Review project and comment.

Perdue Farms & Smithfield Foods Merger Decision

Prepared by:

Anida Chan, Mark Charpentier, Jourdan Coyle, Carrie Lachance, Will Medley,

Ankita Prakashkumar Patel, Surekha Polisetty, Eric Soucy, & Thea Whalen

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Contents Executive Summary ................................................................................................................................................... 2

Financial Aspects ....................................................................................................................................................... 3

Smithfield Financials .............................................................................................................................................. 3

Perdue Farms Financials ........................................................................................................................................ 3

Financial Reasoning ............................................................................................................................................... 3

Smithfield’s Poor Financial Outlook ...................................................................................................................... 3

Valuation ............................................................................................................................................................... 4

Image Considerations ................................................................................................................................................ 4

Perdue Brand Image .............................................................................................................................................. 4

Family First ............................................................................................................................................................ 4

Addressing the Backlash ........................................................................................................................................ 5

Perdue Antibiotic Stance ....................................................................................................................................... 5

The American Consumer ....................................................................................................................................... 5

Smithfield Brand Image ......................................................................................................................................... 5

Smithfield Antibiotic Stance .................................................................................................................................. 6

Strategic Fit ................................................................................................................................................................ 6

Perdue Operations ................................................................................................................................................ 6

Smithfield Operations ............................................................................................................................................ 6

Strategic, yet Unbalanced, Similarities .................................................................................................................. 7

Alternative Ventures ................................................................................................................................................. 7

Current Oil Refining Operations ............................................................................................................................ 7

Increasing Livestock = Increased Need for Feed ................................................................................................... 7

Growth in Soybean Production for Crush (Feed) .................................................................................................. 8

Build vs. Acquire .................................................................................................................................................... 8

Alternative Merger .................................................................................................................................................... 9

Clara Foods Overview ............................................................................................................................................ 9

Financials ............................................................................................................................................................... 9

Financial Partnerships ........................................................................................................................................... 9

Patents & Licenses ................................................................................................................................................. 9

Customer & Sales Considerations ......................................................................................................................... 9

Strategic Fit with Perdue ..................................................................................................................................... 10

Disaster Recovery ................................................................................................................................................ 10

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Executive Summary Frank Perdue, CEO of Perdue Farms, has made the decision to expand the company’s operations, through the potential acquisition of Smithfield Foods. In an effort to determine whether the acquisition of Smithfield Foods is warranted for Perdue, an in-depth analysis has been conducted. To support this analysis, both company’s financials, brand image, and operations have been thoroughly reviewed.

In addition, different ventures and potential mergers were also evaluated to identify possible alternatives to

Smithfield Foods. Results indicate the acquisition of Smithfield Foods as being inadvisable for Perdue. Instead of

purchasing Smithfield and doubling down on consumer products in pork and chicken, Perdue’s current portfolio

lends better to purchasing smaller holdings. By purchasing smaller holdings, Perdue diversifies assets to better

prepare for evolving consumer interests.

The following five areas were evaluated to determine if merging with Smithfield Foods would be a suitable decision: (1) Financial Aspects, (2) Image Considerations, (3) Strategic Fit, (4) Alternative Ventures, and (5) Alternative Merger. Key findings from the analysis include:

Financial Aspects

 Smithfield Foods’ estimated annual revenue is approximately $15 billion (Owler, n.d.).

 Perdue’s estimated annual revenue is approximately $6 billion (Owler, n.d.).

 Perdue does not have the capital to purchase Smithfield Foods. Image Considerations

 Smithfield Foods has a strong pro-antibiotic stance, which conflicts with Perdue’s current standards (Smithfield, 2019).

 Smithfield Foods is more focused on producing the product, rather than caring for the animal. Strategic Fit

 Both Perdue and Smithfield Foods produce meat products in a variety of brands.

 A merger with Smithfield Foods may cause Perdue to lose some decision-making abilities, as it relates to antibiotic use, farm management, and product development.

