Smithfield names insider as new CEO

Dive Brief:

• Smithfield Foods CEO Kenneth Sullivan will step down from his post in early 2021 after five years at the head of the company, the pork producer announced on Monday. He will be replaced by Chief Operating Officer Dennis Organ, who joined Smithfield in 2010.
• The company said Sullivan’s tenure marked “the highest profit periods in the company’s history.” The trajectory of the company’s finances was interrupted by the pandemic, which caused the closure of several of the company’s production plants.
• Smithfield’s CEO is leaving following a tumultuous and economically draining period, during which the company was upended by the pandemic. By the end of the second quarter, the company said it lost $72 million after spending $350 million on costs associated with the pandemic.

Dive Insight:

It’s been a tough few months for Smithfield, and Organ will be walking into a company looking to regain its footing after the pandemic derailed the upward trajectory set by Sullivan.

Not only did the U.S.’s largest pork producer endure millions in losses, but it was forced to close down enough of its processing capacity that it warned of meat shortages in the U.S.

Now that the company has recovered its manufacturing after being hit especially hard by outbreaks, it is facing a fine from the Occupational Safety and Health Administration (OSHA) for “failing to protect employees from exposure to the coronavirus.” The agency recently proposed a $13,494 fine for the Smithfield plant in Sioux Falls, South Dakota, which became one of the top COVID-19 hot spots in the U.S. At this plant, at least 1,294 Smithfield employees got the virus and four died. During this time, Smithfield said Sullivan “did not hesitate to put the company’s pursuit of profits on the back burner,” pouring a total of more than $600 million into benefits and pandemic precautions. 

Sullivan had a two-decades long tenure at Smithfield, so he is taking a lot of industry knowledge with him as he retires. Smithfield’s choice to promote someone internally rather than searching for an outsider to replace Sullivan could help the company retain a continuity of leadership with experience in the meat industry. It also has the possibility to facilitate a smooth transfer of knowledge from Sullivan, who was able to create some of the company’s biggest profits following its buyout by China’s WH Group, which purchased the company in 2013. For the past two years, Organ has overseen the day-to-day operations of Smithfield’s domestic business.

Smithfield is not the only meat company getting a new CEO as the industry has been rocked by the coronavirus. Tyson Foods recently replaced its CEO, following Noel White’s stepping down to become executive vice chairman of the company’s board of directors. Tyson promoted Dean Banks, who was previously president of the company and a tech executive. He is expected to lead the company as it turns to more automation after the pandemic. 

Pilgrim’s Pride also just replaced its CEO with an internal hire after its top executive was indicted for accusations of price-fixing in the chicken industry.

To add to the list of concerns Organ will need to address, the pork producer is also contending with shifting consumer attitudes as consumer interest in plant-based proteins grows. At the height of the pandemic in mid-April, SPINS statistics showed that plant-based food sales grew 35% faster than the food category in general. Although Smithfield launched its Pure Farmland soy-based line last year with eight products, the U.S.’s largest pork producer has a steep hill to climb in order to effectively compete in the growing category.

Despite having the advantage of a decade of familiarity with Smithfield’s internal operations, Organ will be stepping into the CEO role at a time when radical changes seem inevitable for the industry as a whole. Organ will likely need to persevere and be adaptable in order to effectively guide Smithfield through the remainder of this pandemic and maintain its foothold as the options for proteins continue to expand.