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Not chickening out: Evans returns to Peterson Industries Inc. to lead $195 million firm into new markets.

VICTOR EVANS PREFERS not to dwell on why he left Peterson Industries Inc. for 16 months. He's only concerned with being back, ready to lead the agricultural conglomerate's efforts to expand its international presence.

The 44-year-old Evans returned earlier this month to his old post of chief executive officer, in addition to the newly created position of vice chairman. He's somewhat taciturn in responding to why he took the extended leave of absence beginning in August 1992, citing "personal reasons" and saying simply that he "needed to go at the time."

But when asked about reported problems between himself and Peterson founder and Chairman Loyd Peterson -- Evan's father-in-law -- evidence of some past difficulty is implicit in his reply.

"That's what was reported," Evans says, "but if there were any problems before, they're obviously settled. We're both happy now with the situation. I look forward to working with him, and I think he feels the same way."

Evans even downplays the importance of his absence. The company, he says, "has been breaking its own records consecutively for six of seven years, and last year was no exception." Peterson had revenues of $195 million in 1993.

Much of the credit for the continued success rests with Dan Henderson, the man tapped to replace Evans in his absence. Henderson focused on bringing Peterson's newly constructed production facilities up to full capacity; the company now processes about one and a half million chickens a week.

With that task completed, Peterson is turning its sights on expanding its presence in the international marketplace. That's a role well suited for Evans, Henderson says.

"We're glad to have Vic back," Henderson says. "He's always been a healthy part of the company. He's got some really good ideas and strong expertise in the global marketing and international breeder sales ... I see him adding some real strengths to us there."

Evans is pleased with the prospect of a new start and role at the company.

"I think this new organization, if you will, will even be better than before," he says.

The two seem quite compatible. Henderson, 47, joined the firm along with Evans in 1972, working his way up to chief financial officer as Evans ascended to CEO and president before his departure. Now, Henderson will remain president, focusing on the day-to-day operations, while Evans will focus more on long-term planning and global marketing from a small town with a big name around the world.

Down in Decatur

Peterson Industries is omnipresent at its headquarters in Decatur, a small northwest Arkansas burg located at the crossroads of state Highways 59 and 102, creating the town's one, flashing red stoplight. With a population just under a 1,000 people -- about 600 less than Peterson employs -- Decatur is Peterson, and vice versa.

Peterson's role in the community becomes apparent even before entering the city limits as one encounters Peterson hatcheries, feed mills and trucks delivering the company's product.

At the center of this sleepy town is a historic area marked by the Decatur Public Library Museum. Housed in a renovated train depot with a restored 1949 locomotive and car from the Kansas City Southern Railroad on the adjacent track, the two are examples of Peterson largess, donated to the community by the company.

Peterson concerns spread from this epicenter: next door is the company's Crystal Lake division; across the street, the corporate headquarters; looming behind the depot, a large grain silo emblazoned with the Peterson name, a remnant from the company's past. Just down the street is the Decatur Discount Store, Decatur Ag and Auto and the Decatur Pharmacy, all Peterson-owned stores. The local financial institution, the $60 million Decatur State Bank, is owned by Loyd Peterson, who also controls the $25 million Grand Federal Savings Bank of Grove, Okla. The local insurance company and the local propane company are both owned by Peterson.

About the only traffic at the local airfield comes from the company's six planes. The same is true of the town, which seems nearly deserted until shift change at Peterson.

This empire's architect is Loyd Peterson, who founded the company in 1939. At the time, Peterson was running an egg-and-milk cooperative in Decatur. One day he drove over the state line into Missouri, where he bought 500 Rhode Island Red chicks. Back in Decatur, Peterson gave the chicks to local farmers to raise, splitting the profits with them when he sold the chickens to wholesalers in Kansas City, Mo.

From that inauspicious start, Peterson Industries developed into a major corporation.

The three largest divisions are its breeder operation, Peterson Farms; its poultry processing division, Crystal Lake Foods; and the cattle feeding division, run out of Olton, Texas. They comprise about 85 percent of Peterson Industries' revenues.

