Gold Kist Inc. History

Address:

244 Perimeter Center Parkway, Northeast
Atlanta, Georgia 30146
U.S.A.

Telephone: (770) 393-5000
Fax: (770) 393-5262

Cooperative
Incorporated: 1936 as Georgia Cotton Producers Association
Employees: 16,000
Sales: $1.65 billion (1998)
SICs: 0251 Broiler, Fryer & Roaster Chickens; 0254 Poultry Hatcheries; 0213 Hogs; 0762 Farm Manage-ment Services; 0921 Fish Hatcheries & Preserves

Company Perspectives:

The Gold Kist mission is to contribute to the economic improvement of its farmer-owners by providing quality inputs and services at fair prices and by adding value to their products through efficient marketing to domestic and international customers. Relationships with all stakeholders will be guided by the highest ethical standards. All activities will reflect a commitment to environmental preservation and natural resources conservation.

Company History:

The second largest poultry processor in the United States, Gold Kist Inc. is an agricultural cooperative whose members control the common stock of the association. Gold Kist was founded as an instrument to aid cotton farmers in Georgia, giving them the means to control processing and marketing through the ownership of their own facilities. As the cooperative expanded outside of Georgia, it turned to other agricultural crops and activities and began offering marketing services for pecans, peanuts, livestock, grain, and catfish. During this diversification, much of which occurred during the 1950s, Gold Kist began providing poultry marketing services, the chief area of focus for the cooperative during the 1990s. By the end of the 1990s, Gold Kist was operating 12 poultry processing plants that processed roughly 14 million chickens per week in Georgia, Florida, North Carolina, and South Carolina. The cooperative's other operations include pork production, aquaculture research, and catfish breeding stock production, as well as joint venture projects involving pecan and peanut processing and marketing. Gold Kist serves approximately 31,000 farmer members in Alabama, Florida, Georgia, Mississippi, South Carolina, North Carolina, and Texas. Membership in Gold Kist is open to any person, firm, cooperative, or corporation involved in the production of farm commodities. The cooperative's products are sold domestically and abroad under private labels, store brands, and the Gold Kist Farms brand name.

Background of Founder

For nearly a half-century, D.W. Brooks represented the primary force in Gold Kist's development as an agricultural cooperative organization. A visionary and champion of farmers in the southeastern United States, Brooks served as an official advisor to five U.S. Presidents during his illustrious career, a career that began not long after he entered the University of Georgia in 1918. By the time he enrolled in the University of Georgia's School of Agriculture, Brooks had already displayed a powerful mind, skipping several grades of primary and secondary education. At the School of Agriculture in Athens, Georgia, the pattern repeated itself. Brooks was 19 years old when he completed the requirements for a B.S.A., finishing in just three years, and was still a teenager when he accepted an invitation to join the faculty. During his hours spent away from teaching, Brooks pursued a master's degree, concentrating on agricultural economics, which he approached with the passion of a zealot. He empathized with the impoverished state of Georgian cotton farmers and felt a driving need to improve their antiquated production methods and naive marketing systems. Said Brooks, "My studies convinced me that farmers were not farming properly, they were not producing properly, and they were not marketing their products properly--and they never would do this as long as they tried to go it alone." For the rest of his life, Brooks would work tirelessly on the behalf of farmers, seeking to bring stability and prosperity to an occupation that had long been deprived of such qualities.

Brooks felt the greatest rewards could be achieved outside the classroom, although much of his work in the field was predicated on his studies and research at the University of Georgia. In 1921, he helped organize the first cooperative in north Georgia, devoting the summer months to the formation of the Georgia Cotton Growers Cooperative Association (GCGCA). Brooks resumed his teaching duties in the fall, but it soon became apparent that the GCGCA needed him to take on a more active role if the fledgling cooperative was to survive. In 1925, Brooks resigned his teaching post at the University of Georgia and was named supervisor of field operations throughout the greater Carrolton, Georgia area, where cotton farming was highly concentrated. Despite the day-to-day presence of Brooks, the GCGCA continued to suffer, its development not helped by the onset of the Great Depression. By 1933, it became clear to the GCGCA's leaders that the cooperative could not survive, leaving them with two options: liquidate the cooperative or establish a completely new organization from a dismantled GCGCA. Clearly, the first experiment had failed, but for Brooks failure only served to instruct. "From 1925 to 1933 was an excellent training period for me," Brooks explained. "At least I had found out how a co-op ought not to be run, and had built up in my mind fully and completely the way it should be run."

