Foster Poultry Farms History

Address:

1000 Davis Street
Livingston, California 95334
U.S.A.

Telephone: (209) 394-7901
Toll Free: 800-344-3116
Fax: (209) 394-6342

Private Company
Incorporated: 1939
Employees: 7,000
Sales: $990 million (1998 est.)
NAIC: 311615 Poultry Processing

Company Perspectives:

Excellence, honesty, quality and service. These are the Foster Family's principles that have shaped and continue to guide this solid, growing and fully integrated company. Excellence: It is accomplished by hands-on management and strict attention to detail at every level, by people who make excellence a personal goal, as well as a corporate one. Given the best resources and encouragement in aggressive investment and thoughtful risk-taking, we maintain our leadership position. Honesty: It starts with a fair and open sharing of expectations between each and every employee. It guides us throughout the business day, with our suppliers, our customers, and within the communities we call home. The result is a hard-earned reputation for honesty and credibility in all that we do. Quality: More than any other single value, quality at Foster Farms cannot be compromised. We ensure this by a shared recognition that our future is determined by our ability to select and retain a team of quality people, and that the superiority of our product is a measure of these individuals. Service: Honest dealings with customers and consumers, coupled with outstanding people and products, add up to the high level of customer service expected of Foster Farms. In short, we will be our customer's most valued supplier. Committed to and living by these values, we at Foster Farms believe that success is assured, yet never assumed. We also believe that a feeling of accomplishment for a job well done, a clear sense of individual direction and worth, and an open, enjoyable atmosphere on the job contribute to a company continually on the forward move. Key Dates:

Key Dates:

1939:: Max and Verda Foster found Foster Farms.
1959:: Foster Farms purchases a poultry processing plant in Livingston, California.
1982:: Foster Farms acquires the assets of The Grange Company and its subsidiary, Valchris Poultry.
1987:: Foster Farms acquires Fircrest Farms.
1990:: Company purchases an additional chicken processing plant in Fresno, California.
1994:: Foster Farms acquires Lynden Farms.
1997:: Foster Farms acquires Pederson's Fryer Farms.
1998:: Company opens new processing plant in Kelso, Washington.

Company History:

Long the leading poultry producer in California, Foster Poultry Farms has expanded its operations into Washington and Oregon to become the largest producer of chicken and turkey on the West Coast. The privately held company is a vertically integrated business which controls most aspects of its poultry production process. Foster Farms hatches, raises, slaughters, and processes chickens and turkeys. In addition, it manufactures its own feed, runs its own refrigerated trucks to bring its birds to market, and operates processing plants in Livingston and Fresno, California; Creswell, Oregon; and Kelso, Washington. Foster Farms also produces grain at a Colorado facility, and has other operations located in Alabama and Illinois. The company sells over 750 products to retail supermarkets and foodservice wholesalers under its own label, as well as under the Fircrest Farms, Lynden Farms, and Pederson Farms brands.

Launching of a Family Business

Foster Farms was founded in 1939 when Max and Verda Foster borrowed $1,000 against their life insurance policy to buy a repossessed 80-acre farm near Modesto, California. While Max continued to work as a reporter and the city editor at the Modesto Bee, Verda concentrated on raising turkeys. By 1942 the couple's venture had succeeded to the point that Max was able to quit his job at the paper and commit himself to the family business full time.

Although Foster Farms concentrated solely on turkeys during its early years, the company had expanded into chickens and dairy cattle by the late 1940s. After buying a second farm, the company acquired a feed mill in 1950. With the addition of this feed mill, Foster Farms would no longer depend on an outside supplier to feed its chickens. At the time, the Fosters were not the only poultry producer striving for vertical integration of the different aspects of their business. In fact, the entire poultry industry was in the midst of a massive reorganization. Fueled by monumental changes both in the technology of food production and in how Americans obtained their food, poultry producers increasingly came to see themselves less as family farms and more as automated factories.

