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How Clemens Changed the Pig Business
Don’t think of Clemens Food Group as just a packer. At heart, the six-generation family-owned company based in Hatfield, Pennsylvania, is a huge, coordinated, network of families that includes pork production and processing. About 300 members of the Clemens family are shareholders, and the company history dates back to 1895, when John C. Clemens began hauling pork products in a horse-drawn wagon from his farm to market in Philadelphia.
Over the decades, the family business expanded into Hatfield Packing Company, Hatfield Quality Meats, and then Clemens Food Group, but the core values set forth by John C. Clemens 123 years ago – "to operate in a way that honors the Lord Jesus Christ as demonstrated through ethics, integrity, and stewardship" – remain deeply rooted in the company today.
Doug Clemens, 62, great-grandson of the founder, is the CEO. Last month, I toured the Hatfield headquarters and sat down with Clemens for an extensive interview about the past, present, and future for the pork industry. Full disclosure – my father, a farmer in Maryland, sold hogs to Hatfield for more than 30 years.
In 2014, you were approached by a group of Michigan hog producers about partnering on a new plant. Why did they reach out to you instead of other packers?
They said it was because of our reputation in the industry. In 1998 when the hog market dropped to single digits, we put in a floor. We knew that without producers we didn’t exist.
We didn’t put our finger on the map and say, ‘Boy, wouldn’t it be nice if we go to Coldwater, Michigan.’ We were looking to expand in western Pennsylvania or eastern Ohio. If it wasn’t for the Michigan producers coming to us with a need, we wouldn’t be where we are today.
It became a very unique relationship. Coldwater is not an integrated system; it is a coordinated system. Integrated means you own everything from start to finish, and that is not really utilizing people’s skill sets and capital assets. Coordinated is a much better approach. We have no desire to own everything from beginning to end. We can’t afford it, and we are not good at everything. We would rather work with those that are better than us in certain aspects of the whole supply chain.
Why did the Coldwater producer partnership work?
Our values and their values aligned. We are looking for long-term sustainability, meaning generations to come. These producers were looking for the same thing. The values and vision had to align before we could end up building something like this. We compete against companies that are Chinese-owned and Brazilian-owned. We are not private equity. We are not looking to spin this company in three years.
When the Coldwater plant was announced in 2014, it launched a wave of new pork processing construction.
I keep wondering, what in the world did we start? Nobody had built a new plant in 10 years. The Coldwater plant project was the first time in our company’s history when we could actually lay out something beginning to end and become extremely efficient. Others decided to do the same thing for that reason. There are a lot of old plants in this country.
Will some old plants close?
That’s what people speculate.
The Coldwater plant opened a year ago, processing 10,000 hogs a day. Is there anything you would change about the plant now that it is running?
No. When you are given an opportunity like that and it’s your first and only shot at it, you put a lot of time and energy into it. We took our time. We spent two years building the plant and met our target date to open on September 5, 2017. We came in on time and on budget.
How did you learn to work with the Midwest producer partners?
We are still learning. We believe in open, honest, direct conversations. That can be tough, but in the end we are all united. It’s a journey and will continue to be a journey. Don’t think for one second that we have it all figured out. I can clearly and honestly tell you we don’t. It’s a journey that begins with open, honest dialogue, and speaking the truth even when the truth hurts.
Is it possible for additional pork producers to get involved?
Yes, especially as we work toward the next shift. They have to have the right values and right vision for the future. We are big believers in fit, whether it’s our team, or people we invest with. The fit aspect is really important and hard to articulate. When you know it, you know it.
When will you double-shift the plant?
That will be driven by the availability of hog supply, the availability of people, and demand. Right now we are diligently working on those three things. I would say within the next three to five years, not sooner.
How big of a challenge is labor?
Everybody involved in any kind of labor-intense business, whether it be warehouse stockers or people working on a production floor, the theme is the same – there is a shortage of available workers.
When we built the Coldwater plant, we knew the number one challenge was labor. We needed to invest in technology to make hard jobs easier. I’ve done every job on the harvest floor, the cut floor, the boning floor, and more. It is hard work; there is no question about it. I would never ask anyone to do a job that I would not do myself.
