sanderson farms 2017 corporate responsibility report
TRANSCRIPT
1
SANDERSON FARMS 2017
CORPORATERESPONSIBILITYREPORT
2 3
CORPORATE RESPONSIBILITY STATEMENT 4
COMPANY HIGHLIGHTS 6
A LETTER FROM OUR CHAIRMAN & CEO 8
CREATING LONG-TERM VALUE 10
OUR FINANCES 12
GOOD, HONEST PEOPLE OUR EMPLOYEES 16
EMPLOYEE BENEFITS & COMPENSATION 18
TRAINING 20
SAFETY 22
EMPLOYEE TESTIMONIAL 24
GOOD, HONEST PURPOSE FAMILY FARMERS 28
THIS IS HOW WE GROW OUR CHICKENS 30
ANIMAL WELFARE 32
FAMILY FARMER TESTIMONIAL 34
GOOD, HONEST CHICKEN 36
OUR CUSTOMERS 38
OUR CUSTOMER SERVICE 40
OUR COMMUNITIES 42
GOOD, HONEST PROMISE ELECTRICITY, NATURAL GAS AND WATER 46
WASTEWATER 48
RENEWABLE ENERGY 50
ENVIRONMENTAL SUPERVISOR TESTIMONIAL 52co
nten
tsAs a company committed to being a responsible steward of the environment, we choose to partner with other responsible businesses that share our commitment. Paper products used to publish this Corporate Responsibility Report are 100% Forest Stewardship Council® certified, ensuring the paper came from responsibly managed forests.
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As a company committed to being a responsible steward of the environment, we choose to partner with other responsible businesses that share our commitment. Paper products used to publish this Corporate Responsibility Report are 100% Forest Stewardship Council® certified, ensuring the paper came from responsibly managed forests.
55
AT SANDERSON FARMS, WE BELIEVE IN
GOOD,
HONEST CHICKEN,just the way nature intended it. As a company,
our commitment to honesty and transparency
extends far beyond our fresh chicken products.
Our good, honest people are dedicated
to producing quality products and fulfilling the
company’s good, honest purpose of
maximizing shareholder value while feeding a
growing world. As the nation’s third largest poultry
producer, we extend a good, honest promise to operate responsibly with respect to the
environment and communities in which we live.
4 5
CORPORATE RESPONSIBILITY STATEMENT
As a public company, our primary responsibility is to create long-term value for our shareholders. Over the last 70 years, we have created outstanding shareholder value through our strategy of internal growth, conservative financial management and a relentless focus on operational efficiency. But our success has depended on more than these fundamentals. A key part of our strategic plan has always been an emphasis on our environmental and social responsibility.
Our success is directly tied to the success of many individuals, the state of our communities, the future of the environment, the health and well-being of the animals we raise and the satisfaction of our customers. We believe we can maximize shareholder value and create a sustainable future for our company only if we consider the interests of all of these stakeholders.
We must ensure that our company will not only survive for the long-term, but will also thrive. We believe that continuing to prioritize sustainable business practices in our operations is critical to our success over the next 70 years and beyond.
“As we continue to move the company
forward, we will do so without losing sight of our traditional values.”
Joe Sanderson, Jr.
6 7
9 FEED MILLS
12 PROCESSING PLANTS
1 PR
EPARED FOODS DIVISION &
3.3 $
* Estimated: Assumes Tyler, TX opens 1st Quarter 2019 and reaches full production in 2nd Quarter 2020. Assumes Hammond & Hazlehurst return to Big Bird Debone in 2020.
* Numbers include Tyler, Texas facility (under construction)
GROWTH
9.2% SAFM
OUR LOCATIONS
WE SELL OUR PRODUCTS INTO
ALL
STRONG TRACK RECORD OF
BILLION IN ANNUAL
SALES
(POUNDS PROCESSED IN MILLIONS)
our company
TEXAS BRYAN, TX WACO, TX PALESTINE, TX TYLER, TX*
MISSISSIPPI LAUREL, MS COLLINS, MS HAZLEHURST, MS MCCOMB, MS FLOWOOD, MS
1998
1997
722 MILLION
4,291 MILLION
4,902 MILLION*PROJECTED
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
*
2019
*
2020
*LOUISIANA HAMMOND, LA
GEORGIA MOULTRIE, GA ADEL, GA
NORTH CAROLINA KINSTON, NC ST. PAULS, NC
TYSON, 19.4%PILGRIM’S, 17.2%
KOCH
, 5.6
%
PER
DU
E, 7
.0%
OUR LATEST COMPLEX IS BEING BUILT IN
TYLER, TX
11 HATCHERIES
9.2%
SANDERSON FARMS
PERC
ENTA
GE OF POUNDS EXPORTED
MIDDLE EAST
ALL OTHER
CENTRAL ASIAMEXICO
50 STATES & 50 DIFFERENT
COUNTRIES
NEARLY
14%20%
58%
8%
8 9
At Sanderson Farms, we take our obligations as a publicly held company seriously,
and recognize that our primary responsibility as managers of a public company is
to increase the value of our shareholders’ investment. Following our initial public
offering in 1987, we set about meeting this responsibility by maximizing the
profitability of our existing assets and pursuing an organic growth strategy that has
been unique in our industry.
Our approach has resulted in tremendous growth for our company. When we
completed our initial public offering, we had four poultry processing plants, related
live production assets and one prepared foods plant in two states. Today, we have
11 processing plants, related live production assets and one prepared chicken plant
located in five states.
Sanderson Farms’ sales have grown from $150 million at the time of our initial public
offering to over $3.3 billion during fiscal 2017. Our pounds produced have increased
from 722 million to 4.3 billion. We now have 15,000 employees, contracts with 1,000
independently contracted poultry producers and customers around the globe. We will
open our newest poultry complex during the first calendar quarter of 2019.