A Changing Industry

Like other agricultural sectors, poultry production was revolutionized by the rise of large supermarkets. While consumers had once bought their meat from local butchers (as well as their produce from local growers and their bread from local bakeries), beginning in the 1950s, large supermarket chains--which sold all of these items and more under one roof--began to alter the country's patterns of food shopping and supply. As these chains encompassed ever larger geographical areas, they turned to major regional suppliers for their poultry, vegetables, and other perishable goods. The new interstate highway system made it cheaper and easier to move products over land, and the development of refrigeration technology meant that perishable items could be trucked for some distance without spoiling. The result of these changes for poultry producers was that larger operations that provided processed chicken at high volume were favored by supermarket chains. 'The poultry industry, once a collection of thousands of backyard operations' evolved into 'a highly integrated and automated business,' explained the Chicago Tribune.

Expansion in California: 1959-87

Foster Farms embraced this trend in 1959 when it bought a processing plant in Livingston, California. Live birds were trucked to the facility, slaughtered, processed, and packaged. Staffed by workers who repeatedly performed one part of the whole operation--much like auto workers on an assembly line--the Livingston plant also incorporated new technology that sped up the tasks. (Although a fire destroyed the original Livingston processing plant in the early 1960s, Foster Farms quickly rebuilt it on a nearby site.) In the 1960s, the company moved its corporate headquarters from the original family farm to Livingston.

Although Max and Verda Foster remained at Foster Farms' helm, their eldest son, Paul, was the dominant force in the company's rapid expansion. While Max concentrated on the fledgling dairy operations, Paul oversaw the burgeoning poultry production arm. In 1969, Paul officially took the company's reigns, and was named president. Under his guidance, Foster Farms acquired a distribution and sales center in El Monte, California, in 1973. This new facility allowed the company to act as a major distributor of poultry products in southern California. Paul died suddenly of a heart attack in 1977, and was succeeded by his brother, Thomas.

Following in his brother's footsteps, Tom Foster led the family business into new territory. In 1982, the company purchased the assets of The Grange Company and its subsidiary, Valchris Poultry. This deal provided two particular benefits to Foster Farms: it enabled the company to re-enter the turkey processing business after a long hiatus, and it also let the company enter a new segment of the poultry industry. Grange produced packaged deli products, especially luncheon meats, and after the acquisition it continued to do so, but now under the Foster Farms name. By the mid-1980s, Foster Farms offered a number of new products, including poultry franks, bologna, and luncheon meats.

The company's pace of growth was brisk--sales tripled between 1975 and 1988, according to the September 29, 1988 edition of the San Francisco Chronicle. By 1987, Foster Farms was the largest chicken producer in California, churning out some 140 million chickens per year. The company's success was due in part to its total vertical integration. 'Our production pipeline goes from egg to package,' a company spokesperson told the Chronicle. Foster Farms' operations were a model of industrial efficiency. Chickens were conceived on one of 12 breeder farms within 35 miles of the processing plant in Livingston. After the hens laid their eggs (a total of approximately 2.2 million a week), the eggs were trucked to hatcheries, where they were kept in controlled conditions in an incubator for 18 days. When the newborn chicks hatched, they were taken to one of several ranches, where they remained for about 52 days. During that time, the chickens had constant access to the company's own corn and soybean meal feed. 'They are pampered,' a Foster Farms spokesperson explained to the San Francisco Chronicle on June 2, 1987. 'Good chicken is good business.'

After their time at the ranches, the birds were trucked to the Livingston processing plant. Workers hung the chickens by the ankles upside down on a metal conveyor line. The chickens were then shocked with an electric current to stun them before their throats were cut by an automated blade. Still on the conveyor line, the bodies were scalded with hot water, had their feathers removed by plucking machines, and were eviscerated by yet other machines. Next, some 500 workers cut and packaged the birds: some bagged whole chickens; others removed breasts and boxed them; others cleaved off legs and packaged the parts. At the end of the assembly lines, the packages were mechanically sealed with cellophane, and promptly shipped to supermarkets and foodservice vendors via Foster Farms' own fleet of refrigerated trucks. The entire process illustrated the observation of Southern California Business that 'the conversion of poultry raising from a handicraft into a mass production basis' had occurred.