Forty years ago, our employees were mainly white, local farm men and women who lived within a few miles of Hatfield. Today, we have 13 different languages spoken within the business, and people commute an hour or more to work here.
What are possible solutions to the labor situation?
I could go off on a tangent. My parents told me, you better go to college to be successful. I told my kids, you better go to college to be successful. Today, people on production floors are in many cases making more money than many college graduates. We have challenges in finding electricians and plumbers. We need to take a step back and define what being successful really means.
Of all the previous jobs you had at Clemens, which did you enjoy the most?
When I came out of college, my first job was hog procurement. I worked hand-in-hand with producers for 15 years before I moved into my next role. I loved being out in the field with our producers, because they were so diverse. I will never forget one Amish community in Maryland. They were suppliers to Smithfield, and I was trying to get them to switch to us. The first meeting was at the elder’s house. They formed a circle of chairs, put me in the center, and started grilling me with questions. We got the business.
Every Monday morning, I was sitting in the sale ring in New Holland, Pennsylvania, buying market hogs. Throughout the rest of the week, I would go to 17 different auction barns in the state. I really liked that a lot. At nights and weekends, I would drive truck. I would go out to Ohio and pick up a load there. I would drive up to New York State and pick up a load there. I would drive down to the Eastern Shore of Maryland and pick up a load there. I went to every county fair and bought 4-H hogs.
Clemens has 66,330 sows today [#15 on the Pork Powerhouses ranking]. Why did you get into hog production?
We never had the wish, the want, or the desire to get into hog production. We did it out of necessity. The hog supply started to go down. We went from having several hundred independent producers in Pennsylvania to very few. It has changed dramatically. If we wanted to remain sustainable for generations to come, we had to be responsible for our own supply. The landscape of Pennsylvania, whether it be animal production or crop farming, continues to change due to urban sprawl, increased land values, and non-interest in farming.
Being a privately-held company, we only have access to so much capital. Rather than investing capital in land and hog farms, we would rather put the capital into what we know best, which is producing food once the hogs arrive here. We invested in the production side clearly out of necessity. I still believe then and today that if you could end up having people doing what they do best and focusing on what they do best, I think we would become much more competitive in a global market.
The Coldwater plant, at 10,000 head a day, is supplied by about 12 producers. The Hatfield plant, at about the same size, is supplied by primarily 12 producers. So a very small number of producers are supplying two plants at 10,000 head a day. That is dramatically different.
Do you see that shrinking more?
No, I don’t think so. A lot of these larger producers have made significant capital investments in agribusinesses and are diversified into many other parts of agriculture, whether it be crop farming or grain milling. They have built that for future generations, so there is a lot of capital invested.
Will you continue to expand in production?
This industry continues to consolidate and get bigger. We will continue to grow in order to effectively compete in an ever-changing, growing industry. When you engage with a customer like Sysco, for example, the first question they ask is, can you supply me? If the answer is, no, we are too small to supply you, you are pretty much out. Every facet, every segment of our customer base continues to grow, so, therefore, we need to grow.
Besides labor, what is a big issue you are dealing with today?
The tariff situation with our export partners, specifically China and Mexico. Almost 30% of the pork produced in the U.S. is exported to other places in the world, so the result has been depleted values. That is the single biggest factor we are dealing with in the industry right now – the unresolved trade issues we have between us and other countries around the world. There are parts and pieces of the pig that Americans don’t want to consume. Those go to other parts of the world. It really hurts when people aren’t taking those or devaluing them because of tariffs and trade issues. The only reason you send it there is because nobody else will take it. We have to maximize every single part of that pig, and try to generate some value from. It’s a challenge. It’s really hard.
How can we solve that?
It takes perseverance, patience, and hope that those who have the ability will make these trade deals happen. I do not believe that bailouts or handouts are a long-term solution. We are hoping for resolution because there is a dependency on the export markets. We are committed to feeding people around the world, not just this country.
What has the trade situation cost you?
It has had a significant impact on our earnings. I have shared that significant impact with our shareholders, producers, and family alike. We have had to educate them about that and diminish their expectations.
What are some trends in retail and food service?