Alternative Ventures

 Oil refining shows potential for Perdue to increase its revenue.

 Vegetable-based substitutes for meat (i.e. vegetarian/vegan hamburgers). Alternative Merger

 Clara Foods offers the first ever, animal-free egg protein (egg whites alternative) (Rowland, 2019).

 Clara Foods’ overall valuation: between $30 million and $60 million (McGowan, 2018).

 Perdue can utilize Clara Foods’ animal-free egg proteins to offer a variety of eggless products.

In support of Mr. Perdue’s decision to expand the company, the current analysis has identified Clara Foods as an

alternative to Smithfield Foods. Perdue is better equipped to purchase a smaller company such as Clara Foods. In

addition, many consumers are requesting the type of non-meat protein Clara Foods produces. Perdue would be

able to meet this growing demand through the acquisition of Clara Foods, further diversifying its assets. As a

result, merging with Clara Foods is the recommended decision.

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Financial Aspects

Smithfield Financials According to Owler.com, Smithfield Foods most recent estimated annual revenue is approximately $15 billion, employing roughly 54,900 people. Smithfield Foods is currently owned by WH Group. WH Group is the largest pork company in the world with leading positions in the pork market in China and the U.S., and a strong foothold in key European markets (WH-Group.com).

Perdue Farms Financials According to Forbes.com, Perdue Farms enjoys an estimated annual revenue of approximately $6 billion, employing roughly 21,000 individuals.

Financial Reasoning Strictly from a financial standpoint, Perdue Farms does not seem to have the necessary capital to purchase Smithfield Foods. Smithfield Foods generates more than double the revenue that Perdue Farms. This does not consider Smithfield’s recorded 2018 sales of 22.6 Billion, according to the WH Group website does according to their own website. From a business stance, WH Group has no financial gain to sell Smithfield Foods. Additionally, if Perdue Farms were to purchase Smithfield Foods from WH Group, they would face an enormous financial task of updating their new properties to meet their higher animal welfare requirements. While Perdue Farms has had their share of bad press regarding their animal welfare track record, they have taken tremendous steps towards improving their animal care. Perdue Farms chickens are raised more humanely by improving the way in which they are bred, their living environment, and the way in which they are slaughtered. They have worked side by side with the Humane Society of the United States- along with Compassion in World Farming and Mercy for Animals to commit to a series of reforms that address chronic animal welfare problems (Pacelle, 2017). The same can’t be said for Smithfield Foods. Smithfield Foods has a lengthy history of poor animal treatment, and they have done little to reverse that history. As recently as 2018 Smithfield Foods closed a major meat facility due to a $400 million lawsuit filed by locals. The lawsuit was regarding the poor facilities their pigs were being kept in, as well as the illegal open-air pits used to store the animal waste. If the merger were to happen, Perdue Farms would have to spend significantly in order to ensure their new properties and farms operate at an acceptable level.

Smithfield’s Poor Financial Outlook The proposed acquisition of Smithfield by Purdue highlights several financial issues. From the company valuation to the analysis of financial health, Smithfield Foods depicts a relatively strong financial entity. However, its prospects are not promising. This makes it inappropriate for Purdue to acquire or merge with Smithfield in the future. According to the analysis, it is expected that the company will record a poor financial performance. The profitability, liquidity, and asset management for the organization are expected to decline in the future. It implies that the acquisition of Smithfield will negatively influence Purdue’s performance. If Purdue acquires Smithfield, it will inherit the high liabilities that the business has accumulated over the years and negatively affect the performance. Therefore, it is not recommended that Purdue’s management acquire Smithfield.