The company’s growth would not have been possible without an investment in our
people. Managing our business responsibly and consistently includes providing our
people with competitive compensation, outstanding benefits, personal and professional
development opportunities, a safe environment in which to work and the opportunity
to give back to their local communities.
Our focus on our people is only one of the ways we have worked to foster our growth.
In this report, you will read about the efforts we are making to develop sustainable
practices, to create a safe workplace, raise our chickens, responsibly engage with our
communities, respect the environment, respond to our customers and consumers, and
manage our finances. You will also read about our specific achievements in these areas
to date. We believe these efforts will help to maximize shareholder value and ensure
our future success.
No doubt, we have more work to do. But we are fortunate to be led by a motivated,
smart and incredibly diverse group of employees who are driven to make our company
the best in our industry by every measure.
Joe F. Sanderson, Jr.
Chairman of the Board and Chief Executive Officer
A LETTER FROM OUR CHAIRMAN & CEO
10 11DIRECT LINK BETWEEN SUCCESSFUL EXECUTION OF GROWTH STRATEGY AND SHAREHOLDER VALUE
CREATING LONG-TERM VALUE
STO
CK
PRIC
E
$ 100
$ 150
$ 200
$ 50
$ 0
1000
0
2000
3000
4000
5000
1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
* Source: Bloomberg Finance L.P, June 2018
LOW COST PRODUCERAs one of the industry’s most efficient producers, we are well
positioned to capture market share. Upper management meets
annually with all key managers to set strict operational goals for
the year and to measure achievement of the previous year's goals.
FAVORABLE PRODUCT MIXAll production is focused on the customer markets that have
historically been the two most profitable throughout the cycles
in our industry.
STRONG BALANCE SHEETWe manage and maintain an appropriate capital structure,
recognizing that our organic growth has created value for
our shareholders. Our strong balance sheet enables growth
even during industry downturns which are characteristic of a
commodity business.
EFFECTIVE CORPORATE GOVERNANCEOur strong and experienced board of directors oversees
management and our strategic plan and engages directly
with our shareholders.
NET
SAL
ES A
ND
PO
UN
DS
SOLD
(MIL
LIO
NS)
POUNDS SOLD (RIGHT AXIS)
NET SALES (RIGHT AXIS)
SANDERSON FARMS INC. STOCK PRICE (LEFT AXIS)
ATTRACTIVE GROWTH PROFILE
After more than 70 years in business, our company has a
track record of generating strong internal growth and a history of delivering above average
returns relative to our peers.
11
12 13
$0
$250
$300
$200
$150
$100
$50
DISCIPLINED CAPITAL ALLOCATION
COLLINS EXPANSION
PREPARED FOODS
GEORGIA COMPLEX
AIRCRAFT
MAINTENANCE
WACO COMPLEX
KINSTON COMPLEX
TYLER COMPLEX
GENERAL OFFICE
PALESTINE COMPLEX
ST. PAULS COMPLEX
OUR FINANCES
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
CAP
ITAL
EXP
END
ITU
RES
(MIL
LIO
NS)
POULTRY POUNDS SOLD (MILLIONS)SUSTAINABLE ORGANIC GROWTH ACROSS MARKET CYCLES
0
4000
3000
2000
1000
500
1500
2500
3500
4500
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
4,248
3,765
3,455
3,0663,0382,9562,800
2,5812,4632,399
2,0491,809
1,5801,537
TRACK RECORD OF DELIVERING EXCEPTIONAL SHAREHOLDER RETURNSTHREE-YEAR TOTAL SHAREHOLDER RETURN (TSR)
200 %
0 %
20 %
-20 %
40 %
60 %
80 %
100 %
120 %
140 %
160 %
180 %
PEER AVERAGE
SANDERSON FARMS
S&P 500
January 2016 January 2017
* Source: Bloomberg. Data as of 7/18/18. Peers include Dean Foods Company, Hormel Foods Corporation, Pilgrim’s Pride and Tyson Foods, Inc.
+40.5% TSR vs. PEERS+14.2% TSR vs. S&P 500
12CONTINUED CONSERVATIVE STEWARDSHIP OF OUR BALANCE SHEET IS AT THE CORE OF OUR LONG-TERM STRATEGIC PLAN, AND WILL HELP ENSURE FINANCIAL SUSTAINABILITY.
14 15
At Sanderson Farms, we believe that all of the people who are connected to our business should be treated with absolute respect and integrity. Our more than 15,000 employees are the core of our operation. Therefore, our board of directors and our management team see employee welfare as integral to our company’s strategic plan and our long-term success.
In order to attract, retain and motivate a diverse team, Sanderson Farms strives daily to foster an environment where employees are safe, compensated equitably, included and appreciated for their contribution. To promote individual effectiveness and success, our employees have access to valuable educational resources such as a comprehensive training program that includes management training, mentoring, safety training and operational training. These programs both enhance our company’s prosperity and create transferable skills for our workforce.
As an equal opportunity employer with a zero tolerance policy on discrimination in any form, Sanderson Farms aims to create an environment where differences are recognized, understood and appreciated. We believe that our commitment to inclusiveness inspires innovation and promotes a corporate culture in which our team members are dedicated to helping their associates be successful and fulfill their potential in all aspects of life.
GOOD
, HON
EST
PEOP
LE
GOOD, HONEST
people
16 17
WHITE
MALE
OUR EMPLOYEESSanderson Farms works hard to maintain a diverse workforce and promote an environment that values respect, dignity and the professional growth of our people. We believe it is the responsibility of every employee, from chief executive officer to line operator, to make our company a place where each individual is rewarded on the basis of his or her achievement and contribution, rather than by any other measure. The company has a strict written policy prohibiting discrimination by any employee at any level, including discrimination based on race, color, religion, sex, pregnancy, disability, medical condition, national origin, ancestry, age, veteran status, marital status, sexual orientation and gender identity. Our board of directors leads our diversity and inclusion efforts by example as 38 percent of our directors are women and 23 percent are minorities.
