Smithfield Foods to form 50/50 joint venture with US sausage firm

American pork producer Smithfield Foods has agreed to form a 50/50 joint venture with US-based Kansas City Sausage and its sister company, Pine Ridge Farms, as part of a plan to strengthen its packaged meats business.

Kansas City Sausage is a leading sausage producer and sow processor in the US, with annual sales of approximately $100m.

The company, which has operations in Des Moines, Iowa and Kansas City, Missouri, is one of the largest live sow customers of Smithfield Foods.

While the Iowa facility produces premium raw materials for sausage, and value-added products such as boneless hams and hides, the Missouri facility is the company’s latest and most modern facility, catering to retail and foodservice customers.

With this joint venture, Smithfield Foods is seeking to strengthen two key packaged meats categories – breakfast sausage and dinner sausage – which have not historically been a focus for the company, and also expand its product offerings.

Smithfield Foods noted that the breakfast sausage and dinner sausage categories represent over $4bn in retail and foodservice sales annually.

Smithfield Foods president and chief executive officer C Larry Pope said that joint venture will enable the company to move raw material up the value chain from commodity live sows to branded packaged meats.

"We will merge Kansas City Sausage’s low-cost, efficient operations and high-quality products with Smithfield’s strong brands and sales and marketing team to continue to grow our packaged meats business," Pope said.

"This combination should allow us to fill existing plant capacity and dramatically increase the joint venture’s sales in a relatively short period of time," he added.

The financial terms of the joint venture have not been disclosed.

Smithfield Foods plans to fund the deal with cash on hand, and the transaction is expected to close in the fourth quarter of fiscal 2013, subject to customary closing conditions, including regulatory approvals.

The company expects the transaction to be immediately accretive to earnings.

Smithfield Foods, which has annual sales of $13bn, is a leading pork processor and hog producer, and it produces numerous packaged meats products under brands such as Smithfield, Eckrich, Farmland, Armour, and Cook’s.

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Image: With this joint venture, Smithfield Foods is seeking to strengthen two key packaged meats categories – breakfast sausage and dinner sausage. Photo courtesy of Smithfield Foods.