Less is more. People are moving away from anything with “trates” or “trites,” or anything added into the product. All-natural is big. Other trends are open-pen gestation, locally-sourced, locally-raised, and certainly antibiotic-free. We recently launched the brand Farm Promise. It is labeled “no antibiotics ever” or NAE. In chicken they call it ABF or antibiotic-free. We’ve continued to grow with no antibiotics ever, and currently we are about 10,000 head per week. We expect that to grow over the years to come. Most of that demand has come from people in the food service sector more than the retail sector. We have seen it take off in the food service sector quicker.
What products are hot?
Bacon. I’m constantly telling our salespeople to stop talking to me about bacon. Bacon is the easiest thing out there to sell, the easiest thing to make money on. Bacon is a tiny amount of the biological being that we need to sell and be profitable on. Who would have guessed the popularity of the belly years ago? The belly used to be the hardest part of the pig to get rid of. We used to base our harvest number on loin demand and now it’s based on bellies. We can’t get rid of loins now. When talking about primal cuts, bellies have the highest value and loins have the lowest value. It used to be the opposite. If you told my dad that 20 years ago, he would have said you were nuts.
Did we get pigs too lean?
There is no doubt about it. We got them too lean, and we are somewhat to blame. There was inconsistency in the quality of hogs, from way fat to way lean to everything in between, so we started incentivizing toward lean.
We recently launched a line we call Premium Reserve, also known as Butcher Block Prime Pork. We developed a way to reintroduce marbling back into the loin product by using fat trimmings. It’s got taste, it’s easy to cut, and you can’t overcook it.
How did your career progress here?
After college, I worked in procurement, and then moved into operations and then business development. One day, the CEO tapped me on the shoulder and said, ‘Next week, you are going to be in charge of strategic planning.’ I said, “What is strategic planning?’ He said, ‘I don’t know, but I’m pretty sure we need to have a plan.’
I quickly realized how little I knew, so I went to night school at Eastern University and got a degree in organizational management. At the time, I had three children in diapers. Prior to that, my wife went back to school and became a registered nurse. Our oldest daughter is still her one and only patient.
Tell me about your family.
I met my wife, Becky, in the company cafeteria. Her mom worked in our laboratory and Becky was visiting her for lunch. I was working on what we now call the harvest floor, then called the kill floor. I came up to the cafeteria for my lunch and I was not a pretty sight. I saw her, and the rest is history.
We have three daughters. The younger two, Abby and Maddie, are 24 and identical twins. Our oldest daughter, Natalie, was born three months premature and has cerebral palsy. She has been 100% dependent on others for total care since she was born. She is now 30 and lives in a residential community in Wilmington, Delaware. My wife and I routinely visit and I serve on the board. She has never spoken a word, never eaten an ounce of food. Even though she has never spoken a word in her life, she understands everything. She has touched more lives than all of us here combined in her 30 years. When she turned 21, we as a family got together and asked, what is going to be best for her long-term? We made a decision as a family to move her to this residential community where they can give her physical therapy, occupational therapy, speech therapy, education, socialization, aquatic therapy, massage therapy, and more. It was the hardest decision we ever made.
How do you keep a family business growing for 123 years?
The company went through a significant reorganization in 2000 to address growing pains. We made a decision to separate the family from the business and the business from the family. Both are important, but they can’t be meshed together. We changed the board of directors to be a majority of nonfamily members. We put into place a policy that discourages automatic placement of family members into jobs at the company. Family members must work outside the business for at least three years.
Where do you see your company in 10 years?
Having more of a presence in the marketplace with our brand and in value-added products. We want to penetrate the rest of the country with the Hatfield brand. We as a company need to adapt to changes in family size, demographics, and eating habits. We need to be producing products that address those ever-changing needs within the consumer group.
What would you like to tell farmers?
Embrace change. Farmers are independent thinkers, and that’s good, but they can be resistant to change. Change is constant in life. We, as producers and providers of food, need to keep anticipating what those changes might be. That requires us to embrace those changes whether we like it or not. Take the open pen gestation issue. We started experimenting with that long before it was mentioned by any consumer group. We are always challenging ourselves and anticipating changes that may be coming down the road from our customers.