Foster Farms' sales had risen so rapidly in the mid-1980s that the company announced plans substantially to increase its poultry producing capacity in 1988. That year, Foster Farms constructed a new fryer ranch with one million square feet of poultry housing in Merced County, California, and upgraded its feedmill in Ceres, California. It also built in Livingston a new 85,000-square-foot distribution facility, and a sales office for northern California. In addition, the company erected a plant to process chicken byproducts. Most importantly, Foster Farms acquired a turkey processing plant in Fresno, California, from Roxford Foods in November 1989. Foster Farms immediately converted the facility to a chicken processing plant, by adding new equipment and making structural additions. The Fresno plant was slated to process an additional 80 million chickens each year.

Foster Farms' booming sales were driven by a number of factors, foremost of which was the growing popularity of chicken in the United States. With the discovery that saturated fat intake was linked to heart disease, Americans began to consume less red meat, which was often fattier than poultry and contained more cholesterol. In place of meats such as steak, roast beef, and pork, Americans increasingly opted for chicken, which typically contained less saturated fat. According to the March 5, 1996, USA Today, poultry's share of the meat market rose from 24 percent in 1976 to 41 percent in 1996, and per capita poultry consumption rose from 40.6 pounds in 1970 to about 72 pounds in 1996. In 1987, per capita poultry consumption surpassed beef for the first time in history.

Chicken's more prominent role in the American diet was not only attributable to its lower fat content. Innovations made by the poultry industry itself also spurred demand for the fowl. For most of their history, poultry processors had offered whole chickens and little else. But a new trend hit the market in the early 1980s. As the September 17, 1987, Wall Street Journal explained, the fast-food chain McDonald's had greatly influenced the poultry industry. In 1982, McDonald's introduced a new product--nuggets of boneless, deep-fried chicken that came with a dipping sauce. These McNuggets sold briskly at McDonald's, and also inspired a bevy of knockoffs. According to the Wall Street Journal, the lesson that McNuggets imparted to poultry processors was the 'value of moving beyond standard chicken.' A huge and untapped market was discovered for prepackaged and jazzed-up chicken products. To capitalize, leading poultry producers--including Foster Farms--quickly released a variety of so-called 'value-added' products, such as boneless-skinless chicken breasts, chicken tenders, and marinated chicken strips.

Poultry's meteoric rise up the American food chain was slowed in 1987 by a report broadcast on the television news magazine show '60 Minutes' which claimed that a high percentage of chicken was infected with salmonella. This bacteria, a naturally occurring organism that tainted meats and vegetables, could cause illness ranging from flu-like symptoms to death. Because the bacteria could be spread between birds in fecal matter and blood, the close proximity of so many birds--both on the ranches and in the processing plants--made it more prevalent as the poultry industry became more automated. Poultry prices dropped precipitously in the wake of these revelations as consumer demand slackened.

Foster Farms emerged from the salmonella crisis unscathed, however. The company, notorious for its aversion to publicity, took the uncharacteristic step of inviting members of the media into its processing operations to witness its state-of-the-art anti-contamination measures. The positive coverage generated by this effort boosted public confidence in the company's products. Moreover, Foster Farms was able to rely on its strong brand image to assuage consumers' concerns. In fact, a company spokesperson told the San Francisco Chronicle on September 29, 1988, that 'the salmonella scare indirectly boosted Foster sales, because consumers became pickier about the chickens they bought.'

In the aftermath of the salmonella scare, other poultry producers realized the importance of branding as well. According to the Atlanta Journal-Constitution, brand name birds could command an extra ten cents a pound over their generic counterparts in the supermarket. One of Foster Farms' major competitors, Perdue Farms Incorporated, had been advertising since 1967, but stepped up its branding efforts in the late 1980s. Perdue aired a series of commercials featuring the company's eponymous chairman, Frank Perdue, proclaiming that 'it takes a tough man to make a tender chicken.' Recognizing the need to defend its position, Foster Farms also increased its television marketing presence in 1988. One spot, portraying a mother-in-law showing her daughter how to prepare chicken, received a prestigious Clio Award that year. Foster Farms subsequently launched a sales promotion aimed at Latinos in 1990.

