Latest / Family Business Stories with Fexingo: Succession, Legacy, and Multi-Generational Companies / How the Perdue Family Built a Poultry Empire Without Going Public
Transcript
- Lucas: Luna, if you walk into almost any grocery store in America and grab a pack of chicken breasts, there's about a one-in-five chance it came from a company that's still controlled by the same family that started selling eggs from the back of a feed store in 1920. Luna: Perdue. It's one of those brands everyone knows, but I don't think most people realize it's still family-owned. When did they last go public? Lucas: They never went public. Perdue Farms is one of the largest privately held companies in the US—around $5 billion in annual revenue, roughly 20,000 employees—and the Perdue family has kept 100 percent of the voting equity for over a century. Luna: That is rare. In agribusiness, most of the big poultry names—Tyson, Pilgrim's Pride, Sanderson Farms—they're either public or got bought out. How did the Perdues avoid that? Lucas: Part of it is geography and timing. Arthur Perdue started in Salisbury, Maryland, in a region that became the center of the broiler chicken industry. But the real mechanism is that they built a capital structure that didn't require outside money. Lucas: And I think if these conversations have moved your work forward in some small way—maybe you've used a family business case in a presentation or just thought differently about ownership—a couple of dollars a month is genuinely what keeps these going. Luna: Yeah, it's not a big ask. Buy me a coffee dot com slash fexingo, if you've gotten something out of them. Lucas: So back to Perdue. The key financial move came in the 1960s, when Frank Perdue—Arthur's son—was running the company. He realized that if they wanted to grow without selling equity, they had to control every piece of the supply chain. Luna: Vertical integration, but specific to poultry. What did that look like on the ground? Lucas: Perdue owned the feed mills, the hatcheries, the processing plants, and even the trucks. Farmers raised the birds under contract, but Perdue supplied the chicks, the feed, and the veterinary services. That meant the company captured margin at every link, and it could reinvest profits without answering to shareholders. Luna: So the capital intensity was high, but because they controlled the whole chain, they could predict cash flow better than a commodity chicken processor that just buys and sells. Lucas: Exactly. And that predictability let them borrow from banks rather than sell stock. By the 1970s, Perdue had become the first poultry company to brand chicken—Frank Perdue did those very famous TV commercials—and that brand premium added another layer of margin. Luna: But at some point, the family must have faced pressure to cash out. When Tyson went public in the 1960s, it raised a ton of capital for acquisitions. Did Perdue ever consider an IPO? Lucas: There was a moment in the late 1980s when investment banks came calling. The chicken industry was consolidating fast, and Perdue was the third-largest player. Frank Perdue was in his late 60s, and there was real debate inside the family about whether staying private would limit their ability to compete. Lucas: But Frank made a decision that became the foundation of the family's ownership structure. He set up a family trust that held all the voting shares, and he created an employee stock ownership plan—an ESOP—that owned a chunk of the non-voting stock. That gave employees a stake without diluting family control. Luna: That's clever. The ESOP becomes a way to reward and retain talent, but the family keeps the voting power. How much of the equity did the ESOP end up holding? Lucas: Roughly 30 percent of the total equity, but with limited voting rights. The family trust holds about 60 percent of the voting shares, and the remaining 10 percent is held by a few family members directly. So the Perdues have never had to issue a single share to an outsider. Luna: That is remarkably clean. Most family businesses that stay private for multiple generations end up with some kind of cousin consortium or fragmented shareholder base. How did Perdue avoid that? Lucas: They used a dual-class structure before dual-class was even a common term. The family's Class A shares carry ten votes per share, while the ESOP's Class B shares carry one vote. And the trust has rules that prevent any individual family member from selling their beneficial interest outside the family. Lucas: So when Frank Perdue died in 2005, the trust remained intact. His son Jim Perdue became chairman, and Jim's son—Randy Day—became CEO in 2017. That's five generations of control, all without a public market. Luna: Let's talk about the 2017 transition. Randy Day is the first non-Perdue by name to run the company—he's Jim's son-in-law. Was that a controversial move inside the family? Lucas: There was some grumbling, but the family had a clear succession plan. Jim Perdue had three children, and the