The thing that hath been, it is that which shall be; and that which is done is that which shall be done: and there is no new thing under the sun.
While it may be true that change is inevitable, it's also true that change isn't a synonym for new. Ideas get recycled. The past is relived. Many times though, we don't realize when history is happening again.
The JBS-Swift purchase of National and Smithfield Beef is more than just further consolidation of the beef industry. It's evidence that the past is the best predictor of the future.
It was 1983, and Ken Monfort was on a mission. He was troubled by the consolidation taking place in the beef industry, and wanted desperately to stop it. The growing trend was for conglomerates to swallow meat companies, and that was not beneficial to small regional packers. Nor was it appealing to companies like Monfort of Colorado.
EXCEL Corporation was a packer originally called MBPXL that was purchased by the agricultural giant Cargill, Inc. in 1979. It had announced plans to acquire the Spencer Beef Division of Land O' Lakes. At the time, EXCEL was the second-largest beef packer in the country, and Spencer Beef was the third. Monfort, with packing plants in Greeley, CO, and Grand Island, NE, came in a distant fourth.
Monfort thought the purchase would make it harder for his and other companies to compete. He thought it would allow EXCEL to pay more for cattle and use predatory pricing, pricing their boxed beef lower than the market and driving smaller companies out of business. EXCEL's response to that was, basically: Hey, that's competition. Get over it.
Monfort of Colorado was used to competition. Begun as a family feeding operation in the 1930s by Ken's father, Warren, it had grown steadily through the decades to become the world's largest feedlot operation by the 1960s. A packing operation was added in 1960, with a fabrication component coming later in the decade, along with portion control, distribution and transportation. Monfort of Colorado was the industry's most vertically integrated beef company, and went head-to-head with others constantly.
The sale of Spencer Foods to EXCEL had already been approved by the Justice Department, but Monfort brought suit in U.S. District Court on July 24, 1983, to enjoin EXCEL from making the purchase. A trial was held Oct. 5-7 of that year, with lengthy testimony by expert witnesses and voluminous documents. On Dec. 1, 1983, the judge ruled in Monfort's favor.
It was appealed to the Tenth Circuit Court of Appeals, and in April 1985 Monfort prevailed again.
What's the deal, EXCEL lawyers wondered? Didn't Monfort realize this would work to their benefit? It meant fewer competitors, not more. And it wasn't like there would be more plants putting additional beef on the market.
However, compared to the giants, Monfort, Inc. was a relatively small company, with more than 70% of the stock controlled by the Monfort family. They had no parent company to fall back on when the market got out of whack. If the sale went through, they believed it would be much more difficult to keep up.
In December 1986, the Supreme Court decided there was nothing illegal about the sale, and overturned the Appeals Court. Ken Monfort and his family saw the handwriting on the wall; four months later, they sold out to ConAgra. In subsequent public statements, Ken Monfort, who died in 2001, admitted that a firm the size of Monfort of Colorado would have a hard time competing against companies with such deep pockets.
The Batista family, which controls JBS, began with a packing plant in 1953 that slaughtered just five head/day, and through acquisitions grew to an international powerhouse. With the purchase of Swift last May, and if the Smithfield sale goes through, JBS will be responsible for 30% of total U.S. beef-processing capacity. It will also own much of Monfort's vertically integrated operation, taking the concept to an international stage.
So a family business focused on beef is again gaining prominence. Even though he was one of the industry's leading visionaries, however, it's doubtful Ken Monfort could have envisioned this turn of events.
Walt Barnhart is a freelance writer and communications consultant based in Littleton, CO. Currently writing a biography on Ken Monfort, Barnhart can be reached at [email protected].