PEOPLE
HOURLYEMPLOYEES
ASIAN MALE
TWO OR MORE RACES FEMALE
SALARIEDEMPLOYEES
88% Sanderson Farms employees
that are women and minorities, including the 50% represented on our
management team
46%Sanderson Farms employees
that are female, including the 25% represented on our
management team
BLACK
MAL
E
BLACK FEMALE
*Based on demographics for fiscal 2017
WHITE FEMALE
MALE FEMALE
HISPANICHISPANIC
EMPLOYEE RETENTION WOMEN ON THE BOARD
*MORE THAN 16%
of employees have been
employed with the company
for 10 or more years
*MORE THAN 30% of employees have been
employed with the company
for five or more years
*MORE THAN 4%
of employees have been
employed with the company
for 20 or more years
BEVERLY HOGAN
DIANNE MOONEY
GAIL JONES PITTMAN
SUZANNE MESTAYER
TONI D. COOLEY
*Numbers do not reflect facilities that had yet to reach five years of operation in 2017.
OTHE
R M
ALE
OTHER
FEMALE
BLACK MALE
BLACK FEMALE
Sanderson Farms was named a winning company by 2020 Women on Boardsfor the past six consecutive years for having a diverse board of directors.
5YEARS
10YEARS
20YEARS
WHITE MALEHISPANIC FEMALE
HISPANIC MALE
WHITEFEMALE
EMPLOYEE DIVERSITY
AMERICAN INDIAN/ ALASKA NATIVE MALE
TWO OR MORE RACES MALE
AMERICAN INDIAN/ ALASKA NATIVE FEMALE
ASIAN FEMALE
18 19
LONG-TERMDISABILITYINSURANCE
$15 OR LESS
GENERIC
PRESCRIPTIONS
AFFORDABLEVISION &DENTALINSURANCE
AFFORDABLEHEALTHINSURANCE
EMPLOYEE COMPENSATION & BENEFITSAs a leader within the poultry industry on employee compensation, Sanderson Farms offers team members a highly competitive pay and benefits package that includes a 401(k) plan, an employee stock ownership plan, and comprehensive and affordable health care plans. Over 71.5 percent of our employees participate in our 401(k) plan, to which the company contributed more than $8.4 million in 2017. Employees are 100 percent vested in their 401(k) account upon enrollment. In addition to employee compensation and retirement planning, Sanderson Farms paid over $42 million in premiums for the more than 10,600 employees who elected to participate in our health insurance plans. To ensure the continued health and wellness of our team members, Sanderson Farms offers workplace wellness programs including free annual wellness screenings, health fairs, wellness classes, gym reimbursement, a walk-to-run program and our annual “5K Chicken Runs.”
ESOP PROGRAM
In 2017, Sanderson Farms contributed $18 million to the
company’s employee stock ownership plan. The plan’s value
exceeded $192 million as of the end of fiscal 2017.
401(K) MATCHING
Sanderson Farms employees are eligible for 401(k) matching after
only one year of employment. The company matches the first three
percent of employee contributions dollar-for-dollar.
Sanderson Farms employees are eligible for educational benefits
such as reimbursement of college tuition and high school
equivalency exams after only one year of employment.
TUITION REIMBURSEMENT
In 2017, more than
9,000 employees participated
in 20 free health fairs across all
facilities in which health care
professionals checked their glucose,
cholesterol, blood pressure and BMI.
PEOPLE
SANDERSON FARMS OFFERS EMPLOYEES PAID VACATION BASED ON TENURE AND EIGHT PAID HOLIDAYS ANNUALLY
Employees are eligible for the employee
stock ownership plan after one year of
consecutive employment at zero cost to
the employee. The company contributes
money to the plan based on the board
of director’s recommendations.
75/25SANDERSON FARMS PAYS 75% OF HEALTH PREMIUMSFOR EMPLOYEES & THEIR FAMILIES
20 21
TRAININGTo promote individual effectiveness among our team, Sanderson Farms provides personal and professional development opportunities for employees at every level of seniority. These include leadership and management training and mentoring programs. We also conduct safety and operational training that encourages employees to incorporate sustainable thinking and practices into their everyday responsibilities. Our commitment to providing advancement opportunities to our associates requires a specialized team who trains employees on company policies, procedures and standards of operation. Our courses cover job-related skills such as good manufacturing practices, animal welfare and food security, as well as personal development topics like trust, teamwork, collaboration and communication skills. By investing in training and development, Sanderson Farms supports creativity in the workplace, employee job satisfaction, positive interpersonal relationships and greater employee participation in the process of setting company goals. The company recognizes that with a mobile and evolving workforce facing increased automation, helping our people develop transferable skills is critical to our long-term success.
PEOPLE
23 SPECIALIZED TRAINERS WHO TRAIN EMPLOYEES ON A VARIETY OF TOPICS INCLUDINGANIMAL WELFARE, GOOD MANUFACTURING PRACTICES, SAFETY, FOOD SECURITY, ENVIRONMENTAL
CONSERVATION, HEALTH AND WELLNESS, COMMUNICATION SKILLS, TRUST AND TEAMWORK.
IN 2017, SANDERSON FARMS
INVESTED MORE THAN
$4.3 MILLION IN EMPLOYEE TRAINING AND DEVELOPMENT
22 23
PEOPLE
Fost
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arm
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Peco
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ds
Tyso
n Fo
ods
Keys
tone
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ds
Koch
Foo
ds
Perd
ue F
arm
s
Geo
rge’
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Way
ne F
arm
s
Mou
ntai
re F
arm
s
Pilg
rim’s
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ford
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rms
#1RANKED
As of April 2017, Sanderson Farms ranked #1 in the poultry industry in terms of fewest OSHA violations per 1,000 employees.
