Chapter Eight
Perdue: Soft on Chickens, Tough on Everything Else

Jesse Hartline

When citizens in Salisbury think Perdue they think of many things, such as that particular smell that occurs on a breezy day, the Frank Perdue School of Business at Salisbury University, the Arthur W. Perdue baseball stadium, and the Perdue chicken they ate last night for dinner.  When many people in Salisbury catch that smell in the air, some say, “It smells like money.”  That is exactly what that smell represents.  Somewhere nearby, someone is cleaning out their poultry house, getting ready for a new flock to arrive, ready to grow chickens, ready to make money.  Perdue has been a growing economic and agricultural force on the Eastern Shore’s main industry for more than half a century.  Perdue’s influences on the growth of the county have been very obvious while some aspects of the company go unnoticed.  Perdue starts off with humble beginnings, but the son and grandson of Arthur Perdue take the company in many directions, mostly to the top of their industry.  Perdue’s success story can be measured by its steady rise in annual sales; over the last 30 years, Perdue has increased its annual sales by an average of nearly 14 percent a year.”[i]

Perdue’s Business History

The Perdue business began in 1920 when Arthur Perdue founded his backyard table egg business.  Arthur gave up a promising job as a railroad agent in the rural Eastern Shore of Maryland to work on his egg business full time.  Arthur Perdue believed businesses should be run on the principles of honesty, integrity, and quality[ii].  The company continued in 1925 when he built his first hatchery.  Before the 1930’s, marketing chickens for consumption was a byproduct of egg production for Arthur.  Generally, old hens and cockerels were processed for meat but the focus was on the eggs produced.  The company hired its first associate in 1930 and purchased a second farm in the same year to expand its production capabilities. 

In 1939 Frank Perdue, Arthur’s son, joined the business.  Shortly thereafter, a poultry disease hit the Perdue farms and wiped out their egg laying flocks.  On a gamble with the rising meat market and with consideration of World War 2 affecting meat prices, Perdue switched to growing broilers instead.[iii]  Also around this time, Frank began to experiment with mixing his own feed that was better than what he could buy.[iv]  In 1950 the company began contracting out the growing of their broiler chickens to local farmers and those chickens were then sold at auction.  This move allowed Perdue to increase profits by not actually growing the birds themselves and it began the company’s vertical integration climb.[v]  Vertical Integration is best defined as the process in which several steps in the production and/or distribution of a product or service are controlled by a single company or entity, in order to increase that company's or entity's power in the marketplace.      

Perdue grew in 1958 with the construction of its own feed mill in Salisbury, continuing in the path of vertical integration.  This state of the art plant was at the time, one of the largest grain storage facilities on the east coast.  At this plant, technicians monitored the mixing of corn and soy along with other ingredients to produce the Perdue blend of feed that their chickens ate.[vi]  Along with this plant, in 1961 Perdue opened a soybean processing plant that allowed them to expand with their grain mixing because soy is 20% of Perdue’s poultry feed blend.[vii] 

In 1968, Perdue purchased a broiler processing plant that was located in downtown Salisbury in response to realizing that poultry processing plants were making a sizeable profit from buying live chickens on the market, processing them, and selling the cleaned birds to distributors.[viii]  Perdue was actually one of the last integrated companies to start processing their own chickens.[ix]  At this plant, Perdue was able to bring in live chickens, kill them, strip them of feathers, remove organs and blood, properly clean the chickens, and pack them in ice for shipments to markets.  Perdue’s renovation and reopening this plant allowed them to continue vertically integrating their poultry operation while still controlling the quality of their products.[x]    

Soon after integrating the company, Frank Perdue began a campaign to spread the name of Perdue and encourage Perdue chicken consumption.  He began with radio ads in 1968 and in 1971 he started television ads which Frank didn’t star in at first.[xi]  With some encouragement Frank became the spokesperson for Perdue and the existence of the company to the nation and the world became better known.  His heavy campaigning in the north allowed him to expand into the markets of New York and the surrounding areas.  In an anonymous poultry industry, Frank Perdue stood out and the company was able to profit by this.  This expanse of their markets allowed Perdue to expand, invest, and build more facilities.  By spending more on advertising than any other poultry company, in 1977 Perdue was the No. 1 producer of chickens in the northeast.[xii]     

During the 1970’s, primary breeding and genetic research programs were founded to help eliminate genetic diseases and to produce a specific blend of chicken that Perdue heralds as their own.  Also in the 1970’s, chicken waste became a more prevalent issue.  Farmers traditionally had used their chicken manure to fertilize corn and soybean fields, but now environmental groups linked chicken-manure runoff to excessive nutrient buildup in the Chesapeake Bay. 