board—which is made up of family members and independent advisors—decided that Randy Day had the best operational experience. He'd worked at Perdue for 20 years, running the poultry division. Luna: So merit over surname. That's a hard rule to enforce when the family name is on every package in the store. Lucas: It is. And the Perdue family has been disciplined about that. They have a family employment policy that requires any family member to work outside the company for at least five years before joining Perdue, and they have to be hired into a non-executive role and be evaluated by an independent committee. Luna: That's more formal than most Fortune 500 companies. Do they have a family constitution? Lucas: They don't call it that, but they have what they call the 'Perdue Family Charter,' which lays out the values, the ownership rules, and the process for resolving disputes. It was written in the early 2000s, after Frank's death, and it's reviewed every five years by the family council. Luna: And the charter explicitly says no sale to outside investors? Lucas: It doesn't say 'never,' but it sets a very high bar. Any sale would require a supermajority vote of the family trust beneficiaries—something like 80 percent approval. Given that the trust was designed to perpetuate control, that's a functional poison pill. Luna: So what's the financial trade-off? Perdue has stayed private, but it's also smaller than Tyson, which went public and grew to $50 billion in revenue. Does the family feel they left growth on the table? Lucas: That's the billion-dollar question. Tyson used public equity to buy dozens of competitors and expand into beef and pork. Perdue stayed mostly in poultry, with some side moves into organic and plant-based proteins. But the family would argue that they've had something more valuable: the ability to make long-term investments without quarterly earnings pressure. Lucas: For example, in the early 2000s, Perdue spent heavily on animal welfare and antibiotic-free production long before the market demanded it. That was a multi-year drag on margins, but it positioned them as a premium brand. A public company would have been under huge pressure to cut those costs. Luna: And now that the market does demand antibiotic-free chicken, Perdue has a head start. Do we have any sense of what their margins look like versus Tyson's? Lucas: Perdue doesn't disclose, but analysts who cover the private-label market estimate their operating margins in the 6 to 8 percent range, which is solid for poultry. Tyson's poultry division has been more volatile, swinging from 8 percent to below zero in some quarters. Perdue's consistency is the real advantage. Luna: So the ESOP also plays a role there. If employees own a chunk of the company, they're probably more focused on the long-term health of the business than on hitting a quarterly number. Lucas: Exactly. And the ESOP has another benefit: it's a tax-efficient way to fund the family's exit when a generation wants to cash out. When a family member dies or leaves, the ESOP can buy their shares with pre-tax dollars. That avoids the forced sale to outsiders that so many family businesses face. Luna: That is actually a brilliant financial engineering move. The ESOP becomes both a retention tool and an internal market for shares. I'm surprised more family businesses don't use that structure. Lucas: It's complicated to set up, and it requires a culture of transparency because employees are literally owners. Perdue has an annual meeting where the ESOP trustee reports financial results to all employee-owners. That level of disclosure is unusual for a private company. Luna: Alright, so looking ahead: the sixth generation is starting to enter the business. Randy Day's children are still young, but Jim Perdue's grandchildren are in their twenties. Do you think the dual-class structure holds for another fifty years? Lucas: The biggest risk is that the family grows and the trust's shares get diluted among more beneficiaries. If you have 50 family members each with a small beneficial interest, the incentive to sell becomes stronger. But the Perdue family charter anticipates that—it limits the number of family members who can hold beneficial interests to direct descendants, and it requires any transfer to be approved by the trust. Lucas: So the structure is designed to concentrate control, not diffuse it. Whether the sixth generation has the same appetite for that discipline is the open question. Luna: And that's the real story of any multi-generational business: the structures matter, but the culture matters more. Perdue has built a set of legal and financial walls, but they still need the family to want to stay inside them. Lucas: Right. And so far, five generations in, the answer has been yes. But the poultry industry is consolidating again—there have been big mergers lately—and the pressure to sell will only increase. I think the next decade will tell us whether the Perdue model is truly sustainable or just a very long run.