Dj Americans Don't Eat Enough Bacon. The Pork King Has A Plan.

By Patrick Thomas

Shane Smith has helped make the country's largest pork producer into a grunting, rooting, squealing marvel of efficiency.

The chief executive of Smithfield Foods took the company public this past week and is ready to invest in it to confront his biggest challenge: getting us to eat more pork. He has a contingency plan to get our pets to eat pork, too.

In a more than $50 billion pork industry that produces far more bacon, chops and hams than Americans will eat in a year, Smithfield needs to push U.S. buyers to fill up their bellies with pork, but it also needs markets around the world to continue to consume what its domestic diners don't eat — heads, feet and other pig byproducts.

The Smithfield IPO raised roughly $500 million on the Nasdaq Stock Market and its owner, China's WH Group takes half of that and retains its majority stake. Smith plans to use the funds to build out Smithfield's packaged-meats business and sell more bacon, deli ham and hot dogs. He also plans to automate and invest in its plants scattered across the U.S.

Pig pickins and corn-price dreams

Smith, 51, took over as CEO in 2021 after nearly two decades rising through the company's ranks . Raised on a farm in Wayne County, N.C., Smith grew up tending crops and helping his father, a logger. Now, he lives with his wife near Smithfield, Va., where the company is located. He has four children and a granddaughter.

"I was either topping trees in the summertime or pushing pigs or picking corn," Smith said.

He studied accounting at Mt. Olive College in eastern North Carolina, but wound up back in agriculture, joining Smithfield in 2003 as a financial analyst. The future CEO was analytical but inquisitive about grain prices and hog production, said Jeff Deel, a former corporate controller at Smithfield who hired Smith. "He had this ability to home in on what was important."

And a good cook. Deel said Smith occasionally conducted "pig pickins," where a whole hog is slowly roasted. Smith would set up the cooker early in the morning in the Smithfield corporate parking lot and supply free lunch to roughly 100 of his colleagues.

Smith worked his way up, overseeing European operations and later becoming chief strategy officer. He had a long commute for a while, often traveling to Mexico, back to Virginia and on to Europe, spending weeks at a time in each place.

He became CEO as the meat industry was coping with labor issues after the Covid-19 pandemic. Meatpackers offered signing bonuses and other incentives to attract workers, which drove up their costs.

In 2022, Smith contended with spiking grain prices — the main cost in raising hogs — surged when Russia invaded Ukraine, a major grain exporter.

"When I go to bed at night, I think about corn, and when I wake up in the morning I'm still thinking about corn," Smith said in a 2023 interview.

Smithfield's next challenge could come from Washington, D.C. President Trump has pledged to levy tariffs on goods from China and Mexico — critical markets for everything from hams to pig heads — and the U.S. pork sector makes a juicy target for retaliatory duties in a trade war.

In a trade-war scenario, the company could redirect pork toward different Asian markets, or pet-food production, Smith said.

"If there is a tariff put on Mexico, my expectation is it would look like it did during the first administration. It would just maybe be short-lived and very manageable," he said.

A Trump administration clampdown on immigration could make staffing Smithfield's meat-cutting lines tougher, raising labor costs again and making it harder to fill customer orders .

Investors are cautious. In its first day of trading this past week, Smithfield shares fell 1.3% to $19.75, a tepid reception after the IPO priced at $20 a share, below its target range. Since its debut the stock has ticked up roughly 7%.

'Absurdly big'

Founded in 1936 and still based in its namesake Virginia hometown — also known as the "Ham Capital of the World" — Smithfield helped pioneer the methods that made the U.S. a global pork powerhouse.

To bulk up, Smithfield went on a buying spree in the 1990s and early 2000s, snapping up several large hog farms to supply the processing plants that then made up most of its business. In 2000, Smithfield bought Murphy Family Farms, a North Carolina hog producer that the Agriculture Department once called "absurdly big," producing about six million hogs a year. Owning farms let Smithfield raise hogs in a uniform, commercial-scale manner, while breeding pigs that yielded leaner meat.

The rise of industrial-scale hog farms, growing overseas demand and steadily increasing crop yields helped roughly double U.S. pork output since the 1980s. It also made the industry more reliant on international trade — particularly with China, where a rapidly growing and urbanizing society sharpened its appetite.

"There's too much pork in the U.S. and too little in China," said Joe Luter III, the son of Smithfield's founder and its CEO from 1975 to 2006, in a 2013 interview with The Wall Street Journal.

By 2013, though, Smithfield's massive scale wasn't enough to shield against years of escalating grain costs, low hog prices and increasing pressure from investors. Smithfield sold itself to Chinese company WH Group that year for $4.7 billion — at the time the biggest Chinese takeover of a U.S. company. WH Group has a 90% stake in Smithfield.

Smith says the relationship has helped his company thrive despite a pork glut pressuring prices. "We're more profitable today than we've ever been at any point in our history," Smith said in an interview.

Smithfield since then has built up its packaged-foods business, expanding brands like Eckrich sausage, Farmland bacon and Armour pepperoni. Packaged-meat sales, which tend to carry higher and steadier profits than sales of commodity pork cuts, now make up 58% of the company's sales and much of its profit. Its packaged meats profits are more than double what they were a decade ago.

Diced ham

When China has scaled back on pork purchases, Smith trimmed Smithfield's production to make fewer packaged products. It recently sold off farms in Utah, Missouri and North Carolina, seeking to cut the company's exposure to swings in grain and other commodity prices.

WH's ownership has helped Smithfield weather export volatility in recent years, Smith said. In China, WH can sell Smithfield products directly, while U.S.-based competitors use brokers. WH's feedback helped Smithfield change how it packages products such as pig heads so it translates to premium prices.

Smith knows that Smithfield also needs to turn more younger and health-conscious Americans into regular pork eaters. Pork consumption per capita in the U.S. has been flat for decades, according to the USDA.

Younger consumers tend to prefer chicken sandwiches and burgers, and some longtime pork fans complain the meat has gotten too lean over the years. The pork industry says consumers have been cooking it wrong.

Holiday ham sales volumes have been falling at a rate of about 5% a year, Smith said, so Smithfield is trying to turn them into something younger consumers want — cubed and diced ham for omelets, or thicker ham slices sold in deli-style wraps.

Smithfield ham sales are rising 2% annually as a result, Smith said.

Write to Patrick Thomas at patrick.thomas@wsj.com