by the 1980s, these were often one and the same—could no longer afford to think of hogs (or cattle or chickens) as basic commodities whose price depended on supply, demand, and the cost of corn. Those traditional “fuzzy” price signals, explained two economists, had been supplanted by ones transmitted by consumers who ma
de purchases based on calorie and cholesterol count and a product’s “convenience” quotient. Put another way, packers and processors didn’t want hogs. They wanted four-legged sources of specific types of pork: low-fat, low-cholesterol for diet-crazy Americans; fattier cuts for the Asian market. The most cost-effective way to lay their hands on such animals in the huge quantities needed was by demanding that farmers add value to a hog from the moment of its inception. By the late eighties, “value-added” referred not to, say, boxed pork or microwaveable sausage, but to a hog bred with specific genetic traits and raised on a combination of computer-designed rations and biotechnologies, such as porcine somatotropin (pST), a drug that increased weight gain per pound of feed and reduced fat accumulation by as much as 80 percent. But all those hogs also had to be identical. Said one packer: “I can do well with lean hogs. If I have to, I can get along with fat hogs. What I can’t stand is two fat hogs, then a lean hog and then another fat one coming down the chain. It’s impossible to merchandise the mixed shipments we get today.” Small wonder, then, that the new food-and-meat giants constructed their own hog-and-pork supply chains. It was the only way to guarantee a consistent product, volume, and price. Nor was it any wonder that in the world of meat, wrote two analysts, “product development” now began “on the farm, rather than in the processing plant.” When packer-processors had to buy hogs outside their own supply lines, they replaced fuzzy signals with contractual detail, telling farmers, “We will buy X number of hogs with X amount of fat and at X weight, and we want uniformity, not just sometimes but always.” But because most conventional in/out farmers could not meet those demands, processors and packers relied on corporate farmers who understood the rules of the game, new-style farmers like Premium Standard Farms. “We want everything to be consistent,” explained an official with PSF, “and that’s part of our name.”