1981 showed an interesting addition to the Perdue line of products with the opening for a short time of their first restaurant in New York City.[xiii]  Frank saw that his campaigns were working and that consumers were willing to pay more for his “higher quality” poultry so he decided to capitalize on that advantage by pushing other Perdue products.  In 1983, after 8 years of research, Perdue released their chicken hot dogs into the Northeast markets.[xiv]  In 1984 Perdue expanded into the turkey business with the purchase of acquisition of Shenandoah Valley Poultry and Shenandoah Farms.[xv] 

The late 80’s gave rise to more on-the-go families and less time to cook meals.  In response to these changes, Perdue began offering cooked products to consumers.  Pre-breaded chicken and other products allowed the company to get another foothold into the growing poultry industry.[xvi] 

Perdue further grew in 1991 with Jim Perdue becoming Chairman and the establishment of the International Division.  In 1993, Perdue opened its first Wellness Center as part of the company’s integrated health care program in response to demands made during a union strike. 

Perdue went international in 1998 with the opening of a processing facility in Shanghai.[xvii]  Perdue’s international markets have expanded rapidly as seen in the graph below.  In just a few short years, Perdue was able to almost quadruple its international broiler sales.  With the continuing international expansion, Perdue is able to provide more products worldwide, like using the company’s deepwater port in Chesapeake, VA to help transport and sell Mid-Atlantic grain to other countries.[xviii]  

Rapid growth of Perdue’s Recent International Broiler Sales[xix]

From starting as a part-time egg business to becoming a leading international corporation with annual sales of $2.7 billion and its products being sold in over 40 countries, Perdue is still family owned and run.  Throughout Perdue’s existence, the company has said that their impressive rise to having been the 2^nd highest in poultry sales in the United States is from staying true to Arthur Perdue’s original standards of business.[xx]  The Perdue family has donated to countless organizations and charities.  The most prominent in Salisbury is the Frank Perdue School of Business at Salisbury University, established in 1986, by a 2.4 million dollar fund donated by Frank Perdue.[xxi] 

Many Perdue plants and associates participate in fundraisers and charity events that positively impact the community and advertise the name of Perdue.  The total community impact of the Salisbury Processing Plant, is 70 Million dollars a year, including salaries, taxes, and utilities.[xxii]  The community impact describes how much money the plant impacts on the local community in the form of taxes, wages spent by plant workers, and other money paid out by Perdue that goes into the local economy but doesn’t include any strains the plant puts on the local economy other than taxes paid. 

Baskets inside of Baskets

Perdue does not focus on just the poultry only.  The company always tries to keep all their eggs in one basket, but they watch that basket very closely.  The development of Perdue’s Grain and Oilseed Division began in 1959 when Perdue built its first grain receiving and storage facility in Salisbury.  This facility gave complete control to Perdue of what their chickens would eat and allowed them to modify their feed to whatever specifications they wanted.  In 1975 the division expanded with the building of its first rendering plant for converting poultry byproducts into feed ingredients.  To curb the declining demand for crude soy bean oil that is produced when soy beans are processed, Perdue opened a soybean oil refinery in Salisbury.  The oil refined at that plant is marketed to major food companies.  The oil at the plant is supplied by Perdue soybean processing plants along the East Coast.[xxiii]  The division further continued to grow when in 1986, Perdue acquired InterTrade Inc., a commodities trading, which allowed Perdue to expand their feed procurement and trading capabilities.  In 1997 Perdue added a protein blending operation to enhance their feed processing plants.[xxiv]  

In 1999 Perdue established a partnership to construct a micronutrient facility which would allow the company to convert poultry litter into pelletized starter fertilizer.  In 2001 Perdue opened its first-of-its kind poultry litter palletizing plant in Delaware.  With the opening of that plant, Perdue is the “First to develop commercially viable pelletized poultry litter.”[xxv]  The Perdue plant is capable of taking in 96,000 tons of litter each year and converting it into 82,000 tons of pasteurized organic fertilizer for sale in the home and garden retail market.  In 2002, the plant processed 48,000 tons of poultry litter and showed profits.[xxvi]  These are only some of the Grain and Oilseed Division’s diversifications into related agriculture businesses that allow the company to control the quality of feed that maintains their birds and to turn a potential waste problem associate with poultry into profit.               