The First Decades

Brooks quickly got a chance to put his theories to the test when he was selected to organize a new cooperative from the rubble of GCGCA. The reorganization that followed was thorough, so much so that Gold Kist did not trace its history back to the GCGCA but to the 1933 formation of the Georgia Cotton Producers Association, an organization that changed its name to the Cotton Producers Association (CPA) in 1943. Brooks assumed full control over CPA, running the co-op by day and speaking before small groups of farmers wherever they could be gathered by night. To interested yet hesitant farmers, Brooks preached the virtues of joining a cooperative and he railed against the old system that left farmers as the powerless victims of a host of agricultural intermediaries, the individuals and companies who transported, distributed, and processed the cotton--and pocketed most of the profits. "We've got to get on the profit side of agriculture," he declared. "Small farmers like us can no longer make the grade just by producing raw materials. To get on an equal footing with large corporate farms and other big businesses, we've got to pool our resources, buy--and later manufacture--our own supplies in wholesale quantities." Toward this end, Brooks started buying cotton warehouses and then fertilizer plants for CPA member farmers, acquiring the facilities at sharply reduced, Depression-era prices. In one illustrative deal, Brooks acquired a fertilizer plant that cost $100,000 to build, yet paid only $3,500. Brooks also created a sophisticated system for grading and weighing cotton, one that enabled cotton farmers to obtain optimum prices for their bales of cotton. Gradually, CPA gained momentum, but considering the pernicious economic conditions of the time, there was much to be done before the cooperative began to fully reflect the ideals of its founder. The emphasis during the 1930s was on survival; in the decades ahead, Brooks would have the opportunity to vertically integrate the cooperative further and diversify its activities into a range of agricultural fields.

Although CPA could not begin to focus on much beyond its own survival until after World War II, the cooperative did expand on the services it provided to farmers during the war years. Gradually, farmers in the Southeast were beginning to turn away from cotton and toward other crops and activities, as cotton production moved westward. CPA, too, would begin to concentrate its efforts on other crops, but until the end of World War II the cooperative was engaged principally in providing cotton marketing services to its members. There were exceptions, however. The first farm supply store was opened in 1943, marking the starting point of what would develop into a network of Farmers Mutual Exchanges (FMX), which purchased supplies from CPA on a wholesale basis and distributed them to farmer members on a retail basis. The first store, which began with an inventory of 30 tons of feed and nothing else, led to the establishment of additional stores situated in CPA's expanding operating territory. By 1945, as CPA's membership expanded throughout much of Georgia and into Alabama and South Carolina, there were six FMX stores. Following the war, CPA began to diversify in earnest, beginning with a foray into poultry marketing services during the latter half of the 1940s and the establishment of a grain marketing operation in 1948. Organized to handle all types of grain grown in the Southeast, the grain marketing operations became more comprehensive in 1950, when CPA constructed a 300,000-bushel grain elevator in Waynesboro, Georgia. The diversification into poultry and grain touched off a period of ambitious expansion into a number of agricultural fields that began with a flourish in 1951.

Post-World War II Diversification

In 1951, grain marketing services became fully operational following the completion of the Waynesboro facility, as did the cooperative's poultry marketing services following the acquisition of CPA's first poultry processing plant, also in 1951. The move into poultry was extremely important, marking the starting point of a business that would serve as the cooperative's foundation at the end of the century. By the late 1990s, poultry would be to Gold Kist what cotton was to the cooperative during the 1930s, but in between cotton and poultry were a number of agricultural commodities that represented the breadth of CPA. These other agricultural fields became part of CPA's operations primarily during the 1950s. Cotton marketing activity reached its peak during the first half of the 1950s, then began to gradually diminish in succeeding years, finally disappearing altogether. In cotton's place came pecan marketing services, which CPA introduced in 1951. The following year, the cooperative began offering livestock marketing services. In 1956, by virtue of CPA's acquisition of Georgia Peanut Co., the cooperative established peanut marketing services and gained peanut storage facilities in Georgia, Florida, Alabama, Oklahoma, and Texas. The addition of these new agricultural fields into CPA's business scope pushed the cooperative's annual sales volume up from $35 million in 1950 to $140 million by the end of the decade. During the same period, the cooperative's profits exploded from $231,000 to a high of $2.4 million, giving Brooks the financial means to embark on the greatest facility expansion in the history of CPA. Aside from the remarkable increase in the cooperative's financial might and the physical growth it engendered, the diversification into other agricultural pursuits also had a symbolic importance, giving CPA its future name. During the 1950s, it was decided that the Gold Kist brand name, which first was used in the cooperative's pecan marketing operations, would be the name under which the poultry division would operate and under which a portion of the poultry would be sold. Although the official name change of the cooperative did not occur until the 1970s, from the 1950s forward the Gold Kist name began to take on growing prominence in the endeavors of CPA.

