The Meat Racket: The Secret Takeover of America's Food Business

by Christopher Leonard

  * * *

  New members of the Northwest Poultry Growers Association noticed a clear pattern. As soon as they joined the group, chicken companies like Tyson found a reason to cut off their supply of chickens. It seemed obvious the poultry companies were trying to put out of business any farmers who tried to challenge their authority. Farmers who were cut off discovered they couldn’t even get a contract from the poultry companies that supposedly competed with Tyson. They felt blacklisted by the few remaining poultry firms, which seemed to be talking to each other, picking out which farmers were deemed troublemakers.

  In 1965 the U.S. Department of Agriculture intervened on the farmers’ behalf, filing a complaint against Tyson and two other poultry producers, Ralston Purina and Arkansas Valley Industries. The agency claimed the companies violated a 1921 law called the Packers and Stockyards Act. The law was passed to challenge the power of the infamous “meat trust” companies like Swift and Armour, and it prohibited a long list of behaviors those companies used to wring low prices out of ranchers and control the market for cattle and swine. The law was written vaguely enough to give farmers strong protections, penalizing companies for practices that could be deemed simply “deceptive” or “unjustly discriminatory.” The practice of cutting off poultry contractors for joining an industry association seemed to be clearly illegal.

  Jim Blair helped Tyson fight the complaint. And he learned from the experience. Tyson fought the USDA in a fashion that would come to define much of its legal strategy in coming decades. The company was aggressive, admitted no guilt, and was legally creative enough to look like it knew federal law better than the regulators.

  Tyson responded to the USDA complaint by suing the agency in federal court. Rather than fight the charges head-on, the company made a novel argument, claiming that strong penalties under the Packers and Stockyards Act didn’t apply to Tyson because it wasn’t technically a meatpacker. It was a poultry company. When the law was passed, the biggest meat companies raised cattle and pigs, and John Tyson had yet to sign his first contract with a farmer. Poultry dealers, as they were called, weren’t considered significant enough to earn a specific mention in the law’s passages, which referred repeatedly to meat companies simply as “packers.” The law was revised in 1935, just as John Tyson was getting his company started, and the amendments made mention of poultry companies in certain parts of the law. But as Tyson’s lawyers pointed out in federal appeals court, when Congress updated the law in 1935, it hadn’t gone through the law and inserted the words “poultry dealers” at every juncture where it mentioned “packers.” Most important, the term “poultry dealers” was not inserted into a section authorizing severe penalties under the Packers and Stockyards Act. That meant the USDA could find Tyson guilty of violating parts of the law, but it could not impose penalties like the cease-and-desist orders it slapped on meatpackers. It seemed clear, according to Tyson, that Congress didn’t intend to regulate poultry companies in the same way as beef and pork processors.

  The federal appeals court agreed in a 1969 ruling. Tyson was something new under the sun, and the old laws didn’t apply to it. The appeals judges in St. Louis threw out the USDA’s complaint and ruled that the agency had no authority to regulate Tyson’s relationship with its contract farmers.

  Not surprisingly, the Northwest Poultry Growers Association faded into history. Its members knew they didn’t have federal regulators to back them if Tyson decided to cut them off. The federal courts set clear law: The farmers would be on their own to negotiate with the company. And they would have to depend on Tyson to set rules that were fair.

  * * *

  By 1966, Don Tyson was eyeing his company’s next acquisition. This deal wasn’t just aimed at letting Tyson get bigger. It was aimed at changing the economics of chicken production.

  Don had become interested in an East Coast chicken producer with the odd-sounding name of Washington Creamery. Don wasn’t just interested in buying out the company’s market share. He wanted to buy a new market altogether. Washington Creamery wasn’t just selling ice-packed chicken; it specialized in selling “game hens,” which were small birds sold in shrink-wrapped plastic. What caught Don’s imagination about game hens was their price: 50 cents. Every bird carried that same price tag, 50 cents, regardless of what the underlying price of chicken was. Don saw this as a kind of Holy Grail: a chicken product that could hold its value even when the markets gyrated. There was something even better: Game hens were sold frozen. So if supply outstripped demand, Tyson could store its birds and wait until the market recovered before selling them again.

  Selling frozen birds had yet another benefit, one that was clearly understood by Buddy Wray. After purchasing Garrett Poultry, Don Tyson needed a sales manager for the new poultry plant. He named Buddy Wray to the post after Wray had shown so much talent for signing up new farmers.

  As a sales manager, Wray found his life had been ruled by a simple credo: Sell ’em or smell ’em. It was the law of selling ice-packed chicken that spoiled quickly. If companies produced too much chicken and couldn’t find a buyer, the meat could go bad on the loading dock. It put salesmen like Wray at a perpetual disadvantage when they tried to bargain for a good price. The buyers knew that ice-packed chicken had to be sold quickly, and a poultry company would take a low price to get rid of it. Selling frozen chicken would erase that disadvantage for Buddy Wray.