1 3 3 3 4 4 5 6 6 6 7 17 74
IN FISCAL 2017, SANDERSON FARMS RECEIVED ONLY TWO OSHA CITATIONS OUT OF MORE THAN 15,000 EMPLOYEES AND ONLY ONE CITATION WAS CONSIDERED “SERIOUS.”
FOR OUR EMPLOYEES, ADHERENCE TO SAFETY POLICY IS A CONDITION OF EMPLOYMENT AND THE COMPANY MAINTAINS A STRICT POLICY AGAINST
RETALIATION TO ENCOURAGE EMPLOYEE REPORTING OF SAFETY CONCERNS.
OSHA Violations per 1,000 Employees Jan. 1, 2010 through Dec. 31, 2016 (as of April 2017)
Sources: ProPublica analysis of Occupational Safety and Health Administration data.
Sanderson Farms is heavily invested in the well-being of our workforce because we know our people are our most valuable assets. Our occupational health and safety programs are overseen by the president’s safety committee, which meets quarterly to set specific goals and measure attainment of those goals. We have identified and developed a new safety training program to educate our team members on both a monthly and annual basis about how to incorporate safety practices into their roles at Sanderson Farms, and how their safety record compares to their goals. Through this safety training initiative, our employees are coached extensively on process safety management, lockout/tag-out, hazard communication, confined space entry, fire extinguishers and ergonomics. We keep our line speeds significantly below the industry average to reduce employee stress and injuries. Outside consultants and ergonomists also audit our practices and continuously update our safety policies to ensure the continued welfare of our team. Our executive management team receives a report every Monday morning on the previous week’s safety record at all locations, keeping safety top of mind in all we do.
SAFETY
BOARD CERTIFIEDPROFESSIONALS
OUR IN-HOUSE SAFETY PROFESSIONALS COMPLETE AT LEAST 20 HOURS OF CONTINUING EDUCATION ANNUALLY
Sand
erso
n Fa
rms
24 25
While it is important that managers have a good grasp
of company operations, at Sanderson Farms, it is even
more important that managers value the people whom
they manage.
Kwanza McCoy, plant manager at McComb Processing,
recognizes her responsibility to be kind to the employees
under her leadership and direction.
“Anyone in leadership must understand that we
are managing people who have families as well as a
career, and help them to find a balance between both,”
said McCoy.
After working her way up the company’s ranks from
her start as a beginning trainee, McCoy was the first
African-American woman to be named a plant manager in
Sanderson Farms’ history.
“At Sanderson Farms, there is no glass ceiling, and anyone
who is self-motivated and goal driven can achieve any goal
they set for themselves,” said McCoy.
For those who just started their career with the company,
McCoy has an inspiring message.
“Never despise small beginnings,” said McCoy. “With a
strong work ethic and goal setting, you can accomplish
anything you desire with our company.”
“PEOPLE
KWANZA MCCOYMCCOMB PROCESSING PLANT MANAGER
25
26 27
Our social responsibility is not limited to the good treatment of our employees. The more than 1,000 independent family farmers who grow our chickens are vital to our operation. We have worked hard to create a competitive program that rewards our farmers for their performance and contribution to our results. As a poultry producer, we are also responsible for the welfare of the millions of animals we raise. We are proud to have one of the highest livability rates in the industry for our birds, which is a direct result of the quality of our animal welfare program. Through our vertically integrated model, we are able to ensure all of our chickens receive high-quality feed, are housed in state-of-the-art housing and receive the veterinary care necessary for a high-quality life.
Growing healthy birds is the first step toward providing safe and quality food products for our consumers and customers. We must also respond to consumer preferences and customer needs. As a company, we continuously monitor consumer sentiment about our brand and the factors that our customers and consumers consider most important when they purchase chicken. Our research shows that customers and consumers purchase primarily based on price, quality, freshness and customer service. Consequently, we have prioritized these factors in our business plan.
We could not maximize shareholder value without engaging with the communities where we do business. Whether that means being a good neighbor through charitable giving and disaster relief or providing employment opportunities for thousands of people in rural areas, we understand that our success is tied to the success of the communities in which we operate.
GOOD, HONEST
purpose
GOOD
, HON
EST
PURP
OSE
28 29
PURPOSE
FAMILY FARMERSDuring fiscal 2017, we contracted with over 1,000 independent family farmers who produced more than
4.3 billion pounds of affordable chicken to feed people around the world. Recognizing the talent and
investment that our contract producers provide the company, we were the first in the industry to offer
long-term, 15-year contracts with our growers more than 20 years ago. Under these agreements, Sanderson
Farms provides chickens, feed, veterinary care, supervision and advice to growers. In return, our growers
follow modern animal husbandry techniques and our environmental standards to ensure our flocks are
efficient, healthy, well fed and watered, and are raised in clean, safe and humane conditions. Because we
provide chickens and feed to our growers, they are insulated from market swings that are characteristic
of commodity markets. This makes poultry production in our vertically integrated model one of the most
stable, profitable and rewarding endeavors available to family farmers. The predictable cash flow generated
under our contracts often allows growers to pursue other interests, both on and off the farm.