The remainder comes from cursory businesses such as L&L Farms, the company's cattle breeding operation; Peterson LP Gas, a propane division started to give the company's contract growers a constant supply of propane to heat chicken coops; and Decatur Mutual Indemnity Co., a company started to provide growers with affordable insurance. The company also has facilities in Kansas City, Trion, Ga., and Cullman, Ala.

But the company's claim to fame is its breeder operation, developed from the humble beginnings with the 500 Rhode Island Red chicks. After years of genetic development, the Peterson male breeder is the world leader, capturing 70 percent of the domestic and 50 percent of the international markets.

"That's a bird that's just been developed over years and years and years basically for the reproductive traits that make things really work in this business," Henderson says. "This is historically a very low-margin business where every penny counts, where every quarter of a cent counts, and we've worked on developing the right traits such as growth rate, feed efficiency, livability, carcass yield and things of that nature."

It's with that male bird that the company hopes to continue the growth it has enjoyed particularly over the last decade, as the popularity of chicken has grown.

"I see most of our growth coming through our breeder operations," Henderson says. "We're primarily known for our male line product, the rooster side of the equation, if you will. We're currently working on enhancing that bird for more premium meat yield and total yield, so we see some growth through the male side even though we've kind of dominated that market for several years."

Peterson Dominance

Two thirds of every chicken eaten on the planet today is descended from a Peterson male broiler. The success of that bird has not only dominated the world marketplace, it has also been quite profitable. Evans estimates that while breeder operations make up only 20 percent of sales, they constitute 80 percent of the company's profits.

Having nearly monopolized the domestic market with the Peterson male breeder, company officials are now focusing on marketing the bird to more customers, primarily international ones.

The company's international breeder market already is strong, with sales representatives in Malaysia, Belgium and Chile. During the past three years, Peterson's international breeder sales have grown more than 100 percent, comprising nearly a third of all the company's breeder sales.

Peterson sells to growers in 40 countries, including recent shipments of 14,800 chicks to South Africa and 15,000 to Brazil, its two largest international buyers. Growth also has been seen in the Pacific Rim and Far East, with a recent shipment of 4,000 breeders to Malaysia. Officials hope to make China one of their next big targets.

"China is becoming an interesting spot for us," Henderson says. "We're doing quite a bit of work in there, trying to get a piece of that market. It's something that just hasn't been available to us in the past until recently."

Company officials are focusing on international sales primarily to offset what is expected to be a weaker domestic market.

"The poultry industry has got some basic weakening in some of the markets, so we could potentially end up flat for this year," Henderson says. "We've had expansion volume-wise on the average of 5 percent a year for a good many years now, and it looks like we've got 5 percent programmed in for this year.

"I don't know if the U.S. market will be completely flat, but the growth rate on it isn't 5 percent. I'd say we can probably support 2 percent growth a year, possibly a little bit more than that, but once you get up to 5 percent I think you've got to get some help from exports."

Industry analysts agree. Professor Ed Fryar of the University of Arkansas at Fayetteville's Department of Agriculture and Economics says poultry production will increase from 22 billion pounds to 23 billion in 1994, which is more than the domestic market can accommodate.

"Everybody is always looking for any new market they can get, whether domestic or international, but this year it looks like the domestic is going to be pretty tight, so firms are looking overseas," Fryar says.

In addition to overproduction, costs are expected to increase, cutting into profit margins.

"There's two things happening," Fryar says. "First of all, broiler prices are going to be down about 6 or 7 percent because of the production increases. At the same time, feed costs are going to increase 15 percent because of the drought in the Midwest."

This promises to make the international market, operating at higher profit margins, more attractive. For example, Peterson sells its premium-priced breeder chicks for about $3.25 a head in the United States. Overseas, the company sells them for as high as $32 each.

While focusing on the international market, Peterson is not putting all its eggs in one basket, so to speak. The company is actively developing a female chick it hopes will rival its world-famous male bird, opening even more markets. "It's still in the R&D stage, about a year away from being ready to market," Henderson says. "But if it proves to be a marketable product, there could be some good growth in that area. Until then, we'll focus on our international sales and making what we've got a little more efficient."
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Title Annotation:Victor Evans
Author:Tobler, Christopher
Publication:Arkansas Business
Date:Jan 17, 1994
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