The Times’ Stephen Faleski and Steve Stewart sat down recently with Smithfield Foods Chief Executive Officer Shane Smith for a wide-ranging interview on the past, present and future of the community’s anchor employer and world’s largest pork processor. What follows is edited for length and clarity. Click below to listen to audio of the full interview.

 

Stephen Faleski:  The genuine Smithfield ham, it’s been just under a year since that was discontinued. How’s the country ham market doing? 

Shane Smith: The country hams, the Smithfield Genuine Ham, one, it was a tough decision, but the reality was it had become just such a small volume. And so we weren’t seeing the volume that supported the product, and we were seeing volume in other ham categories continuing to grow. But that was a specialty product. I know there was a lot of heritage to it and a lot of sentimental value attached to it. But the reality, as the business model has continued to evolve, we just didn’t see the volume pick up on that brand, and so we had to make the difficult decision to discontinue it. We retired one and put it in the (Isle of Wight County) museum. The last one, but I think that ham had been made here since, gosh, the 1600s. So it was one we talked about a lot, because we knew there would be a sentimental attachment to it, but again, when you follow the data, it just became the right decision.

Steve Stewart: I know you all are aware of that really old state law that defines what a Genuine Smithfield Ham is, one of the provisions of which, it has to be done within the Smithfield town limits. So, what would, if someone just wanted to put up a smokehouse and curing facility in Smithfield, the law as written would seem to give them the rights to use the Genuine Smithfield name, but would that conflict with any trademark you have?

Smith: It would. 

Stewart: So short answer, somebody couldn’t just do it and say, well, the state law gives us the right to take this name.

Smith:  No, I think there would be more to it than that. So, it wouldn’t be something someone could just pick up on. Interesting question.

Faleski: Let’s go to the plant here in town. I think around 2021, you stopped doing the slaughtering here. You talked about possibly not doing the pet food rendering, but I’m not sure if that’s still going on or not. What is and isn’t happening at the plant here in town these days?

Smith: What we’re doing there now is really bacon and for our fresh pork operations. We’ve had a lot of discussion about how to put products in this facility to help utilize the overall capacity. We’ll return back to growing that footprint, growing the products, the number of products and the volume that’s coming out of that facility. It’ll just be with a number of different packaged meats. When you think about bacon, it’s the No. 1 category across the U.S. We’re in a very well positioned area right here, so I think you’ll see over the course of time in the near future, you’ll begin to see volumes increasing, the number of categories that are being produced there increasing, and there’ll be a lot more people in and out of that facility as we continue to bring things into that footprint.

Stewart: More jobs? 

Smith: Yeah, we’ll come along with more jobs. Now, one of the things from an employment standpoint, and this is not just specific to the town of Smithfield, but it’s all across the country, we’re really looking at ways we can use automation. COVID really showed us that you can’t just rely on the people side of the equation. You’ve got to balance that with the technology and the automation side as well. So I think you’ll see some automation coming in here. So as the industry has moved more toward automation, there’s a lot more opportunities to continue to use things like robotics or other forms of automation technology to lessen that overall supply of labor, but it allows us to repurpose that labor.

And so it’s not about taking people out of the facilities; it’s about repurposing those people to something that’s more value-added. So instead of two people putting a label on the box, now we can automate that and put those two people doing something more value-added somewhere else in the plant. 

Stewart: Are you test-driving the robotics in there?

Smith: We are. We’re probably investing, as a company across the U.S., probably 25% to 30% of our capital every year toward automation technology. 

Stewart: Is the south plant dormant?

Smith: Yes, it is.

Stewart: Could it come back to life as part of what you’re talking about? 

Smith: Possibly. Actually, Chief Operations Officer Doug Sutton and I were talking about that this morning, what could be some functionality for that building as we continue to think about our footprint and how we have 41 plants right now across 19 states, how we optimize that overall footprint with a facility sitting right here three hours from Tar Heel and two hours from Clinton (in North Carolina). This is a good location.

Stewart: How many shifts are you running at the local plant? 

Smith: We’re running two shifts now. 

Stewart: What goes on in the Innovation Center?

Smith: Oh man, we do all kinds of good stuff in there. We have a team in R&D and packaging engineers that work out of there that are always coming up with new products. We bring customers in and we’ll show them different ways they can use the product. Or we’ll have idea sessions with, for example, IHOP looking at some new breakfast options that we thought would be good for them. There’s always something coming in and out of there.

It is a USDA-approved facility, so we can run small batches of products to see If, one, is the product something we want to pursue, and number two, how do we scale it up into our bigger facilities? So it’s a great tool for us, both from a sales side and R&D side.

Stewart: Pet food rendering is over, correct?

Smith: Yeah, there’s no more pet taking place.

Stewart: How many people work on the headquarters campus?