The Current System, Beginning to Present

In the mid 1950’s, poultry growers on the Eastern Shore were independent; they bought chicks and feed from the cheapest companies, and the played the markets, hoping to make money.  These processes created a boom and bust cycle that soon put farmers in debt because they would build more growing houses during the good seasons and have empty houses when the market was low.  In regards to the national trend, Perdue started entering into contracts with growers so they would specifically raise their chicks and use their feed.  At the time, most of the farmers were desperate to find a way to make money, and the deals were in Perdue’s favor, so they entered into them.  The situation remained even, sometimes with the grower making more profits due to rising volume, so Perdue began to take back the birds after they were grown and process them in their own plants.[xxvii] 

For almost all of the Perdue poultry produced on the Eastern Shore, the company contracts out the laying, hatching, and growing of chickens to local farmers.  Perdue retains ownership of the birds and pays to have them raised, therefore eliminating the need for the company to own and provide growing houses, hatcheries, and incubation houses.  The elimination of these costs allows the company to be more profitable and reduce the risk involved, but also utilizes the existing farming in the area.

National Proportion of Broilers Produced under Contracts, Vertical Integration and Independent Production, 1950-1995.[xxviii]

This graph shows the national trend towards contract growing that Perdue was able to follow.

The contact grower relationship has been around for three generations of farmers because it’s mutually beneficial for the grower and the integrator. With the contact grower relationship, the companies take most of the risk associated with market fluctuations – including poultry prices, feed ingredient prices and fuel costs, while providing stable, year-round income for growers. This process ensures that chickens are raised on family farms, not company-owned factory farms.[xxix]

This “relationship” allows farmers to keep farming and eliminates the need for Perdue to own all the land.  In this relationship, the grower assumes most of the risk because he or she gets paid depending on how the flock develops.  As the grower raises a flock, Perdue would send feed, nutrients, medications if necessary, and fuel to heat or cool the houses.  The cost for these products would be taken out of the gross profit of the flock that would be determined after the birds reached the processing plant.  Medication and more fuel during colder months could result in low paying flocks for many farmers.[xxx]    (See Diagram in Back)           

To do any sort of hatching or growing for Perdue, a farmer must bring up his farm to certain specifications.  The extent of the specifications depended on the pre-existing chicken houses.  As some companies move their operations off the Eastern Shore, farmers are left to find contracts with other poultry companies.  Perdue is shown to have some of the highest regulations for poultry houses so switching to growing for them can be costly.  

The shutdown of Tyson, Worcester County's largest private employer, left 650 workers unemployed. It also forced most of the region's 155 growers to find contracts with the other three companies with processing plants in or near Maryland.  Several growers who have won contracts had to shell out thousands of dollars, despite getting a settlement from Tyson, to improve or build new houses. Allen Family Foods Inc., Mountaire Farms Inc. and Perdue Farms Inc. have higher housing standards for chickens than Tyson's former plant required.[xxxi]

A frequent upgrade for some farmers who were left unemployed by the closing of the Tyson plant in Worcester County was a tunneling system, which deals with the cooling systems of the chicken houses and the air circulation system.  At the time of the growers transition to Perdue, the tunneling system was described as “an up and coming system that all farmers would use eventually.”[xxxii]  For many farmers that didn’t or couldn’t upgrade their houses, Perdue would only give them flocks when it was warm to cut back on fuel costs.[xxxiii] 

Several interviewed growers have commented on the professional work ethics of Perdue and its employees, especially their bio security measures, environmentally friendly practices, and customer service with their growers.  Jane King, a retired Perdue grower, commented on the way Perdue handled complaints:

The liaison between you and the company is your serviceman. I think they have a more modern name for them now….They would come out once or twice a week, sometimes more if necessary. He or she always knew when a farmer was disturbed. And whenever we were disgruntled, we would express it and they would in turn take it back to Perdue. The few times we complained, we received a reply. usually a visit from one of the supervisors. Sometimes from an executive.[xxxiv]

Industry Hazards

Disease is always a danger for all parts of the poultry industry.  This is made more problematic by the biology of poultry:

Chickens are extremely sensitive to viruses.  Poultry experts say it’s mainly because chickens have lung cavities that were once designed for flight, but are now laden with fat.  The fat and the close quarters of chicken houses makes diseases common in the industry.[xxxv] 