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Valuation Secondly, on the aspect of corporate valuation, Smithfield is undervalued. The valuation reflects a company that is struggling to maintain a stable financial position in a fast-changing business environment. The valuation shows that Smithfield has a low value in the industry. As such, it will realize limited financial contribution to our organization. The free cash flows and terminal values for the project indicate that Smithfield’s acquisition will have limited financial impact on our business. Finally, the company’s stocks have been poorly performing and it would be inappropriate to acquire the business due to the negative implications on our business. The business environment as explained by the regulatory environment also does not make it an ideal option for acquisition. The fact that the business is operating in China complicates the regulatory environment. In effect, the management will undergo a series of complex procedures that may be costly in the long-term. The high expenses may lower profitability.

Image Considerations

Perdue Brand Image The Perdue legacy is one built on trust and brand recognition. Brand Image is critically important and is the deep- rooted initial impression of how customers think. Developed over time, it is the perception of the brand in the minds of the customers. It creates an image based on their interactions and experience with the brand. Historically, Perdue has used commercials to win the heart of America. From early commercials right through today Perdue has focused on instilling the image of family friendly farming practices to win the hearts of America. The Perdue brand is characterized by their commitment to build trust. Their imagery is steeped in open spaces, idyllic farmhouses, bright sunshine and fluffy chickens. These images speak to the larger mission and focus of the company as they have made great strides over the years to improve their animal care (Perdue Farms, 2018). The open spaces and bright sunshine themes depicted in their brand imagery illustrates some of the more recent endeavors of the company to bring light into chicken houses. Perdue has exceeded their goal of having 35% of their chicken houses fitted for windows to allow natural light, and they now have windows in 48% of their houses (Perdue Farms, n.d.).

Family First As a means to build consumer trust, family has been another mainstay of the Perdue image. From their very first days, they have portrayed the importance of family through their marketing. Maintaining the business as a family run, down-home business, builds trust within the minds of consumers. According to Carrie Hall and Joseph Astrachan with the Harvard Business Review (2015), family-business branding builds trust, 76% of companies surveyed report that they refer to themselves as a family business in their marketing materials to establish a strong identity, differentiate, and build trust with customers. Today Perdue adds to that that image through their partnership with small town American farmers. They offer consumers the opportunity to meet the farmers in which they are contracted with through photographs and stories on their website. Images of happy farmers, their children, and farm animals grazing in the field help them to maintain a trusted image. Arthur and Frank Perdue believed that trust was the number one value they had in the company. They took that value and developed that into their vision, “To be the most trusted name in food and agricultural products”. Today, with the new generation and millennials, trust is a big deal. Baby boomers trusted brands; they trusted companies. Millennials are skeptical; transparency is very important (Vuocolo, 2019).

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Addressing the Backlash Because transparency is important to the company, Perdue chose to be open and honest with criticism they faced in the past. In late 2014 and early 2015, the animal rights groups Compassion in World Farming and Mercy for Animals (MFA) released videos of alleged abuse on two of the company’s contract chicken farms. The MFA video showed egregious treatment, as a farm employee slammed chickens into the ground, stomped and kicked them (Noble, 2019). In response to two class-action lawsuits, Perdue dropped the “humane” claim from its packaging. To overcome this and to maintain their trusted image Perdue had to drastically changed the way in which they farm. Since then, Perdue have become the leading major poultry producer by shifting toward more humane practices. In 2017 Perdue met with some of their harshest critics, including members from Mercy for Animals, to discuss changes to their practice (Charles, 2017). According to Josh Balk, Vice President of Farm Animal Protection at the Humane Society of the United States, “Perdue is reflecting consumer sentiment that all animals—including farm animals—should be protected from pain [through] their work to address these issues in a meaningful, transparent and collaborative way”.

Perdue Antibiotic Stance Another area of focus which builds consumer trust for the brand has been their commitment to “no-antibiotics ever” which is proudly displayed on their packaging. This commitment also extends beyond chicken to their beef, and pork products as well, which truly does set them apart from the competition (Perdue Farms, 2018). Their pork subsidiary, Coleman Natural, is the first national retail pork producer to fully implement a crate-free hog environment – both gestation and farrowing crate-free – which has been verified by a third-party (Perdue Farms, 2018). These steps characterize the brand of Perdue. They are committed to trust from the animals they care for and the customers that purchase their product. This trust is based on their constant commitment to transparency, innovation, and improvement.