Smith: Gosh, I think here between this campus and the office down by the (Food Lion) grocery store location, we probably have 1,000 to 1,100 people.

Stewart: Are you out of white-collar space here?

Smith: We’re pushing the limits, yes. It’s something we have to think about as we go forward, as we continue to move people to here to the corporate office. We’re pushing the limits here on the three buildings here.

Stewart: There was speculation a few years ago that you might buy The Smithfield Center from the town and be part of a solution for replacing that facility somewhere else in town. 

Smith: It is a discussion we had, but it never came to fruition. 

Stewart: Your choice or the town’s choice? 

Smith: I don’t think it ever really passed the discussion phase. Just kind of tested the waters of what would it look like.

Faleski: Is Smithfield Foods definitely committed to keeping and expanding this headquarters here? 

Smith: We’ve been here, gosh, since 1936, so 90 years, and we don’t have any designs or plans to leave the area. I don’t think this will be a surprise to anybody, but it has been hard to recruit professional talent to the area. I think what the town’s done with the new (Hardy Elementary) school, what they’ve done with the potential Grange at 10Main project, the growth we’re seeing at Carrollton, all of those things make it easier to recruit. So those things have allowed us to recruit talent from around the country. I think the town is doing the right things, and that helps us continue to have a long-term view here. 

Stewart: If you were making a list of things that the community, town and county government could do to make it even more appealing to stay here, what would they be? Housing would be high on the list, I assume? 

Smith: We don’t have necessarily a problem with housing. I would love for everyone to live in Smithfield, but the reality is we’re anywhere from Norfolk to Williamsburg. I think the first thing young people ask about, especially young families, is the schools. And I think having a new school has helped a lot with that. Then it comes to housing. Where can we live? And then, depending on the age, what’s the nightlife look like? Are there restaurants to go to and things to go do while you’re here?

But with people coming in, yeah, that’s the first things they want to know. What’s a school system like? What’s the housing situation like? Are there things to do from a restaurant standpoint or a things-to-do standpoint? The new hospital going up is a huge investment. I think the town is doing the right things to help make it easier for us to continue to bring people here. 

Faleski: Along the same line, we talked a little bit about the new Grange concept that’s been scaled down a little bit, or at least less dense than it was before. Does that still meet your needs? Does the company still support that project? 

Smith: We do. We’re really supportive of it and I think what they’re doing there would be good for the town. I think it would be good for us and other employers in the area as they continue to move in. 

Faleski: So how’s the new stock listing doing?

Smith: It’s doing pretty well. I probably should be, but it’s not something I’m fixated on right now, the price of the stock. I think we positioned it at a price point to be really successful as we build our book to go back to the markets. We’ll start seeing news as we start issuing our quarterly statements and annual statements. Right now, it’s just kind of what I expected it to do, which is kind of move in such a way that until additional news and additional data points come out. But for the early stages, I’m really pleased with how it’s traded. I look forward to seeing how it progresses over the year.

Stewart: Has the public offering been helpful at all as it relates to some of the geopolitical tensions, some of the anti-China blowback that we’re seeing in America right now? Does this help ease that tension?

Smith: I think it does. I think it’s an additional talking point. When we meet with legislators, one of the things we do is talk to them about really who we are. We’re an American company. We’ve been here for 90 years. All of our raw material is sourced here in the U.S. Ninety-five percent of the products that we make are sold to the U.S. consumer. Once you kind of go through that education of who we are and what we do and how we do it, and then you add this data point on the level of transparency we’re now able to provide being public back on the U.S. markets, I think it only helps that conversation, helps people understand who we are and what we do. Will it take it away? No, it won’t. And I don’t think any of us really expect it to end that conversation. But it is a helpful data point that we can now say every three months you get to see everything we’re doing. 

And we’ve done a lot of other things when you think about, for example, foreign ownership of farmland has been a big topic for a couple years now. As part of optimizing our whole business, having gone through a process, not reactionary to anything going on, but just as part of optimization, our farmland holdings are down, gosh, probably around 40% over the last two years, so we’re down to about 85,000 acres from a high of 145,000 acres. And again it’s not reactionary, it’s just a function of going through all of our assets and saying, Does this asset add value? We’ve got a 200-acre piece of land in Oklahoma. Well, why do we own that? Well, 20 years ago we were going to build a beef plant. OK, we’re not building a beef plant, so we’ll sell that piece of property, or a 10-acre parcel of farmland in Iowa that we’re going to build a feed mill on. Well, we’re not building feed mills in Iowa. So sell it. We’re less than one-one-hundredth (of 1%) of foreign-owned farmland in the U.S., and the land we have now is land we need to grow pigs on.

Faleski: With regards to the meatpacking plant here in town, were there any changes made during COVID that remain in place today, regardless of whether there’s a pandemic, because you just found the things just plain work better this way?