550MILLION CHICKENS
IN 2017, OUR FAMILY
FARMERS RAISED OVER
HOUSED IN NEARLY
MORE THAN 49% OF OUR FAMILY FARMERS
10 OR MORE YEARSHAVE MAINTAINED A CONTRACT WITH THE COMPANY FOR
STATE-OF-THE-ART POULTRY HOUSES THAT ARE MONITORED DAILY TO ENSURE OUR CHICKENS RECEIVE QUALITY AIR, SUSTAINABLE POULTRY BEDDING AND THE PROPER NUTRITIONAL DIET.6,000
*Numbers do not reflect production facilities that had yet to reach ten years of operation in 2017
PURPOSE
30 31
As a global food producer providing chicken to nearly all 50 states and more than 50 countries, Sanderson Farms is making great strides toward feeding a growing and hungry world with a product that is healthy, affordable and sustainable. Over the last 20 years, the United States population alone has increased by nearly 30 percent. Considering that the average American consumes approximately 90 pounds of chicken annually according to the National Chicken Council, it is evident that the demand for sustainably grown poultry products in the United States and the world will steadily increase.
THIS IS HOW WE GROW OUR CHICKENS
THIS IS HOW WE FEED A GROWING WORLD
1
2
3
TO BEGIN, SANDERSON FARMS PURCHASES YOUNG BREEDER CHICKENS CALLED PULLETS
FROM A PROFESSIONAL BREEDER BASED ON THEIR UNIQUE,
NATURAL GENETIC MAKEUP
AFTER 22 WEEKS, MATURE PULLETS ARE TRANSPORTED TO BREEDER FARMS WHERE THEY
PRODUCE FERTILE EGGS
THOSE FERTILE EGGS ARE THEN BROUGHT TO
OUR HATCHERIES WHERE THEY ARE INCUBATED
AND HATCH INTO YOUNG CHICKS 21 DAYS LATER
PURPOSE4
6
5
FAMILY FARMERS RAISE OUR CHICKS ON BROILER FARMS FOR APPROXIMATELY
49 TO 63 DAYS, DEPENDING ON DESIRED MARKET WEIGHT
ONCE THEY REACH MATURITY, OUR BIRDS ARE TRANSPORTED TO THE PROCESSING FACILITY
WHERE THEY ARE PROCESSED HUMANELY, THOROUGHLY CLEANED AND CHILLED
OUR CHICKEN PRODUCTS ARE THEN INSPECTED, PACKAGED AND SHIPPED TO CUSTOMERS AROUND THE GLOBE
32 33
“Our position on antibiotics is aimed
at caring for animals, consumers and the
environment.”Dr. Phil Stayer
Corporate Veterinarian
PURPOSE
ANIMAL WELFAREAt Sanderson Farms, we take very seriously our obligation to ensure the health and well-being of the hundreds of millions of chickens we grow each year. Our animal welfare programs are audited at least twice per year by internal and third-party professionals to ensure all live birds are handled in a safe and humane manner. Sanderson Farms’ internal quality programs actually exceed industry requirements. Our farmers monitor their flocks’ environment on a daily basis to ensure proper air quality, bedding and plentiful food and water. They also follow a state-of-the-art biosecurity program to reduce the possibility of disease in the chickens and to protect them from wild birds and animals. Since our flocks are raised on the ground and not in cages, Sanderson Farms’ team of nationally board-certified veterinarians monitors flocks for diseases associated with soil-borne organisms such as parasites and bacteria, and treats them with FDA-approved antibiotics when necessary. The only time Sanderson Farms’ birds are ever caged is for their safety when transported from the farm to the processing facility. We are able to benchmark our flocks’ performance against our peers, and know our live birds set the industry standard in terms of performance, livability, health and wellness. This supports our belief that our animal welfare programs are second to none.
4MOver 4 million
tons of feed produced
annually in feed mills owned
and operated by Sanderson Farms
ALL Sanderson Farms’ feed is formulated
and approved by a corporate
nutritionist and is made from all
natural ingredients
100% Natural
42% of production
costs are dedicated to purchasing
feed ingredients necessary to ensure
our birds receive a balanced diet
99% Sanderson Farms’
average audit score for animal welfare practices in 2017, as rated by the National Chicken Council
%
METRICS FROM SANDERSON FARMS’ FEED FACILITIES ARE REVIEWED DAILY, WEEKLY, QUARTERLY AND ANNUALLY TO MAXIMIZE FEED EFFICIENCY AND PERFORMANCE.
34 35
“EDMONDSON POULTRY FARMKINSTON PRODUCTION FAMILY FARMER
Originally a row crop producer, Brooks Edmondson, owner
of Three Sons Poultry, took a leap of faith when he built his
first four poultry houses for Sanderson Farms in 2011.
“I learned that the broiler manager, division manager and
flock supervisor can be your life line,” said Edmondson.
“And I have never questioned their devotion to my success.”
According to Edmondson, working as a grower for
Sanderson Farms has been a great experience for his family,
and particularly his three sons.
“It’s been a good thing for my boys as far as learning how to
work,” said Edmondson. “They have the opportunity to get
out and actually see what it’s like to have to earn a dollar.”
After experiencing success with poultry farming,
Edmondson expanded his farm, adding four more broiler
houses to his original four. He said his initial hesitation
about the new farming venture has turned to confidence
because of the help he received from Sanderson Farms
employees.
“I couldn’t have asked for better people to help me along this
journey because I knew nothing about growing chickens,”
said Edmondson. “They’ve been a great group of people to
work with, and if I’ve ever had a question, rest assured I’ve
received an answer quickly.”
PURPOSE
36 37
PURPOSE
GOOD, HONEST CHICKENIn an environment where food production buzzwords such as “hormone
free,” “antibiotic free” and “organically raised” are more and more
common, we continue to be transparent about how we raise our chickens.
For example, under federal law no poultry producer may use hormones
to grow chickens. Therefore, we don’t market our chicken with a
“hormone free” claim.
Despite another trend in the protein industry to market products as
“antibiotic free,” we have remained true to our principles about animal
welfare, environmental stewardship and food safety. We have decided
to use antibiotics judiciously to prevent and treat disease in our birds.
