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How Christensen Farms Beat the Odds in Pork

Pork Powerhouses 2019: Exclusive interview with Glenn Stolt

Family-owned Christensen Farms has been on the Pork Powerhouses list of the 40 largest U.S. pig producers every year since the ranking began in 1994. Only a dozen companies can say the same.

What makes this Sleepy Eye, Minnesota, firm even more admirable is that it survived and thrived after the death of its founder and CEO, Bob Christensen, at age 51, in 2012.

Glenn Stolt was the CFO at the time of Christensen’s death, and the CEO since. He fills us in on the company’s evolution.

SF: This is the 25th anniversary of the Pork Powerhouses ranking, and Christensen Farms has been on the list of the Top 40 producers every year.

GS: I have each report. A while ago, I put together a chart looking at the evolution of our company, as well as the consolidation in the industry. It’s fun to look back. Our trajectory has changed a lot. In 1994, your first list, we had 11,000 sows. [Today it is 148,000 sows.]

SF: Many companies struggle to thrive after the founder and visionary dies. How did you succeed?

GS: I was brought in two years prior to Bob's passing, by Bob, to be the CFO. At that point, I brought 22 years of experience in large, publicly-held organizations. Most of those companies were a lot older and therefore more mature than Christensen Farms, or many companies across agriculture, let alone pork production.

At the same token, I was not the pig guy. After Bob’s passing, the Christensen family and those involved in the decisions, I would imagine, had to wonder if they were making a mistake taking a chance on somebody like me in this business. There were many individuals with more technical experience in pig production who had a direct connection with Bob.

Bob was not only the leader of the business, but a confidant, a visionary, a coach, and a mentor to them. There were questions about the choice of having a non-pig guy run a pig company.

It worked because of the family support, which has been unwavering to this day. Regardless of who took over, the ability to communicate that support to our employees and all of the stakeholders in our business was critical.

We had a leadership team here that was instrumental in getting people to understand that although Bob was gone, we had a lot of great pig people here, and what we needed was an element of business acumen to run the business.

We transitioned the culture of the organization from an entrepreneurial-led culture, which is highly essential in building any business from the ground up, to a more established culture from a systems, technology, and administration standpoint. You need broader business acumen for an increasingly complex business to continue to build and thrive and move forward.

The support I had from my immediate team members that helped calm the anxiety I had about not being a pig guy will never be forgotten. It created the ability for me to follow the legend of Bob Christensen and drive the business forward. Again, it was thanks to the family support and the team of people that I had around me.

SF: How is the Christensen family involved today?

GS: The family is not involved in day-to-day operations. They leave that entirely up to me and the team here. Bob’s widow, Mary Ann, and his younger brother, Lynn, sit on the board of directors with me and the trustee of the family trust. The family plays more of a governance role, although they are involved in philanthropic and strategic investment decisions.

Triumph Foods

SF: Christensen Farms was an original shareholder in the pork processing company Triumph Foods, starting more than 15 years ago. Triumph opened a second packing plant last year. Do you consider that involvement a success?

GS: Much of the heavy lifting and the risk associated with Triumph Foods happened before I joined the company. It has been a huge success, but it's also challenging. There are many producers that want to get involved in something like a Triumph Foods, and we understand why, but it is a challenging endeavor.

It’s a very costly thing to get into and requires some intestinal fortitude to see the plan through. Building the plant takes two years, and then you have two years of ramping up production from start up to second shift. Those challenges remain at the plant in Sioux City.

SF: What is your role at Triumph today?

GS: I am chair of the Triumph board of directors and one of eight members on that board. The members represent the five owners of Triumph Foods. I'm spending an increasing amount of time on the integrated Triumph platform, which includes, in addition to our live production, our partnership investment into Seaboard Triumph Foods in Sioux City, and the Daily's Premium Meats business we jointly own with Seaboard.

SF: The pork business has changed since the first Triumph plant opened in 2006.

GS: Yes. Whether you are in live operations, processing or further processing, most people say that history is a great predictor of the future. I would say that is not the case. In fact, I warn our teams not to think that way.

The world we live in today, versus that of five years ago, or 10 years ago, or most definitely when the first Pork Powerhouses story ran in 1994, is incredibly different. One might say that it's a new ballgame. I would say that it's an entirely different sport.

Biggest Challenges in Pig Business

SF: What are the biggest challenges to your pork production business today?

GS: Health remains a key challenge. If you look back 25 years, for example, good bio security was putting a shower on a farm. Today it's filtration and fumigation rooms. It is all kinds of technology and behaviors to keep our herds as healthy as possible.

Prevention, including vaccines and bio security are a greater focus today, given the conversations around antibiotics, rather than the treatment-oriented protocols in the past. That is good for the animal, and good from a sustainability standpoint.

Another challenge is labor. We would venture to guess that 20 years ago, perhaps half of our labor grew up on a farm. Today, it might be less than 2%. Finding the labor, creating passion for what we do in our company and processing plants is a big challenge. That will continue.

Trade is a challenge; we can't ignore that. Through our industry associations, as well as efforts within the company, Christensen Farms is doing whatever we can to influence our politicians on various trade discussions.

The other challenge lurking out there is meat substitutions. I'm worried we aren't taking that seriously enough. For many years, our competition was other proteins like chicken, aquaculture, beef, and turkey. Now there are substitutions in the market. We can't stop it in our free enterprise system, but we can mitigate the risk. Let’s engage to make sure that consumers understand the differences between those products and our products from a nutritional perspective, an affordability perspective, and a human health perspective.

