PERDUE FARMS Poultry & Profits by Bob Hall Bob Hall is research director of the Institute for Southern Studies which recently released an extensive report on the poultry industry entitled "Ruling the Roost." The report is available for $5 from the Institute at P.O. Box 532, Durham, NC 27702 Millions of television viewers have heard Frank Perdue boast, "It takes a tough man to make a tender chicken." Behind the folksy slogan, however, there is a "tough man" making terrific profits. Frank Perdue and 46 other chief executives manage the nation's $16-billion-a-year chicken business. In one generation, they transformed a down-home enterprise with hundreds of competing mom-and-pop firms into a finely-tuned system that controls every phase of a bird's life cycle-from the feedmills that supply its ration of corn and soybeans, through the hatcheries and "growout houses" managed by 20,000 contract farmers, to the processing plants where 150,000 workers slaughter and package 110 million fryers every week. "We've gone from a very independent, grower-oriented business to a vertically integrated system," says John Wolford of the poultry science department at Virginia Polytechnic Institute. In 1960, there were 286 integrated broiler firms. Today, there are 47. This is survival of the fittest with a vengeance. And Frank Perdue typifies the breed. In 1920, Perdue's father, Arthur--or "Mr. Arthur" as he was known on the eastern shore of Maryland, near the Chesapeake Bay- -bought 50 Leghorn chickens, built a coop, and started selling eggs to the populous Northeast. Frank was born that same year; three years later, America's commercial chicken business officially began when a farmer a few miles further up the Delmarva peninsula sold her flock of 500 birds for slaughter. Mr. Arthur soon shifted to breeding chickens, but store-bought roasters were expensive--a Sunday dinner luxury--and demand remained modest until World War II. Uncle Sam's huge appetite for a cheap source of protein changed everything. Boosted by government-backed research and subsidized growing and slaughter houses, broilers joined a host of other consumer products (from frozen orange juice to margarine) that developed quickly as a result of the war. Americans now eat five times as much chicken per person as they did in 1955. The rise in consumption has been accompanied by a dangerous lowering of industry standards. Like the Chicago meat- packing industry, exposed by Upton Sinclair in 1906, today's poultry business is an over-heated jungle that cripples workers (mostly Black women), cheats farmers and poisons consumers at an alarming rate. Perdue Farms is a company that typifies the industry. Frank Perdue, who quit college to join his father's business in 1939, became president of Perdue Farms in 1950. In 1958, he took a major step on the road to vertical integration by building the company's first feed mill. In case after case--from Tyson Foods and Holly Farms to the big grain operators like Cargill and ConAgra--the feed mill became the magnet that attracted farmers and their flocks, and eventually that controlled their markets. In the booms and busts of the post-war years, hundreds of financially shaky, family-owned mills, breeding houses and processors collapsed or merged. By 1967, Perdue Farms' network of contract growers and company-owned hatcheries made it the nation's largest supplier of live chickens to slaughterhouses. "I really didn't want the problems of running a processing plant," Perdue recalls. "Finally, we were forced to get into poultry processing in 1968 because we got too many chickens and not enough processors." By year's end, the company was processing 80,000 chickens a day on a single shift, and selling 400,000 at auction. "There was more money in processing," says Perdue, "so eventually we added a night shift and were killing 800,000 a week." In the months before he opened his first processing plant, Perdue began courting grocery store chains and distributors along the East Coast. But his marketing approach differed radically from other suppliers. Instead of treating chicken like apples or beef, which lack brand identity, Perdue promoted his products with his own label. He began with $50,000 of radio advertising in New York, he says, because "New York consumers are very willing to pay more for a quality product." When he learned that Maine growers got more because their birds' skin had a yellow hue, he added marigold petals and corn gluten to his flocks' diets, and pitched them as more tender and well-fed than his competitors' chickens. "We thought, 'Well, if we can emulate them in producing a yellower chicken, we can get a three-cent premium.' So we started doing that," Perdue remembers. With the help of his distinctive advertising, Perdue pursued one market after another with his yellow fryer: New York in '69, Philadelphia in '72, Boston and Providence in '73, Baltimore in '76. Perdue is now the leading supplier in the Northeast and battling with Holly Farms for supremacy in the Southeast. "Frank knows the territory and he fights like hell to keep it," says Ed McCabe, of Scali, McCabe, Sloves which handled his advertising. But competitors say Perdue sometimes fights too hard. The U.S. Justice Department has repeatedly accused his company of threatening to cut off distributors who handle other branded poultry--and of carrying out the threats. But when Perdue threatened to contest Justice's jurisdiction on the issue before the Supreme Court, the department dropped its charges. Perdue's move to promote brand loyalty spurred a broader revolution in the industry. Before the sixties, nearly all birds were shipped whole from the slaughterhouse to the grocery store, where butchers cut them up or packaged them whole, sometimes with the store label. Today, poultry giants like Perdue have replaced the neighborhood butcher with huge processing units attached to their slaughterhouses. "It takes a substantial capital expenditure, but the margins are good--damn good," says John McMillan, an analyst with Prudential Bache. Poultry firms are reaping even higher profits from poultry that is "further processed" into chicken hot dogs, deboned breasts and products designed for the fast-food chains. In 1980, companies "further