The American Consumer Lastly, Perdue focuses on the consumer family. Providing the highest quality foods has become priority. As consumers have become more concerned with where their food comes from and what their food contains, a shift to what is important to the consumer was essential. As a result, they became a leader in all-vegetarian-fed and no-antibiotics-ever chicken; turkey, pork and USDA certified organic chicken. Because trust of the American consumer is very important to Perdue, and what has led them to be a 6-Billion- dollar company, maintaining that image is extremely important. They currently commit to the highest standards and guarantee that all chicken is born and raised right here in the USA. The purchase of Smithfield Foods would certainly derail the local small-town family image that has been so successful, and that they have strived to hold onto for so many years.

Smithfield Brand Image The Smithfield brand speaks first and foremost about the ‘good food’ they produce. Their imagery is entirely focused on the product, not the process. Their website opens with a picture of sizzling bacon in a skillet, happy families around a grill in the summer, and a mouthwatering sandwich constructed on a cutting board. There are

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no images of the pigs on the main page and the central theme is clearly taste. This is in opposition to Perdue who spends a good deal of their imagery highlighting the animal not the product.

Smithfield Antibiotic Stance Smithfield, unlike Perdue, has a strong pro-antibiotic stance. They use antibiotics in their animals to control disease, treat disease, prevent disease, and promote growth (Smithfield Foods, 2017). This is in stark contrast with the Perdue brand, which has eliminated all antibiotics from their products. Another opposing view is the care of the pigs at Smithfield. In the United States Smithfield has eliminated the use of confinement pens, however, they are still phasing the practice out abroad (Sauers, 2018). Although they strongly encourage contract farmers in other countries to drop the practice, they are not actively terminating contracts for those who maintain this level of confinement (Sauers, 2018). Perdue on the other hand is 100% crate free (Perdue Farms, 2018). The Smithfield brand image is a far cry from that of Perdue. Smithfield is focused on the product, not the animal. They seek to instill hunger in the viewer, not compassion. This stark difference between brands is one reason of many, why Perdue should not seek a merger with Smithfield.

Strategic Fit

Perdue Operations Perdue founded nearly a century ago, by Arthur W. Perdue, and has remained a family-owned business to the present day (Perdue, n.d.). In 2018, Perdue had 21,000 associates, 2,900 poultry farmers, 8,200 grain farmers, and 900 pork farmers (Perdue, 2018b). Today, the company provides customers with a variety of poultry products, but also offers pork and beef products under their sub-brands. To support these operations, Perdue has two divisions: (1) Perdue Foods, and (2) Perdue AgriBusiness (Perdue, 2018b). The first division, Perdue Foods, is responsible for the raising animals needed to produce food products in a variety of brands. In fact, these brands (i.e. Perdue Harvestland, Coleman Natural) are said to be leaders within the industry, by offering all-vegetarian fed animals and using no-antibiotics-ever (Perdue, 2018b). Perdue also raises their animals without crates or cages, without growth drugs, on all-vegetarian-diet with no animal by-products, and with an emphasis on freedom to express natural animal behaviors (Perdue, 2018a). In addition to Perdue Foods, the second division is Perdue AgriBusiness, which is the company’s international venture. Perdue AgriBusiness is responsible for the sourcing, merchandising, and processing of the agricultural commodities (Perdue, 2018b). This division also manages the imports and exports, as well as operating grain storage in nine marine facilities (Perdue, 2018b).

Smithfield Operations As for Smithfield Foods, the company was founded in 1936 by Joseph W. Luter and his son Joseph W. Luter, Jr. In 2018, Smithfield Foods had 54,900 employees, and produced 20.6 million market hogs (Smithfield Foods, 2018b). Although based in the U.S., Smithfield Foods is the world’s largest pork processor and hog producer, offering packaged meat products in a variety of brands (Smithfield, Nathan’s Famous, Farmland) (Smithfield, n.d,;

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Smithfield Foods, 2018b). One key difference with Smithfield Foods, when compared to Perdue, is their use of antibiotics in their products (Smithfield Foods, 2018a). Again, Perdue raises their animals without growth drugs (Perdue, 2018a).