Healthy birds require fewer natural resources and bird health enhances
the safety of our products.
At Sanderson Farms, we never use antibiotics for growth promotion, and
medicine is only administered under the supervision of a licensed, board-
certified poultry veterinarian. In fact, most antibiotics used to treat
chickens are not used in human medicine at all. A class of antibiotics
known as ionophores and non-antibiotic coccidiostats are commonly used
to treat chickens.
If compared pound for pound, people and pets use ten times the amount
of antibiotics used in food animal production. Sanderson Farms has
never been cited by the United States Department of Agriculture or any
other regulatory body for violation of any residue law, rule or regulation.
In 2017, all of our facilities earned an AA score, which is the highest
grade awarded by the British Retail Consortium (BRC), a third party
consumer protection organization.
At Sanderson Farms, we have remained
transparent about our production of good,
honest chicken.
* If all United States poultry producers converted all their
products to be antibiotic-free, an
estimated 680 to 880 million more birds would be needed to supply the United
States with the same amount of chicken produced today.
* Chickens raised without antibiotics use an estimated 5.4 to 7.2
million more tons of feed annually than equivalent
conventionally raised poultry, which requires 655 to 873 more miles of grain-filled rail cars and hundreds of thousands
more acres of land for grain.
* Chickens raised without antibiotics
consume an estimated 3 billion more gallons
of water annually than the same number
of birds raised with the judicious use of antibiotics, which
would fill more than 4,500 Olympic-sized
swimming pools. * Sources available upon request.
38 39
OUR CUSTOMERSAs a poultry producer, long-term sustainability requires a marketing strategy that evolves with the preferences of our customers and consumers. By monitoring consumer sentiment using independently collected consumer data, brand tracking studies and direct engagement with consumers through social media, we are able to react to customer and consumer demands. Sanderson Farms is recognized as a leading producer of fresh, affordable and high-quality chicken products. Our track record indicates that our straightforward product mix focused on fresh chicken for domestic customers and frozen chicken for our export partners is a sustainable approach.
In July of 2016, following a significant amount of consumer and market research, Sanderson Farms launched a bold consumer education advertising campaign focused on addressing misconceptions surrounding the use of antibiotics in poultry production, as well as prevalent misleading claims within the marketing of poultry products in today’s marketplace. Our message has generated a significant number of consumer responses. When we receive those messages, Sanderson Farms makes it a priority to respond directly to their questions, comments, complaints, emails or social posts.
Sanderson Farms cannot say we value transparency and engage in a campaign that seeks to educate consumers on common poultry misconceptions without taking an earnest role in responding to our customers and consumers alike. We spend countless hours and resources communicating with our customers and consumers, providing answers, materials and addressing their concerns. This engagement also allows us to better determine what our customers and consumers want from us as a poultry producer.
As a company, we have been totally transparent regarding our judicious use of FDA-approved antibiotics in poultry production. Since we began engaging with the public regarding this position, we have been provided many opportunities to further engage with our customers on the topic, and they have appreciated our honesty, transparency and commitment to animal welfare. Our customers know consumers want and deserve choices. They want to provide consumers with a choice between chicken labeled with “never-ever” claims for which some consumers are willing to pay more, and our high-quality, conventionally-raised chicken products, which are more affordable.
PURPOSE
OUR CONSUMER EDUCATION CAMPAIGN HAS RESONATED WELL WITH OUR CUSTOMERS AND CONSUMERS, WITH POSITIVE CONSUMER SENTIMENT AVERAGING 83 PERCENT.
SANDERSON FARMS’ COMMITMENT
TO SUPERIOR CUSTOMER
SERVICE IS EVIDENCED
BY OUR ON-TIME
DELIVERIES AND OVERALL RESPONSE TO
CUSTOMER NEEDS.
“BEST INCLASS”
ORDER FULFILLMENT RATES
39
40 41
PURPOSE
OUR CUSTOMER SERVICEThere are good reasons our market share in the poultry industry has increased 74 percent over the last ten years. Sanderson Farms’ commitment to superior customer service is evidenced by our “best-in-class” order fulfillment rates, on-time deliveries and overall response to customer needs.
We enjoy a reputation for going above and beyond to meet customer demand, whether it entails adding a shift on Saturday or converting a plant to run a different product mix. The variety of our customer base allows us flexibility to rapidly respond to changing market conditions and product preferences. We understand that our success as a company greatly depends on the success of our customers.
Over the years, the company has continued to expand through thoughtful and carefully calculated new construction. All Sanderson Farms locations are strategically placed in close proximity to our domestic customers, allowing for the most efficient transportation of goods and resulting in delivery of the freshest, highest quality chicken possible. In fact, all Sanderson Farms chicken is hatched, raised and harvested in the United States.
Our commitment to quality, our production flexibility, our transparency and our constant and individual engagement with our customers and consumers has earned us a reputation over the past 70 years of which we are proud. These same attributes will sustain us going forward for the next 70 years.
GOOD, HONEST CHICKEN
24 HOURS
OUR EXCELLENT LOGISTICS TEAM AND STRATEGIC
PLANT PLACEMENT ENSURES THAT MOST ALL
FOUND IN GROCERY STORES WAS PACKAGED AND DELIVERED
FOR RETAIL AND WHOLESALE DISTRIBUTION WITHIN
OF BEING HARVESTED.
4140
42 43
Over $5 million donated since 2013 by the Sanderson Farms
Championship to Friends of Children’s Hospital in Jackson, Mississippi
$5M+given to United Way by Sanderson Farms and its
employees in 2017
$633,318($2,830,000) donated to
charitable and community organizations in fiscal year 2017
$2.8M
OUR COMMUNITIESAn important part of our corporate mission is to give back to the people and communities who have supported our business since our beginnings as a family-owned feed and seed store. We have implemented our charitable giving program because it is the right thing to do and because the success of our communities will enhance our long-term shareholder value. Our business will not be sustainable without success and economic opportunity in the communities where our workforce and consumers live. Not only do we strive to be a good neighbor and corporate citizen, but we encourage our employees to do so as well by providing employee giving programs that are matched equally with company contributions. The company matches dollar-for-dollar every employee donation made to the United Way organizations in the communities in which we operate.