A recent disease threat with poultry, Perdue, farmers, and growers has been the avian flu outbreak.  On February 10, 2004, the DPI (Delmarva Poultry Industry), released a warning that declared a state of emergency for all persons working in the poultry industry on the Delmarva Peninsula.  DPI is the nonprofit trade association working for the continued progress of the broiler chicken industry in Delaware, the Eastern Shore of Maryland, and the Eastern Shore of Virginia.[xxxvi]  Perdue and growers were forced to curb the distribution of poultry because of fear of the Avian Flu.  The DPI helped to coordinate new bio-security measures, arrange testing, and help with disposal of infected flocks.  An issue that hurt many Perdue growers was the lack of relief funds for the actual growers.  The State of Maryland, the State of Delaware, and the leading poultry companies signed agreements about 10 years ago that created a fund to help in situations such as Avian Flu outbreaks.  In that fund was 2.5 Million dollars for the disposal and clean up of infected chickens.  If costs exceeded that amount, Maryland and Delaware had a fund of 5 Million dollars to provide additional help.[xxxvii]  This money was allotted to go the owners of the birds, not the growers.  Since Perdue owns the birds, the money went to the company for the depopulation, carcass disposal, cleaning and disinfecting, and other associated costs.  Growers were left out of this aid, but did receive some aid from the companies, which was typically not enough to cover the losses of feeding the birds, maintaining the houses, and disposing of chicken waste. 

            Many growers were pleased at the overall cooperation of the industry leaders like Perdue, the DPI and its formation of the Emergency Poultry Disease Task Force, and the state governments’ efforts to curb the spread of this outbreak.  The immediate bio-security measures put out were followed strictly which showed the unity that the poultry industry has during extreme crisis.  Also, the local population responded to the Avian Flu outbreak by following the bio-security measures, which shows the severity that the poultry industry has on the Delmarva.   

Bad eggs?

             Many people, especially Salisbury citizens know about Perdue and its history.  Many do not know the full history of Perdue, the good and the bad.  As a poultry company, Perdue isn’t really all that bad.  They have a good environmental policy, they have benefits for their workers, and they have expansive markets.  Not all of these were obtained with the same standards of business that Arthur Perdue founded the company on.  In the past, Perdue faced problems with their wastewater coming from plants in Delmarva, union forming and strikes, and problems acquiring national markets.

The Salisbury Processing Plant contributes over one third of the total water processed by the city.  The plant also discharges water which used to be above governmental regulations for pollutants;       

According to an EPA analysis, the city plant has significantly increased the pollution it sends into the Wicomico River, a waterway troubled by shortages of oxygen. Total nitrogen discharges doubled from 1995 to 1997 -- a period in which Perdue violated its permit 63 times.[xxxviii]

Also other troubled Perdue plants on Delmarva can be found in Accomack, Virginia, and Showell, Maryland.  The Accomack plant was sued by the state for 50 water-pollution violations of the companies permit between June of 1975 and February of 1978.[xxxix]  In 1987, two more permit violations were found at the Accomack plant due to faulty pH sensors.  The violations were settled out of court.[xl]  Again in 1989 the Accomack plant was charged with high acidity levels of sewage that were being dumped into the nearby stream.  With this charge, Perdue negotiated for a better permit that would allow differences in discharge in certain seasons due to the costs involved to maintain a constant pH balance.[xli]  The Showell processing plant, which was purchased in 1995, received violations in 1997 due to excessive ammonia and nitrate levels as well as other excessive contaminants being discharged into the St. Martin River.  John Chlada, Perdue’s Manager of Environmental Services, worked with the State for a settlement that required Perdue to invest 3 million into a facility to remedy the environmental problems and create wetlands in return for a lighter fine.[xlii]  As these environmental issues have flared up, Perdue has taken the necessary steps to correct these problems.

Other problems for Perdue occurred when Frank was looking to expand into the Northeast part of the country.  When certain distributors would not discontinue buying competitors products, Frank Perdue would threaten to stop supplying that distributor with Perdue products.  West Side Poultry Inc., a New York poultry distributor, filed a 35 million dollar lawsuit in 1980 against Perdue for ceasing to supply the distributor with Perdue products in an attempt to monopolize the market. Related, but not caused by the suit was a governmental anti-trust probe that looked into Perdue’s violations of fair business practices.  A governmental suit followed the investigation in 1981, but was later dropped. 