Strategic, yet Unbalanced, Similarities In summary, Perdue and Smithfield Foods do share some similarities, such as offering their customers a variety of products (through different brands). However, both companies are very different in their size and operations, as previously noted. In terms of employees, Perdue employed 21,000 in 2018, whereas Smithfield Foods employed 54,533 in 2018 (Perdue, 2018b; Smithfield Foods, 2018b). In comparison to Perdue, Smithfield Foods’ operations appear far greater in size (Smithfield Foods, n.d.). Therefore, from a strategic perspective, if a merger were to be considered with Smithfield Foods, Perdue would likely be limited in their decision-making abilities given the difference in their size and financials. In other words, Smithfield Foods would be the lead in decision making, since they would be bringing more to the table, so to speak. As a result, purchasing Smithfield Foods is not a good fit for Perdue. Both Perdue and Smithfield operate in producing meat. The differentiator is that Smithfield operates in mainly producing pork-based meats such as bacon, sausage, ham, etc. whereas Perdue specializes in chicken, turkey. For companies looking to successfully merger, many aspects need to be considered. For example, does mission, vision, strategic objectives, etc. align? A company may have difficulty with a merger based solely on profit opportunity. There might be a positive in expansion for a profit opportunity, but there are many aspects to consider such as values, culture and principles.

Alternative Ventures Alternative ventures, aside from Perdue’s poultry investments and holdings, are a significant investment in additional agribusiness ventures through “Perdue AgriBusiness”. Of particular note, this portfolio contains ventures in Oil Seed refining, Specialty (Organic/Non-GMO) crops, grain production, international shipping, agri- recycling, and renewable fuels. Networked together, these non-poultry-centric endeavors create a diverse set of alternatives which would help to maintain Perdue even if their profits from livestock would diminish. However,, oil refining shows the most area for growth for the company.

Current Oil Refining Operations In looking at the Oil Seed Refining, Perdue owns four solvent soybean extraction crush plants on the Eastern seaboard (in MD, NC, VA, and PA respectively). These four plants produce high protein soybean meal and soybean hulls to support their chicken industries as well as pork, aquaculture, and cattle feed industries across the US. The soybean oil can is then sent to their oil refinery in MD for processing required to then be sold to either the food industry or as biodiesel fuel. An additional plant in VA has a deep-water port in VA allows for bulk shipping internationally or locally via trucking containers.

Increasing Livestock = Increased Need for Feed When looking at local economic environments, it would benefit Perdue to investigate additional oil crush plants, perhaps a little closer to Midwest America. This would allow closer proximity to the bulk of their consumers in the Midwest. Additionally, they would be able to much more easily export from potentially opening shipping ventures on the Pacific coast which would allow Perdue to export to China, one of the world’s largest producers in pork.

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While Smithfield may not be as viable an option, routes to more effectively provide revenue through soybean meal and oil would be a considerable asset to the company. China consumed roughly 74 million tons of pork, beef, and poultry in the year of 2017, signaling a strong need for the feed industry, whether it is in the US or overseas (Patton, 2017). However, China has experienced drops in pork consumption over the past four years but if meat consumption is down, seed can be sold as biodiesel rather than livestock feed.

Growth in Soybean Production for Crush (Feed) When looking at the feasibility of building or purchasing additional soybean crushing plants, it is important to understand the demand analysis vs. the potential saturation/competition of additional crush plants. In the decade since 2004/2005, soybean production has grown 116.5 million mt. (up 180%), 41% of the total being in the US. This is projected to again grow to 150 million mt (up 129%) by 2024/2025. In addition, Canada will export a projected 76 million mt (up 119%) (Boersch & Temple, 2015). Also note: 45% of soybeans grown in the US are processed at crush plants each year (NOPA, 2019). Soybean growth is increasing exponentially in the US but also in its close neighbor who could become a convenient partner in sourcing soybeans for additional processing.