PEOPLE
SINCE 2013, SANDERSON FARMS HAS DONATED
1.4 MILLION POUNDS (1,430,675) OF POULTRY TO CHARITABLE ORGANIZATIONS.
MORE THAN
$2 MILLIONDONATED TO THE AMERICAN RED CROSS AND SAMARITAN’S PURSE FOR DISASTER RELIEF EFFORTS IN 2017.
PURPOSE
44 45
Since 1991, Sanderson Farms has expanded its operations and weekly processing capacity by more than 608 percent, surpassing all other poultry companies in organic growth. Spurred by our growth, we have continued to improve the efficiency of our operations in part by incorporating new technology that helps to conserve and recycle natural resources. By using automated and ergonomic technology throughout our facilities, we have also reduced labor and utility costs as well as increased employee safety.
Sanderson Farms tracks the daily usage of electricity, gas and water at each of our poultry complexes and sets aggressive goals every year to reduce our impact on the environment. Our use of these natural resources and utilities are measured against industry standards per salable pound. As the company grows, this method of measurement will remain constant against baseline values established in 2008 for sustainable growth.
Our facilities are built with an intentional familiarity in architecture to create consistency so that employees who are familiar with one location are able to acclimate to another plant environment very quickly. The concept of consistency has helped the company be successful by cross-training employees so they may adapt more easily to any area of the company’s operations.
GOOD, HONEST
promise
— 2017 ENVIRONMENTAL HIGHLIGHTS —
reduction in electricity usage
at Sanderson Farms’
production and processing
facilities since 2008
24%reduction in natural gas
usage at Sanderson Farms’
production and processing facilities since
2008
44%reduction in
water usage at Sanderson
Farms’ production
and processing facilities since
2008
41% 15%
reduction in natural gas
usage for 2017 alone as a result
of renewable energy generated by capturing and refining biogas
GOOD
, HON
EST
PROM
ISE
46 47
0.0500
0.0600
0.0700
0.0800
0.1100
0.1200
0.0900
0.1000
CORPORATE ELECTRICITY USAGE
KILO
WAT
T H
OU
RS
(KW
H) /
SAL
ABLE
LB
0.1400
0.1500
0.1300
FY 09 FY 10 FY 12 FY 13 FY 14FY 08 FY 11 FY 16 FY 17FY 15
0.1374
0.1295
0.1238
0.1298
0.1176
0.1404
KIN
STO
N C
OM
PLEX
BEG
INS
OPE
RATI
ON
0.1429
WAC
O C
OM
PLEX
BEG
INS
OPE
RATI
ON
0.1112 0.1093
0.1155
PALE
STIN
E CO
MPL
EX B
EGIN
S O
PERA
TIO
N
ST. P
AULS
CO
MPL
EX B
EGIN
S O
PERA
TIO
N
Compared to baseline values established in 2008, Sanderson Farms has reduced its natural gas usage per salable pound by 0.000244 thousand cubic feet (MCF) or by 975,181 total MCFs.
NATURAL GASCORPORATE NATURAL GAS USAGE
0.00010
0.00020
0.00030
0.00040
0.00050
0.00060
FY 09
0.000513
FY 10
0.000482
FY 12
0.000407
FY 13
0.000386
FY 14
0.000370
FY 08
0.000561
WAC
O C
OM
PLEX
BE
GIN
S O
PERA
TIO
N
FY 11
0.000471
KIN
STO
N C
OM
PLEX
BE
GIN
S O
PERA
TIO
N
FY 15
0.000355
PALE
STIN
E
BEG
INS
OPE
RATI
ON
FY 16
0.000335
FY 17
0.000317
MC
F / S
ALAB
LE L
B
PALE
STIN
E
BEG
INS
OPE
RATI
ON
ST. P
AULS
BE
GIN
S O
PERA
TIO
N
PROMISE
WAC
O C
OM
PLEX
BEG
INS
OPE
RATI
ON
KIN
STO
N C
OM
PLEX
BEG
INS
OPE
RATI
ON
PALE
STIN
E CO
MPL
EX
BEG
INS
OPE
RATI
ON
1.0621.093
FY 16 FY 17
GAL
LON
S / S
ALAB
LE L
B
CORPORATE WATER USAGE
ST. P
AULS
CO
MPL
EX
BEG
INS
OPE
RATI
ON
WATERELECTRICITY
Compared to baseline values established in 2008, Sanderson Farms has reduced its water usage per salable pound by 0.748 gallons or by 2,989,490,825 total gallons.
Compared to baseline values established in 2008, Sanderson Farms has reduced its electricity usage per salable pound by 0.0336 kilowatt hours (kWh) or by 134,287,288 total kWhs.
Sanderson Farms tracks the daily usage of electricity, gas and water at each of our poultry complexes and sets aggressive goals every year to reduce our impact on the environment.
SUSTAINABLE OPERATIONS
48 49
In 2017, we collected 12,670 samples of
wastewater to monitor groundwater quality as dictated by regulatory agencies. Sanderson
Farms received zero penalties for
violation of wastewater permits since baseline values were established
in 2008.
WASTEWATERSanderson Farms treats the water that has been used to clean and chill poultry products and sanitize our processing plants at state-of-the-art wastewater treatment facilities. We use biological treatment, oxygenation, clarification and ultra violet disinfection to treat wastewater. Treated water is then either discharged directly into streams or applied to land.