During the 1960s, expansion continued, but considerable attention was also paid to organizational and administrative change, a necessity after the feverish diversification and expansion of the 1950s. Although the decade represented a period of introspection and analysis, financial and geographic growth continued to push the cooperative forward, thanks in large part to the poultry division. The poultry division's sales volume increased from $35 million at the beginning of the 1960s to more than $114 million by 1968, which ranked poultry as the single most important facet of CPA's multifarious activities. For comparison, the cooperative's next greatest revenue-generating segment was peanut marketing services, which collected $67 million in 1968. Cotton, meanwhile, had dwindled in importance, generating $17 million in sales. Because of the increasing prominence of the cooperative's poultry division and the name it operated under, the 1960s marked the first time CPA began to identify itself as CPA/Gold Kist. The number of people exposed to the Gold Kist name was increasing substantially as well, broadened by the cooperative's rising export business. Although CPA had sales agents representing the cooperative in foreign markets before the 1960s, it did not place its first direct employee on foreign soil until 1965, when a sales office was established in Brussels to facilitate the export of poultry, cotton, grain, pecans, and peanuts in Europe.

The most memorable event during the 1960s for CPA members and employees was not the growth of poultry activities or increasing export business. Instead, the 1960s were remembered as the last decade CPA's founder influenced direct control over the cooperative. D.W. Brooks relinquished his post as general manager in 1968 and moved into the newly created position of chairman of the board. A second generation of leadership took control after Brooks's retirement from day-to-day management, led by C. Wesley Paris. Behind him, Brooks left a towering enterprise, with sales approaching $270 million and 180 plants in operation, sufficient to rank the cooperative 318th among Fortune magazine's 500 largest industrial firms. Although no longer directly guided by Brooks, Gold Kist continued to record remarkable growth during the 1970s. Annual sales climbed to $463 million by 1972, three times the total collected a decade earlier, and then doubled again in the next five years. In 1977, when Brooks stepped down from his position as chairman, sales eclipsed $1 billion. The small cooperative Brooks had started with less than $5,000, now held sway as a global agribusiness of mammoth proportions.

From the 1970s to the end of the century, Gold Kist concerned itself primarily with increasing the size of its poultry operations. Although the cooperative continued to develop other areas of its business, poultry was the compass point directing growth. A substantial amount of the progress achieved in poultry arrived via acquisitions, which eventually built Gold Kist into the second largest poultry processor in the United States. During the 1970s, the cooperative purchased several poultry facilities from Pillsbury Corporation in two transactions, one in 1971 and the other in 1972. These separate acquisitions gave Gold Kist two processing facilities, a feed mill, and a hatchery. In 1978, the cooperative purchased a poultry plant in Trussville, Alabama, from Purina Mills. In the 1980s, the growing stature of Gold Kist's poultry division prompted management to form a separate poultry company. Golden Poultry Company was formed to receive the assets from the 1981 acquisition of Swift Independent Packing Company, which had decided to exit the poultry business. Swift's poultry plant in Douglas, Georgia, became the first component of the newly created Golden Poultry Company. In 1986, shares of common stock in Golden Poultry Company were sold to the public in an initial public offering (IPO), but Gold Kist continued to hold sway over the company by retaining a controlling percentage of the shares. After the IPO, the Douglas plant was renovated and a new poultry facility was constructed in Sanford, North Carolina. In 1988, Golden Poultry Company's operations were expanded again when a processing plant, feed mill, and hatchery were constructed in Russellville, Alabama. After this two-decade-long expansion campaign, Gold Kist and its majority-owned subsidiary Golden Poultry Company entered the 1990s with the prominence of poultry set to become an even greater feature of the cooperative.

The 1990s and Beyond

By the 1990s, annual sales had passed $2 billion and Gold Kist stood as the only poultry processor that operated as a farmer-owned cooperative. The continual expansion of the cooperative's poultry operations from the first measured steps in the 1940s to the 1990s had created a formidably sized poultry processor that trailed only Tyson Foods in industry rankings. The transformation from a cotton-oriented cooperative to a poultry-oriented cooperative was made complete following a series of transactions late in the decade that left no question about the course of Gold Kist's future. In 1997, Gold Kist purchased the shares of Golden Poultry Company it did not already own and merged the company into its operations. In September 1998, nearly all the cooperative's cotton marketing assets were sold, leaving it with only a cotton warehouse in Georgia that was slated to be closed in 1999. Finally, in October 1998 Gold Kist completed a sale to Southern States Cooperative, Inc. that included the cooperative's 100 retail farm supply stores (the FMX units that debuted in 1943), Gold Kist's pet food and animal products division, and its fertilizer and chemicals division. In the aftermath of these divestitures, Gold Kist continued to provide peanut and pecan marketing services through joint venture partnerships, and operated pork production and catfish production facilities on its own, but the cooperative was primarily a poultry processor. As the cooperative prepared to enter the 21st century, its 12 poultry processing plants located in Georgia, Florida, North Carolina, and South Carolina led the way toward Gold Kist's future.

Principal Subsidiaries: AgraTech Seeds Inc.; Agvestments Inc.; AgraTrade Financing, Inc.; Luker Inc.; Gold Kist Foundation, Inc.

Gold Kist Inc. History

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