Expansion into Oregon and Washington: 1987-98

Along with its ongoing branding efforts, the late 1980s saw Foster Farms decide to expand its geographical presence. Already the undisputed market leader in California, the company eyed the rest of the West Coast as possible territory for expansion. Foster Farms had first ventured into the Northwest in 1987, when it acquired Fircrest Farms. Located in Creswell, Oregon, Fircrest was one of the leading poultry producers in Oregon, and had a firmly-ensconced regional brand. In 1994, Foster Farms made a more aggressive move into the markets of the Northwest when it purchased Lynden Farms for an estimated $8.2 million. Foster Farms shipped the chickens from both Fircrest and Lynden to its Livingston and Fresno plants to be processed.

Although the Foster family continued to play an active role in managing the company, brothers George and Tom had relinquished the role of president and chief executive to Robert Fox (a non-family member) in 1992, while the brothers continued to serve on Foster Farms' board. But the company's growth continued throughout the early- and mid-1990s. Though the privately held operation was tightlipped about its sales figures, Foster Farms did announce that its 1996 sales had topped $900 million. By then, the company had become the largest poultry producer on the entire West Coast, and the eighth largest in the nation, ranking 231st among all Fortune 500 companies. Moreover, the Livingston plant was the largest slaughterhouse in the world, processing 480,000 chickens each day.

The company wanted to keep growing, though. In 1997, Foster Farms spent roughly $7 million to buy the leading poultry producer in the state of Washington--Pederson's Fryer Farms. Pederson's offered Foster Farms a unique opportunity to gain control of most Western markets. As Bob Fox told the Daily News on September 2, 1997, 'Washington ... is the second-most populated state in the Western United States. We believe it's an extension of our California-area business.'

Even with the purchase of Pederson's, however, Foster Farms continued to truck its Pacific Northwest-grown birds back to California for processing. This arrangement was both inconvenient and expensive. To remedy the situation, Foster Farms constructed a $45 million processing facility in South Kelso, Washington. 'It's a very major step for us,' Fox noted to the Daily News on May 15, 1997. 'It's the biggest single from-the-ground investment we've made.' After opening in 1998, the Kelso facility added over 500 workers to the Foster Farms fold. The company closed Pederson's processing operations in Tacoma, Washington (although it kept the brand name), and shifted processing over to the Kelso site. By the close of 1998, Foster Farms processed about 130 million pounds of poultry at its Northwest facilities.

1998 and Beyond

As it continued to expand its poultry empire, Foster Farms did not lose sight of the strategies that had helped establish the company. Marketing the Foster Farms brand remained an important aspect of business. During the 1998 Super Bowl, for example, the company launched a major advertising campaign that brought Foster Farms the accolades of both media critics and consumers. The spots, which featured straggly, junk-food eating chickens who tried to masquerade as Foster Farms chickens, boosted the company's brand image as a producer of high-quality, carefully vetted chicken. The campaign continued through 1999.

The company continued to grow through acquisition, as well. In 1999, Foster Farms acquired Butterball Turkey Co.'s turkey processing plant and feed mill in Turlock, California, along with a hatchery in Fresno, California. That same year, Foster Farms also purchased Griffith Foods--an Alabama-based producer of corn dogs. The company's future prospects were bright. Although Tom Foster died in 1999, brother George remained active in the company, as did CEO Bob Fox. Foster Farms produced more than 750 million pounds of fresh poultry in 1999, and was the second largest corn dog producer in the United States. As the Modesto Bee noted on October 28, 1999, in what seemed a perfect understatement, 'Foster Farms' presence in the industry and the West has been increasing in recent years.'

Principal Competitors: Perdue Farms Incorporated; Tyson Foods, Inc.; Zacky Farms, Inc.; ConAgra, Inc.; Hormel Foods Corporation.

Foster Poultry Farms History

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Key Dates:

Company History:

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