Build vs. Acquire However, with this growth, crushing capacity at plants has increased as well, creating competition. The National Oilseed Processors Association (NOPA) stated that oilseed crushing has increased in production capability over the past several years. The ‘crush’ of soybeans rose from 47.1 million mt to 49.1 million mt from 2013 to 2014. Further soybeans represented 59.3% of the world’s oilseed production, 34% which the US provided. However, according to a new report from CoBank’s Knowledge Exchange Division, the short-term outlook for U.S. soybean processors remains bright, but profitability could be threatened by the end of 2019 as a result of the new production capacity (CoBank, 2018). Due to this increase, it would be beneficial to acquire an existing plant in the Midwest so as not to further saturate the market with further competition. While true valuation on existing plants is difficult to identify due to the variety of equipment type and cost as well as disparate energy costs, a recent grain operation in Belarus built to process 200 tons of grain per day had an estimated $733 million-dollar total investment but is projected to provide billions of revenue (Vorotnikov, 2019). While not an entirely parallel economy, this can baseline expectations for Perdue to acquire potential existing holdings in Montana which process roughly the same weight of soybeans daily. Though a larger investment comparable to Perdue’s current worth, this venture would be possible compared to Smithfield and, given the current landscape of soybean growth and versatility, could have the potential to increase revenue to fund further ventures for the Perdue core consumer product brand.

Alternative Meat Venture Examining the startups that currently exist in the alternative meat space, we can see two types of companies. First, there are companies that produce plant-based meat alternatives such as Better Meat Co. and Beyond Meat. These companies are focused on developing tasty vegetable-based substitutes for meat, such as vegetarian hamburger patties and vegetarian chicken strips. Second, a handful of very well-funding companies, such as Beyond Meat and Memphis Meats, are producing “clean meat,” which is fake meat engineered in a laboratory. While the second type of company may take several years to make a major impact, Perdue would be well advised to make investments in both types of companies, as they transition to an economy where less meat is consumed.

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Alternative Merger Perdue is facing market pressures to make inroads into the alternative meat market, an area that has exploded in the past few years. Given the heavy investment in alternative meat products, and the growing public interest in vegetarianism, it makes sense for Perdue to invest heavily in alternative meat companies, whether through mergers or direct investment. Smithfield Foods is too large a company to acquire for Perdue at this time. As discussed, there are negative risks associated with merging with Smithfield including, but not limited to, a flat consumption rate of pork (Waite, 2018), negative company press, and issues with Smithfield’s supply chain outsourced ownership. Instead of offering a bid for Smithfield’s company, an alternative company, Clara Foods, has been selected for a potential merger.

Clara Foods Overview Founded by CEO, Arturo Elizondo, in 2015 the San Francisco-based “Clara Foods is a market leader in engineering, manufacturing and formulating animal-free, animal protein ingredients.” (Rowland, 2019) The small team of 40 focuses on creating the first ever, animal-free egg protein, which foams, gels and binds similarly to traditional egg whites. Using the foundational egg-free egg white recipe, “Clara is developing sustainable baking products, food and beverage ingredients, and nutritional supplements using its unique sugar and yeast engineering processes.” (Rowland, 2019)

Financials Clara Foods recently attained an undisclosed amount of Series B financing from ingredient developer, Ingredion. Although not disclosed, the investment is estimated between $7 million and $10 million. (McGowan, 2018) This is allowing Clara to expand market reach with new products. With an annual estimated revenue of $4 million, and an overall valuation between $30 million and $60 million (McGowan, 2018), Perdue could easily assume Clara Foods.