Sanderson Farms uses land application systems to discharge fully treated wastewater at our processing facilities located in Moultrie, Georgia; Kinston, North Carolina and St. Pauls, North Carolina. The company adopted land application systems based on scientific research demonstrating that these systems have been successful at over 2,000 sites across the United States.
When properly designed and managed, land application systems improve the productivity of local ecosystems and protect the quality of groundwater. Sanderson Farms’ land application systems apply fully treated wastewater to soil and vegetative crops, which further treats and renews the water before it is returned to groundwater.
Treated water is applied to land through spray irrigation, which is a slow-rate irrigation process recognized for achieving the highest rate of water renovation and the most beneficial use of nutrients and water. Because water is sprayed at a slow rate, it enters the soil with no runoff or accumulation of standing water.
After absorption into the soil, nutrients from the treated water are managed by the growth and harvest of a variety of different crops, including hay and grain crops. Local farmers harvest the hay crops that have been organically fertilized and irrigated with the treated water and use the hay to feed their livestock. In addition to supporting the growth of grass and grain crops, land application systems also fertilize and irrigate local timber crops.
Harvesting the crops and trees removes and recycles the nutrients in the treated water. Therefore, the use of standard farming practices provides an indefinite life cycle for wastewater land application. To ensure our land application systems have a positive effect on the environment, we monitor groundwater quality by installing groundwater monitoring wells before spraying any treated water in order to establish baseline groundwater quality.
By implementing the land application system, Sanderson Farms uses a sustainable environmental practice that eliminates direct discharge to sensitive water bodies. This state-of-the-art process allows the company to replenish natural water sources, support stream flow and propagate vegetative cover while organically fertilizing farmland and irrigating crops.
PROMISE
50 51
1.6YEARS
WITH GAS FOR APPROXIMATELY
THE AMOUNT OF RENEWABLE ENERGY OR BIOGASGENERATED
BY SANDERSON FARMS IN 2017 ALONE COULD
SUPPLY SANDERSON FARMS’ KINSTON, NORTH CAROLINA POULTRY COMPLEX
INNOVATING RESPONSIBLY WITH OUR RENEWABLE ENERGY
FY 17 NATURAL GAS VS. BIOGAS USAGE
0
200,000
400,000
600,000
1,200,000
1,400,000
800,000
1,000,000
NATURALGAS
BIO GAS
1367666
218092
THO
USA
ND
CU
BIC
FEE
T (M
CF)
RENEWABLE ENERGYTo fulfill our commitment to innovation and responsible operations, we create renewable energy with a technology that captures and refines biogas generated during our wastewater treatment process. The biogas is generated in covered anaerobic lagoons that are used to process wastewater, and is then treated in a pressure swing adsorption system, resulting in pipeline quality gas that can be used throughout our poultry operations.
Sanderson Farms has increased renewable energy production by incorporating our state-of-the-art wastewater treatment facilities and pressure swing adsorption systems at each new poultry complex we have constructed since 2005. Each time we open a new poultry complex, our renewable energy process takes an additional three years to fully mature and achieve maximum efficiency within our wastewater treatment facilities. As a result, our renewable energy production has gradually increased to the point where we are now collectively able to fuel entire poultry complexes for more than a year solely with renewable energy.
In 2017 alone, Sanderson Farms generated 218,092 MCFs of biogas, significantly reducing the company’s dependency on natural gas. By using these innovative processes, Sanderson Farms strives to fulfill its good, honest promise to operate our facilities in a way that reduces our impact on the environment.
PROMISE
CORPORATE RENEWABLE ENERGYTHOUSAND CUBIC FEET (MCF)
0
25,000
50,000
75,000
150,000
175,000
100,000
125,000
225,000
200,000
FY 12 FY 13 FY 15 FY 16 FY 17FY 11 FY 14THO
USA
ND
CU
BIC
FEE
T (M
CF)
66244
189793
218092
196482
184612
KIN
STO
N P
ROD
UCE
S BI
OG
AS
PALE
STIN
E PR
OD
UCE
S BI
OG
AS
125855
WAC
O P
ROD
UCE
S BI
OG
AS
55072M
OU
LTRI
EPR
OD
UC
ES
BIO
GA
S
52 53
“MIKE YAWNCOLLINS PROCESSING ENVIRONMENTAL SUPERVISOR
At Sanderson Farms’ wastewater treatment facilities, the
environmental supervisor aims to minimize the company’s
impact on surrounding natural resources by preserving and
returning to the environment what the company has utilized
throughout our operations.
Environmental Supervisor Mike Yawn at the company’s
Collins, Mississippi processing facility said the innovations
made to wastewater systems in his 16-year tenure with the
company have been quite significant.
“We regularly attend training sessions where new
technologies are presented and demonstrated in the
water and wastewater field,” said Yawn. “We then bring
those technologies back to our Environmental Services
Department for review to see if they would benefit
Sanderson Farms.”
Yawn has a high standard for both himself and his team.
That standard includes a long list of goals for his department
such as zero regulatory violations in water and wastewater,
reduced water usage at his facility and regular maintenance
of the company’s renewable energy system to reduce
dependence on natural gas.
“I believe we should do our part and be a good steward of
all the natural resources we have been blessed with, for
the benefit of ourselves and future generations to come,”
said Yawn.
52
54 55
AT SANDERSON FARMS, WE BELIEVE IN
GOOD, HONEST CHICKEN, just the way nature intended it. As a company,
our commitment to honesty and transparency
extends far beyond our fresh chicken products.
Our good, honest people are dedicated
to producing quality products and fulfilling the
company’s good, honest purpose of
maximizing shareholder value while feeding a
growing world. As the nation’s third largest poultry
producer, we extend a good, honest promise to operate responsibly with respect to the
environment and communities in which we live.
56