African Swine Fever

SF: What is your plan to deal with the threat of African swine fever (ASF)?

GS: That is the black swan in our industry. I'm incredibly proud of our team in their engagement across the industry, with other producers and state health officials on this topic. They are participating in drills and exercises across the country. We are heavily involved in conversations around bio security in the industry.

We continue to look for weaknesses that need to be shored up in our company. While everyone looks at bio security a bit differently for their individual systems, we exchange ideas with other producers with the goal of protecting our U.S. herd.

A very big concern and risk for the entire industry is how to handle mass depopulation if ASF comes to the U.S. We are doing a lot of training on awareness and surveillance, doing whatever we can to get early detection so we can stomp it out if it comes here.

Vision 2020

SF: Over the past 25 years, Christensen Farms has grown from 11,000 sows to 148,000. Are you planning more growth?

GS: We are not interested in getting bigger for the sake of being bigger. After Bob died, we spent much of 2013 developing our strategic direction, called Vision 2020. Where did we want to be in 2020? We had four pillars to that strategic plan.

The first pillar was strengthening the foundation of the live production business. We were improving the business, but not performing as well as we could be. There was a whole host of initiatives on how to get better in live production.

As we sit here today, over the last decade, through improvements in throughput and efficiency, we have improved our live operations costs by more than $16 per head. That is good from a fiscal responsibility standpoint, and it's vitally important in terms of our ongoing desire to be more sustainable.

The second pillar was to strategically grow, not grow for the sake of getting larger. If we were to grow, it had to come with some strategic value, such as shoring up our bio security metrics or geographic presence as it relates to feed milling. Our acquisition of Exetare in 2014 was a good example of that.

The third pillar was further integration. We were about 40% integrated as a company at that point, meaning 40% of our pigs were going to Triumph Foods, which we had an ownership stake in. We felt, based on our analysis, that being more integrated would meet our strategic goals and direction. As we look at our system today, working with all of our partners at Triumph as well as Seaboard, once we get the Sioux City plant up on a second shift, we will have achieved this goal.

The fourth pillar, common in most privately-held businesses, was looking for diversification plays to further improve the stability and financial ability of the foundation. By the end of this year, and I say this with a great deal of appreciation and pride of our team, we are putting a completion stamp on the Vision 2020 plan, based on what we've accomplished.

The results of this strategic plan have allowed us to reinvest in our farms.  About two-thirds of the improvements that we captured since 2013 have been reinvested to improve bio security, replace aged equipment within farms that still had life, and replace farms that were 30 to 35 years old and just did not have any more life.

Additionally, we have invested in a whole host of technology and innovation that are broader than perhaps the scope many years ago that were more focused on either pig health or nutrition. Today, we are looking at innovation with a much broader lens for our business. Our growth is focused on throughput, efficiency, and creating better ways to manage health.

Today, we expect to produce about the same number of head that we did with a much larger sow base years ago, which is a testament to what we’ve been able to accomplish in the business, and our sincere desire to be more sustainable as an animal production company.

Contract Pig Production

SF: What has changed with contract production?

GS: It always evolves. We are still focused on using contract production and see that as an important part of our business, but the labor has changed. Historically, a contract producer built a building and looked after your pigs. Today, that model has a lot of variation and we have to continue to be flexible and nimble. Finding new contract producers is driven by the economics, and the cost of building is higher today versus in the past.

We have an initiative focused on helping our long-time producers bring younger people back into the business, particularly the second or third generations. We've been fairly successful.

A partnership with us means stability. We’ve learned to manage the business with a level of conservativeness, given the economic cycles and market volatility, so that people can rely on us and our viability long term.

Trade issues

SF: What else do you think is important to share with producers?

GS: I am amazed at the complexity of agriculture, especially the pork industry. While agriculture is still largely family owned, the family enterprises are a lot larger today than they were in the past. That requires people to look at their business differently as it relates to capital returns, versus just looking at the P&L in terms of what you're making and what you're not. There is a lot of capital and labor intensity in these businesses.

We have an incredible opportunity in agriculture to be competitive globally, despite the trade and geopolitical issues. The opportunities are huge. I applaud our team and everyone in agriculture for their resilience and endurance of the ongoing risks that people experience, whether it's a foreign animal disease, trade issues, or marketing decisions.

As far as trade, agriculture is trying to support the administration as best it can, but we are potentially losing an incredible opportunity with China. As protein circulates around the globe, we undoubtedly play in that game but we aren’t playing in a prominent role like we could if the trade issues were not currently on the table.

Long term, looking past the trade issues and the challenges we face every day, agriculture continues to be an incredible business that we should applaud and appreciate. We must do what we can to attract new talent into our business, because the opportunity is so immense.

Bob Christensen Legacy

SF:  What do you think Bob’s lasting legacy will be in the hog industry?

GS: As time goes on and new people come into the business, his legacy will undoubtedly diminish. However, we will do everything we can to make sure people know who Bob Christensen was. We decided to play a big role in the renovation of the swine barn at the Minnesota State Fair, and it is now named the Robert A. Christensen Pavilion.

We will continue to honor the past of what he brought early on until his passing, but we are continuously focused on taking that past and building into the future. As I said, it is an entirely different sport we're playing today than even what it was when Bob was with us a short seven years ago.

www.christensenfarms.com

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