Food Business News - March 26, 2013 - 20

Continental Grain urges Smithﬁeld Foods to split

Continued from Page 1
26% while, including dividends, Tyson stock
returned +70% and Hormel returned +131%
— a shocking divergence in shareholder
return among industry competitors,” Continental Grain said in the letter. “During this
time, Smithfield has paid no cash dividends
while Tyson has cumulatively paid $429
million and Hormel has paid $728 million.”
Continental Grain said Smithfield’s hog
production segment has yielded negative
returns in three of the last five fiscal years
and uses significant amounts of capital,
and there has been more than $1 billion
invested in the European business with
very little return until recently. Continental
Grain said Smithfield has emphasized its
ambitions in China, but accomplished little
to date despite 50% of the world’s pork be-

ing produced and consumed in that market.
Continental Grain also said the U.S. processing and packaged meats business may
be a very valuable piece of the company if
run by experienced packaged food and consumer product executives.
Yet as recently as December, Larry Pope,
president and chief executive officer of
Smithfield, addressed the issue of splitting
and dismissed it.
“I’ve looked at that idea,” Mr. Pope said
regarding a spin-off. “It’s complex and not
easy to do. And you’d be surprised how
integrated this business is, particularly the
pieces (and) how they tie together.”
But at the same time Mr. Pope described
Smithfield Foods as “essentially two companies” made up of a commodity-based live production company and a fresh and processed

consumer-packaged meats company.
On March 8, Smithfield acknowledged
receipt of the letter and said the board of
directors along with its financial and legal
advisers “will review it in due course.”
“Six years is sufficient time for a management team to provide real results to its
shareholders,” Continental Grain said in its
letter. “We haven’t seen those results and
believe a new strategy with some new individuals is warranted to bring the company
back to the high returns that Smithfield
has produced in the past and is capable
of producing going forward. Smithfield’s
valuation should reflect its full potential.
We welcome the opportunity to meet with
Smithfield’s board and management to discuss in more detail the ideas that we have
presented.” FBN

Wendy’s testing ﬂatbread product, pretzel burger

BOSTON — The Wendy’s Co. is currently
test marketing two premium-oriented
products that use flatbread and pretzels
as carriers to differentiate the items in the
quick-service-restaurant space. One item is
a flatbread chicken product and the second
is a pretzel bacon burger.
“We want you to say if I go to Wendy’s, I
am getting something different,” said Steve

FOODBUSINESS NEWS

Hare, chief financial officer for Wendy’s, in
a presentation at the UBS Global Consumer
Conference on March 14.
Mr. Hare said the flatbread chicken
product is representative of what Wendy’s executives talk about in terms of
innovation and why Wendy’s is different
from other Q.S.R.s.
“If you look at other Q.S.R.s, I don’t think
you are going to find anything close to this
product,” he said. “It is operationally a little
complex. We have taken our time, worked
that through to the testing, so we can do
that and still meet our time standards for a
fast-food operation.”
The pretzel bacon burger is designed to
give Wendy’s some separation in the burger
category, Mr. Hare said.
“We have got people like Five Guys that

are out there pulling at our premium customers and we want you to be able to go
to a Five Guys and compare the experience to a Wendy’s and say, ‘look, we use
fresh beef, they use fresh beef,” he said.
“I dare you to say that our product is not
at parity.’”
With product parity established against
premium burger companies like Five Guys,
Wendy’s hopes to use the operational efficiencies of a fast-food enterprise to further
differentiate it.
“It is going to cost you 40% less, and if you
are time-constrained, you are also going to
have the convenience of a drive-through,”
Mr. Hare said. “I think that is a compelling
difference as we stake out the battle for
premium burger customers and that is a
wedge we want to continue to drive.” FBN

March 26, 2013

Food Business News - March 26, 2013

Table of Contents for the Digital Edition of Food Business News - March 26, 2013