Swift's Tough Cut

Even as millions of Swift & Co. "Butterball" turkeys were being carved last week, the Chicago-based meat-packing colossus announced that it had little to be thankful for this year. In fiscal 1968, which ended in October, sales dropped 5% to $2.8 billion, and Swift suffered a $42 million overall loss.

Swift's depressing balance sheet is a direct result of deep cuts into the market made by streamlined and strategically located smaller packers, which now number 4,000. As in steel and some other basic industries, the moderately sized companies have proved to be nimbler and more imaginative than some of the hidebound old giants. Medium-sized outfits like Iowa Beef Packers, Inc.--which was listed by FORTUNE among the top ten companies for return on invested capital in 1967--have built their slaughterhouses and packing facilities close to livestock farms. Frequently offering faster deliveries than the larger firms, these "independent" packers have forced the giants to admit that they must modernize.

Armour & Co., the second biggest packer, was the first to recognize the need for change, and is spending $250 million on new facilities. Now Swift, the biggest of all, has joined the renaissance. It is closing 250 antiquated plants, and will spend $143 million on new, decentralized packing and slaughtering houses. They will replace cumbersome, multistory buildings in such places as Kansas City and Omaha. Says Vice President Paul Steinbrink: "We are moving closer to the sources of supply, where the animals are."

Rather than turn out a broad range of products, the new Swift plants will specialize in a limited number of related meat products. But the firm expects sales to continue sliding for a year or two, until its new plants begin to win customers from the competition. Compounding its problem, Swift expects that the cost of closing all its unprofitable plants will reach $120 million before the modernization is completed. But executives figure that the shutting down of unproductive facilities will ultimately yield the company about $150 million from inventory liquidation, tax write-offs and sales of fixed assets. Swift will channel much of this capital into a growing list of diversified investments, which already include four insurance companies and two chemical firms.

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