Financial Partnerships Considerations must be taken about the partnership between Ingredion and Clara Foods. The specific agreement between the two companies in relation to the Series B financing was not released. However, more in depth research should be conducted to understand the companies’ relationship and if Clara Foods has a financial obligation to Ingredion. Perdue reached out to both Ingredion and Clara Foods for comment on their financial relationship but both companies have yet to respond.

Patents & Licenses Clara Foods holds several licenses and patents. Provisional Application No. 62,078,385, filed November 11, 2014, is the patent for “compositions, proteins, polynucleotides, expression vectors, host cells, kits, and systems for producing egg white proteins”. (Anchel, D., 2014) This patent is the most important to Perdue because if merging with Clara, it can utilize the egg white proteins to offer eggless alternative to its wide base of customers.

Customer & Sales Considerations Consumer interest in alternative meat products is rapidly growing in the United States. There are several reasons for the trend, including health, environmental, and economic reasons. The most important reason, however, is health. For decades, consumers have been hearing that beef and pork are unhealthy and that they cause heart

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disease and cancer. While many consumers have switched to chicken as a substitute, there is now growing evidence that chicken is not that much healthier, and that fish contains mercury and other unhealthy compounds. As a result, consumers are looking for healthy, natural, vegetarian ways to get their protein. Many consumers are justifiably concerned about the environmental effects of industrial meat processing, which includes inhumane treatment of animals and the release of large-sale carbon emissions into the atmosphere. And some consumers are turned off by the rising cost of beef and other meats in the marketplace, which has risen due to global market pressures, particularly in international supply chains. Customers of Perdue should be excited about merging with Clara Foods based on the interest generated from Perdue’s “Chicken Plus” line, which blends chicken with cauliflower and pea protein. Alison Rabschnuck, Director at the Good Food Institute, states “Perdue is listening to consumers and responding to the meteoric rise in interest in plant-based foods. It’s clear from the research that consumers are looking for plant-based foods that deliver on taste, texture, and nutrition, while also offering flavor experiences that are familiar.” (Perdue, 2019) Customers of Clara Foods may question the merger because of Perdue’s background in poultry. However, Clara Foods is still in the technology and testing phase of their product, they have yet to release a consumable good. And because this is such an early acquisition, Perdue could help control the image of the merger into a positive, forward thinking step towards meeting the needs of consumers.

Strategic Fit with Perdue There is a strategic fit between Perdue and Clara Foods. Clara Foods and Perdue both provide protein food sources to consumers. Clara Foods is striving for sustainable non-meat protein sources while Perdue is advancing towards sustainable meat proteins, clean meats, and alternative-meat products. Clara Foods will help position Perdue to meet the growing requests of consumers for these types of products. Clara Foods and Perdue also have similar views about sustainability. Perdue is extensively researching and incorporating sustainable practices such as crop rotation, organic produce, and decreasing solid waste. As of 2018, Perdue decreased its greenhouse gas output by almost 5% and solid waste by 6.5%. (Perduefarms.com) And according to Clara Foods, their “processes use less water, land and energy to achieve equal or better results compared to current production practices.” For a company such as Perdue, which has been focused for years on the chicken market, investment in meat alternatives would be a particularly good market strategy. As the trend toward vegetarianism increases, many consumers will be looking to replace chicken with meatless products. As a trusted brand name with a large market share, Perdue is well-positioned to capitalize on this consumer trend and successfully navigate toward a future where far less meat is consumed.

Disaster Recovery Acquiring Clara Foods is a strategic initiative for Perdue’s disaster recovery plan. As of 2018, the majority of Perdue’s operations are located on the East Coast, between Pennsylvania and Georgia. If a major storm or national emergency occurred in that area, many of the company’s operations would be impacted and the supply chain may be damaged, leading to significant decrease in product output. Because Clara Foods is located in San Francisco, California, storms damaging Perdue’s operations on the East Coast would not affect Clara Foods. This would create a redundancy in Perdue’s supply chain operations that could potentially offset any damaging effects.

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