Smith: COVID did a lot of things, and not all of them were bad. No. 1, we really refocused our energy on the SKUs (stock keeping unit) we have that are important. And so between COVID and today, we probably took out about 40%, 42% of the SKUs that we produced in packaged meats. We’re not expanding back the offerings. Automation would be another. We really refocused our thoughts on how we can use automation in different parts of the plant as we’ve talked about, so that still remains in place today. A lot of our processes that we had to rewrite or rebuild and fine-tune, all those things are still active today. I think we’re a much stronger business today coming out of than we were when in from a labor perspective, from an investment and automation perspective, and overall process perspective. 

Stewart: Any immediate impacts, good or bad, from the change in administration in Washington, especially the discussion of tariffs? I know you said 95% of your sales are to U.S. consumers.

Smith: Where tariffs are (affecting) is in categories, like Mexico, for example. Mexico is, for the U.S. pork industry, a big importer of hams. They’re a pork-deficit country, so they have to import and, if you think about the industry on a North American basis, if you think of Canada or Mexico, Mexico is important to balance that overall category.

We use about 75% of our hams internally in our packaged meats business. So we’re talking globally about selling 25% on either the domestic market or the export market. If you think about China, for example, we don’t sell meat to China. We sell offal (edible organs) product. So it’s the head and heart and ears and all the pieces and parts of the pig that we don’t eat here. China happens to be the best market for that in the world and that’s where our relationship with WH Group, I believe, gives us a competitive advantage as we compete against other U.S. producers trying to go to that market. 

So again when we think about it in the context, when we think about our business in the context of next-best sale, where’s the next-best place to sell this product, maybe for that off-hog product, if tariffs become too much of a barrier to continue to go to the China market, then we’ll look at other Asian markets. So we’ll look at the pet food market. So we’ll look at any other number of ways that we can utilize that product and still get to make the most margin we can out of those areas 

With Mexico specifically, during the first Trump administration, there was a period of time, I think it was 2018, that there were tariffs in place on U.S. pork going into Mexico. I think it only lasted for a year, so it was relatively short-lived and didn’t have a significant impact on volume or profitability.

We have a lot of different levers we can pull. If you think tariffs in general, there’s virtually no impact on the packaging side of the business, and there’s no impact on the amount of production size of the business. 

Stewart: Any changes in your DEI (Diversity, Equity and Inclusion) programs as a result of the president’s executive order?

Smith: It is something that we’re following closely. It seems like every day there’s something new that comes out. Whether you’re talking about immigration, whether you’re talking about DEI, we follow all the rules and regulations that are out there. One thing that I think we’ve done as a company in the last three years is really develop this merit-based culture that we’re looking for people who are excellent at what they do, and if you’re good at what you do now, you can move up pretty quick. And I think that’s filtered all the way through the organization.

Stewart: When you get hyper-focused on merit, does diversity take care of itself? 

Smith: It does, as long as you’re disciplined. What I mean by discipline is that you’re making sure you’re casting a net to see everybody. And that’s one thing we’re focused on is making sure we’re developing people all across the company so when positions do come open, we can cast a big net and see a diverse pool of candidates that are qualified to fill that role. And then that naturally comes up to where you start getting more and more diversity across the organization.

Stewart: One more question on workplace trends: What’s your philosophy on remote work? Generally speaking, do you want people in the office?

Smith: We do. We’re bringing people back and we’ve brought people back. We aligned our back-to-work policy with the beginning of the recent school year. We gave people a four-month or five-month notice and just said, in September, we’re bringing everybody back. We want to give you time to allow for child care. We want to align with when your kids are going back to school. We tried to be really aware that people have lives outside of work. I don’t personally believe that you can come in on a Monday and say everybody’s back to work next week. I think you’ve got to give people time to plan. 

We do have some positions in our company that are just naturally remote positions. And so we looked at what was remote before COVID and what is remote today, and that’s where we started the analysis. It doesn’t make sense if I have a sales team that’s responsible for sales out in the West, that they need to be in this office five days a week. That’s unrealistic. Or we have operations people who cover multiple plants. So to say you have to be in an office in Sioux Falls every day, for example. So we looked at what was it before, and then what was it after, and then gave people a lot of time to adapt their schedules and adapt their home life so it wasn’t so abrupt. 

But I personally believe that in-office is extremely important. I think it’s an important thing for collaboration, but I also think it’s an important thing for young people coming into the organization, learning the culture, learning how we do things, learning how we think about things, and just learning the business.

I think that allowing hybrid or remote work to continue in the long run would really be a disservice to that next group of leaders who are going to be coming up through the organization in just a few years. 

Editor’s note: This story was updated at 9:05 a.m. on March 13 to correct that Smithfield Foods sells offal, or edible organs, not “off-hog” products, and to add that Smithfield Foods accounts for less than one one-hundredth of 1% of foreign-owned U.S. farmland.