Perdue ran into union and mob problems when the company acquired a Golden Pride poultry processing plant in Stockton, Maryland in 1979 and closed the plant for renovations and modernizations.  The plant employees were unionized and as Perdue closed the plant, the company tried to absorb those union workers into other Perdue plants across Delmarva with the intention to reopen the Stockton plant, but have no union representation there.[xliii]  The local union received national backing from the AFL-CIO that had been trying to unionize Perdue plant workers for several years.  Perdue at first refused to negotiate with the unions due to little worker interest.  A boycott across the East Coast was enacted by the union to try and get Perdue to settle, but Frank had other plans.  Frank went to the Gambino family, the most powerful Mob family in America and asked for help.  When Perdue had been expanding into the New York area in the late 1960’s, Frank was shut out of many markets because they tied to the Gambino family’s poultry company.  To get into the markets that he wanted, Frank eventually decided to do business with the family.[xliv]  When the threat of a boycott arose in 1980, Frank contacted the head of the family, Paul Castellano, hoping to use their prior business dealings to get the mob to help ease Perdue’s labor difficulties.[xlv]  Castellano never responded and the boycott ended when the Perdue workers voted down unionizing due to the higher than national average wages and benefits.  During a presidential investigation on organized crime in 1985, Frank was questioned about his dealings with Castellano and linked to the mob, but he was never charged with any crime.[xlvi] 

There were other small problems that quietly hurt the Perdue image involving Frank Perdue and his obsession with getting things done right and fast.  Frank always wanted things to be improved on and done faster.  In 1980, a Perdue delivery truck in Philadelphia crossed a median, struck another car killing the driver of that car.  The Perdue driver was fatigued and was constantly being rushed to complete deliveries.  Time sheets that were supposed to be filled out by Perdue to prevent such violations and accidents were falsified.  Frank Perdue’s need to get chicken to markets faster trickled down into the lower regions of the company where certain reckless conduct such as speeding and excessive hours were ignored to get shipments out faster.[xlvii]  Other problems have been involved with Frank wanting to speed up production lines by encouraging workers to go faster than safety regulations state is safe to prevent repetitive motion injuries.  A different problem incurred by Frank was his early campaign that his yellow chickens were healthier and that chickens were supposed to be that color, which discredited his competitor’s chickens.  The only reason that Perdue chickens were yellow was because there was a mixture of flower petals in the food to make the chickens yellow.  It was all a marketing ploy that helped to spur greater Perdue sales.[xlviii]  

All of these problems sustained by Perdue were eventually corrected and the company learned from their mistakes.  Perdue’s image now is cleaner; the public mostly has forgotten the mistakes of the past.  With the company solidified in the poultry industry and still expanding markets available, the company continues to keep its good image. 

Poultry, Perdue, and Delmarva

According to the DPI, for every one job created in the poultry processing industry, there are 7.2 jobs created elsewhere to compensate for that money coming into the economy.[xlix]  According to the 2003 Delmarva Poultry Industry statistics, there are 14,100 workers involved with poultry on the Eastern Shore.  These figures equate out to 101,520 jobs that are dependent on poultry to exist.  These numbers do not even count migrant labor that is used in poultry.  A drop in poultry employees would significantly hurt the local economy as well as the farmers that lost their jobs;

A University of Maryland study estimated that a mere 4 percent drop in the state's poultry production would wipe out 1,000 jobs and $74 million in economic output.[l] 

These statistics show how dependent the peninsula is on poultry and what would happen if poultry was to move off the shore without an economic replacement.  According to the DPI and the most recent census bureau figures, Wicomico County is the 10^th largest broiler producing county in the country.[li]       

It is very easy to see how Perdue and poultry in many way, have affected the county, economically, politically, and socially.  Perdue and the poultry industry have provided jobs for thousands, kept farmland from being developed, contributed millions to better education, and have been stimulating growth in Wicomico County and the Eastern Shore since the founding of Perdue in 1920.  Perdue also has hurt the environment, caused some job fluctuations, and inadvertently driven growers into debt, causing them to lose their farms.  With all things considered, Perdue still has been a positive aspect of this area by helping the area to grow, but at the same time retain its farm beginnings and keep that image in the national perspective. 

Vertical Structure of the Broiler Industry

This diagram shows the breakdown of the poultry industry and how it starts and ends.  Perdue provides their genetic or parent stock, developed over the years by their cross and selective breeding to breeders who start off the industry

Collaboration. “The Economic Contribution and Long-Term Sustainability of the Delmarva Poultry Industry,” Maryland Agro-Ecology Center April 2003

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