Simmons Goes Back to Future

Expansive problems facing the chicken industry in recent years are hardly foreign to Simmons Foods Inc. But the $460 million Siloam Springs company hopes 2003 will be a turning point as it goes back to the future with 31-year-old Todd Simmons taking over many of the duties formerly held by CEO Buddy Pilgrim.

Pilgrim’s three-year tenure as CEO expired March 1. He will remain as vice chairman and as a member of Simmons’ advisory board. Todd Simmons, grandson of the late company founder Bill Simmons and son of chairman Mark Simmons, was named president and chief operating officer in November.

Pilgrim came to Simmons Foods from Pilgrim’s Pride in Pittsburgh, Texas, in 2000.

“I learned a lot from him,” said Todd Simmons. “One of the reasons why he came on to work with us was because he’d been around the industry for several years and had a lot of further processing experience. The intent was for him to come and work with us, me specifically, and help mentor me into my current role.”

Although the CEO position is vacated for now, the company is confident Todd Simmons can lead Simmons Foods through what it hopes is the last stretch of the national poultry crisis. Disease outbreaks and international trade stoppages plagued the industry in 2002.

“We view Todd as having wisdom beyond his years,” said Steve Gardner, director of people services at Simmons Foods. “He’s a very bright young fellow.”

Yes, he’s young. But Todd Simmons has lived and breathed the company since his father took over the reigns in 1973 when Bill Simmons died. Todd was 1 at the time.

“I started working [at Simmons Foods] right out of high school as an hourly employee,” recalled Todd Simmons, who earned a degree in entrepreneurship and business management at Georgetown University.

“And during college I worked summers. I learned it from the back dock of the chicken plant through live operations. I’ve spent most of my time since being out of college in the sales and marketing side of the business.”

In his new role with the company, Todd Simmons will concentrate about 75 percent of his time as COO of the poultry group’s sales. But he stresses that the leadership team at Simmons Foods will involve several people.

“The message I want to get out there is that we have a great team here,” Todd Simmons said. “I just want to make sure we’ve got the best folks in the industry coming in and we’re giving them the tools to build one of best companies in the industry. It’s my job to have great folks here who are motivated and with the tools they need.”

Simmons Foods has four different business divisions. Todd Simmons will be leading the poultry group, Mitch Newton is general manager of the Pet Food Division, and Gene Woods heads the protein division and custom processing division. Those three will report directly to Mark Simmons.

About eight individuals will report directly to Todd Simmons.

“I think what’s gonna bring others in here is Todd and our group are constantly communicating to hire people with the right values,” Gardner said. “You can teach people how to do the technical aspect of the job, but if you do not have the right values there’s not much we can do. You need to fit into our culture.

“We are in the process of creating our leadership teams and management teams. We want to create an atmosphere that is open and honest … no politics, just shoot straight. We want to attack the problems and not attack our people. We’re focused on turning our attention to problem solving. It’s a challenging process.”

Poultry Problems

The most persistent problem facing Simmons Foods, a mid-sized poultry firm (see chart), faces the same persistent problems as industry giants such as Tyson Foods Inc.

For several years there has been a glut of meat in the marketplace. And now export problems, particularly with Russia, are wrecking havoc.

Fortunately, life was very good for poultry companies throughout the 1980s and much of the 1990s, allowing even the mid-sized and smaller firms to build up large reserves. Those companies have been hitting the reserves hard the last few years.

There are still gray skies in the 2003 forecast. But Todd Simmons believes things could warm up if the industry would just execute the plan it has been talking about for years.

Companies say they’re going to cut back on production so the meat glut will begin to fade. But despite 2002’s industry pressures, Watt Poultry USA magazine said the nation’s largest growers still increased production by 2 percent in 2002.

“There is still more capacity to produce chicken than there is a demand,” Todd Simmons said. “That restraint has yet to be demonstrated as far as I’m concerned. I’m not convinced.

“We have a very dedicated group of people willing to make sacrifices to weather the storm. Not that the storm is over yet. As the industry moves toward consolidation you could see the end of some of that. You’re in business to make a profit. But in order to get a good return on capital the overall industry has to change its mindset.”

The export issue is as cloudy as ever.

The latest proposals by Russia and Mexico to limit imports has forced many poultry firms to reshuffle their marketing schemes. Russia’s latest legislation could place a quota on imports of poultry products by April 1.

Russia and Mexico ranked first and third, respectively, among export markets for United States broiler products in 2002. (Mexico is the largest market for U.S. turkey products.)

“I don’t think anybody is exactly rolling in the dough right now,” said Dick Lobb, director of communications at the National Chicken Council. “Last year was a difficult year. And ’03 is shaping up to be a fairly tough year also. I think all companies are facing a tough road.

“Every company has its own strategy. They try to fill a niche. Some just have more and bigger niches. I don’t think the particular economic conditions this year are going to push anybody to the wall. That said, there is an ongoing consolidation. I do not think we’ve seen the end of consolidation. I think there is continuing pressure for consolidation.”

One bit of good news is ready-to-cook chicken consumption on a per capita basis is up 17 percent from 78 pounds in 1992 to 91 pounds in 2002, according to the National Agriculture Statistics Service. That number has, however, hovered at 90 or 91 pounds since 1999.

Simmons Strategy

Todd Simmons sees a lot of potential in 2003. In particular, the company, which has 3,800 employees in Arkansas, Oklahoma and Missouri, will stay aggressive in pursuing efficiency.

“I believe we will grow our share in the market place and utilize our internal capacity,” he said. “I think it will be a pretty good year. We will continue to build and strengthen customer relationships while diversifying our customer base to additional folks out there in the food service and retail arenas. We will continue to be very aggressive with our operational and efficiency improvements.

“Overall cost reduction has been our been focus over the last year. There are many market disruptions. We’ve just tried to stay focused on our bread and butter in retail, but you also have to focus on the Russian situation and other market disruptions. We’ll just watch our costs without sacrificing our quality to the customer. And the only way do that is to have great people working for you.”

Simmons Foods is one of the 10 largest privately held poultry processing companies in the United States and is among the top 20 of all broiler processing companies in the U.S. Todd Simmons said although the firm has some capacity available for strategic investments, it’s not looking to make any acquisitions in the near future.

“We just really going to work on paying attention to our knitting,” he said.

Todd Simmons said his father is still making “decisions on daily and weekly basis.”

“[Mark] is in office every day,” Todd Simmons said. “He’s real enjoyable to work with. He’s a very intense person. We’re a lot alike that way and that can create some interesting situations. He’s always been a great mentor for me from the business ethics perspective.”

Labor considerations

Poultry firms have watched closely the proceedings between Tyson Foods and the U.S. Justice Department’s trial in Tennessee, where Tyson Foods has been accused of knowingly hiring illegal immigrants. Simmons Foods’ Web site specifically addresses its hiring practices.

It states:

“Contrary to what some folks have said, Simmons Foods does not recruit people from other countries. While the number of foreign nationals who work at Simmons over the recent past has increased, most come because their friends or relatives have spread the word of good paying jobs — jobs which are available to all qualified workers and pay well over the federal minimum wage. Also available is the opportunity for many benefits.

“As with every other employer in the United States, federal law states that Simmons must confirm an applicant’s status as a legal worker by requiring proof of citizenship or legal residence…”