Businessmodel of Smithfield Foods

Customer Segments

Smithfield Foods has a mass market business model, with no significant differentiation between customer segments. The company targets its offerings at consumers who desire meat products.

Value Proposition

Smithfield Foods offers two primary value propositions: innovation and brand/status.

The company embraces innovation as part of its culture. It maintains a vertically-integrated platform through which it controls all aspects of development, from conception to packing. The system allows it to consistently supply traceable and high-quality raw material. It has also enabled Smithfield to lead in areas such as sow group housing conversion and the production of ractopamine-free pork, which is of major importance for export markets.

The company has established a powerful brand due to its success. It is the world’s largest hog producer and pork processor, raising 15.8 million pigs each year and producing over 2.7 billion pounds of packaged meat and over 3.8 billion pounds of fresh pork annually. It maintains leading products in several packaged meats categories, with prominent brands such as Smithfield, Eckrich, Nathan’s Famous, Farmland, Armour, John Morrell, Cook’s, Kretschmar, Gwaltney, Curly’s, Margherita, Carando, Healthy Ones, Krakus, Morliny, and Berlinki. It employs 50,000 people throughout North America and Europe and generated $14 billion in annual revenue in its most recent fiscal year. It exported products to over 40 countries around the world. Lastly, it has won a number of honors, including the following:

• 91 awards from the North American Meat Institute (NAMI) in 2015
• Recognition as #1 in water management among meat companies by Ceres in 2015
• Recognition as Sustainable Processor of the Year by *Food Engineering *in 2014
• The Environmental Excellence Silver Award from the Virginia Department of Environmental Quality for its Smithfield North facility (2013)
• Recognition as a Best of Sustainable Supply Chain winner by McDonald’s (2012) ### Channels

Smithfield Foods’ main channels are regional and national supermarket chains, wholesale distributors, the foodservice industry (fast food, restaurant and hotel chains, hospitals, and other institutional customers), export markets, and other processors.

The company promotes its offerings through its website, social media pages, advertising, sports sponsorships, sales incentives such as rebates, and trade promotion programs.

Customer Relationships

Smithfield Foods’ customer relationship is primarily of a self-service nature. Customers use its products while having limited interactions with employees.

Key Activities

Smithfield Food’s business model entails manufacturing its products for its customers.

Key Partners

Smithfield Foods’ key partners are the suppliers that provide it with the raw materials it needs to manufacture its products. Its most common materials are feed grains, including corn, wheat, and soybean meal. It also purchases live hogs for its Fresh Pork segment.

Key Resources

Smithfield Foods’ main resources are its physical resources, which include farms, manufacturing facilities, and distribution centers across North America and Europe. It processes its hogs at nine plants (three in the Southeast U.S. and six in the Midwest).

Cost Structure

Smithfield Foods has a cost-driven structure, aiming to minimize expenses through significant automation and low-price value propositions. Its biggest cost driver is cost of sales, a variable expense. Other major drivers are in the areas of sales/marketing and administration, both fixed costs.

Revenue Streams

Smithfield Foods has one revenue stream: revenues it generates from sales of its products to its customers.