processed" one in 10 chickens. With the advent of Chicken McNuggets, the number leaped to one in four. Industry-wide, however, product quality has steadily declined. The United States Department of Agriculture (USDA) admits that 37 percent of the birds it approves are contaminated with salmonella, up from 29 percent in 1967. A censored USDA report released by a whistleblower through the Government Accountability Project (GAP) says the figure is actually as high as 76 percent in some plants. "Relaxed inspection and faster processing lines pose a serious health hazard," says Tom Devine of GAP. "The number of cases of salmonella poisoning has risen to 2.5 million a year, with an estimated 500,000 hospitalizations and 9,000 deaths." But the industry growth continues. To meet the growing demand, Perdue has followed a profit-maximizing strategy: expand production, shorten the bird's life cycle and squeeze everybody involved in the process, beginning with the farmer. Perdue Farms' brochures, for example, "guarantee" healthy returns to farmers who borrow $100,000 for a chicken house where they can raise flocks of day-old chicks on company feed. But its contract must be renewed with each flock, and for a farmer facing a mortgage payment, the prospect of being cut off is frightening. "We have no negotiating leverage," says David Mayer, one of Perdue's 1,000 plus growers in North Carolina. "After you pay your real expenses, we get about $2,000 a year per house in income." That works out to $2.88 per hour for a farmer with three chicken houses. Perdue is also pushing his chickens to the limit. He has opened a second high-tech research facility to test new drugs, genetic engineering, and chemical additives that maximize meat-from-feed conversion while minimizing the "chicken stress" which comes with mass breeding. Researchers in the state agricultural colleges that serve the industry expect to shave another six to nine days off the bird's life cycle sometime in the 1990s. Today's broilers already reach market size--about four pounds-- in half the time and with half the feed it took in 1940. In addition to biological speed-ups, Perdue has increased output by mechanizing parts of his processing plants and increasing the line speed. Workers--more than two-thirds are Black women--who eviscerated and cut-up 50 chickens a minute in the 1970s now find themselves processing as many as 90 a minute. This human speed-up has had very serious and negative health consequences for poultry workers. Perdue's employees perform two or three motions over and over, thousands of times a day--until their hands or arms "wear out. " There has been an epidemic of repetitive or cumulative trauma disorders (CTD)--a family of diseases including tendinitis and carpal tunnel syndrome--in Perdue's processing plants. Perdue claims "grossly inaccurate media reports have created undue concern over CTD" and that "less than 1 percent" of his 12,000 employees suffer from the problem. But a 1984 investigation by the National Institute for Occupational Safety and Health found "apparent under-reporting on the OSHA 200 log for workers in all departments" at Perdue's largest plant; and a 1989 internal memo written by the personnel manager at another Perdue factory says it is "normal procedure for about 60 percent of our workforce" to visit the nurse daily for treatments including "Advil, the vitamin B6 and hand wraps." "The abuse they showed me when I went to them with my problem was unbelievable," recalls Donna Bazemore. "The fear, the harassment is so bad, I call it a closed-in slave camp." In 1987, Bazemore became the first Perdue worker to win worker's compensation for CTD in North Carolina. She's now a staff organizer with the Center for Women's Economic Alternatives in Ahoskie, NC. "Most people just can't take it," she says. "The pay is good for these rural areas, but the treatment is inhuman. They actually feel like they own you." Poultry workers quit their jobs at five times the rate of other workers, and with good reason. Their injury rate is one of the 10 highest in manufacturing, higher even than mining. And their pay is the lowest in the food industry. But the widespread fear and record of company retaliation prove major obstacles to organizing. None of Perdue's processing workers are represented by a union. In the late 1970s, Perdue bought four unionized processing plants as part of its expansion on the Delmarva peninsula. He renovated the factories and increased line speeds, and reopened them as non-union plants. When he purged 55 pro-union workers at another plant in 1980, the United Food & Commercial Workers (UFCW) called for a national boycott of Perdue products. Frank Perdue responded by suing the union and, in testimony before the President's Commission on Organized Crime, confessed that he also solicited aid from the Gambino crime family in New York, an alleged mafia family. Perdue explained his actions, saying "they have long tentacles, and I just figured they might be able to help." "He was out to destroy the union," said UFCW staff member Jerry Gordon, noting that the number of union members on the Delmarva peninsula has declined by half since the early seventies. "We had to take him on," he adds. Perdue won the fight--even though the Mafia turned him down--and he defended his anti-union policy by pointing out that he paid his "associates" 29 cents more per hour than the remaining unionized poultry plants. But actually the $5.62 hourly wage that Perdue workers earn in 1989 is significantly below even the 1987 industry average of $6.11. At the same time, Forbes and Fortune estimate that Perdue's personal wealth is between $200 million to $500 million. He owns 90 percent of the stock in Perdue Farms, which now boosts sales of over $1 billion a year. Sharing the profits from the booming chicken business has been one of the last things on the industry's agenda. In 1960, workers received 2.6 cents of the 43 cents a pound that chickens fetched at the store. Twenty years later, they got only 3.3 cents--but chicken prices rose to 72 cents a pound. "Perdue showed everybody how to really market chickens," says Tex Walker, an organizer with UFCW. "Now somebody needs to show him how to treat people like human beings."