  Soon after Tyson bought Washington Creamery in 1966, the company began catering to the perception that game hens were some kind of luxury item, calling them “Cornish game hens.” There was an exotic appeal to the product, the air of nobility to it, as if it were the kind of dish that was served by butlers after a fox hunt. Haskell Jackson marveled at the gimmickry of it. All of Tyson’s chickens were Cornish birds, as Jackson and others in the industry knew. The Cornish breed had been selected as the industry standard because it grew fast. The only difference between a Cornish game hen and an ice-packed chicken was that you killed the game hen when it was younger. It was just a smaller chicken, wrapped in plastic and frozen, given a better name and sold at a fixed price. But the strategy worked. Cornish game hen sales expanded steadily, and, most important, the business provided a predictable cash flow. Tyson could always predict what the sales price would be. Soon Tyson was dedicating slaughterhouses in Arkansas to nothing but game hen production. The birds were frozen and shipped to markets as far away as New York.

  Business was booming, and salesmen like Buddy Wray had finally been liberated from the law of sell ’em or smell ’em.

  * * *

  Haskell Jackson noticed that as the company grew, the roles of its founders were diverging. Don and John Tyson remained close, still meeting for lunch at Neal’s and engaging in the usual back-and-forth during Monday morning meetings. But in important ways, the men were segregating their attention to different parts of the company.

  Don embraced the intangible aspects of the business. He recruited new talent and trained a crop of young lieutenants. He was constantly reading and studying theories of business management. He absorbed the teachings of other great CEOs, and he sat around the office Saturday mornings to debate why one company failed as another thrived in the very same market. Don was fascinated with the methods that managers used to maintain control over a company’s operations as firms grew bigger. He quizzed Haskell about the “span of control” a CEO could have over a big company. How big could an organization get before managers could no longer steer it? When did a corporation get so big that it lost its original culture?

  John Tyson, by contrast, focused on the material side of the business. He haunted the slaughterhouses and made sure the equipment was clean and the slaughter lines were up to standard for federal inspectors. He looked over the steel conveyor belts and the suspended rows of hooks that carried plucked chickens. He imposed his standards of order and tidiness on the workers, creating a cleanliness regime that permeated Tyson’s operations for decades. John milled around the hatchery a
nd spent afternoons inspecting the company’s trucks as they sat in the parking lot. John, the former fruit shipper, seemed most proud of the fleet of well-maintained refrigerated semitrucks. He quizzed the mechanics, looked over the vehicles, and made sure they all lived up to his expectations.

  John Tyson grounded himself in what he knew best. And he was smart enough to let his son lead them into the unknown.

  * * *

  In 1967, John Tyson and his wife, Helen, were out on a Sunday drive, heading to a new cabin the couple had built on nearby Beaver Lake. They planned to watch the first Super Bowl on their new color television set there. The country roads around Springdale were overlaid by a web of railroad tracks that often weren’t marked. Country drivers knew to stop and look both ways if they approached the tracks, wary of the steady traffic of boxcars carrying grain, coal, or feed to the local farms and factories. For some reason on that Sunday, John Tyson didn’t spot an oncoming train. He and Helen were hit and killed on the tracks.

  Don Tyson got a call at his house from his father’s personal doctor, who told Don he needed to get to the hospital. His father and stepmother were dead, and Don needed to identify their bodies. Don went to his father’s house and picked up his fourteen-year-old half-brother, Randall, whom Don took into his home. Don went to the hospital and identified his parents.

  Later that day, Don took a call from a local trucking magnate named Harvey Jones, who had been a friend and business partner of John Tyson’s going back years. Jones had some simple advice:

  — Have your funeral quick, and go back to work, Jones told him.

  Don complied. There didn’t seem to be any sense in prolonging the most painful experience of his life. John and Helen were buried the next day after a ceremony at the Methodist church in Springdale. The pews were packed as the city laid to rest one of its most successful citizens, a man who arrived broke and desperate nearly forty years prior.

  By Tuesday, Don was back in his office. Haskell Jackson, Buddy Wray, and others saw a hollowed-out look in his eyes, a dazed quality about him. Don went into his father’s office and looked at the desk, the items that had been laid casually there on his father’s last day at the company. Don saved the effects, and decades later they would be displayed on John Tyson’s desk at the company’s headquarters, arranged exactly as Don had found them.

  At the Monday morning managers’ meeting Don took the floor for the first time without his father at his side. He told his lieutenants they had work to do. There was still a business to run, still employees depending on them.

  If Don Tyson was ever tentative about running the company without his father, he didn’t show it. The restraining voice of caution and the Depression’s hard lessons were gone. Don was free to push the company forward as aggressively as he wished.

  If his father’s death affected Don emotionally, he was loathe to show it to many people.

  “If you’re a farmer, see, you look at things a little different,” he recalled later in an interview. “Things are born. Things die. People are no different.”

  * * *

  1. Another big advantage of cash-basis accounting is that companies don’t have to count their inventory as an asset on the books. So all of Tyson’s chicken, being inventory, could be counted as worthless on the books, making losses look even bigger as it spent money on feed and fuel.

  2. The company would later simplify its name to its current form, Tyson Foods, Inc.

  CHAPTER 4

  * * *

  The Industrial Animal

  (1970–1995)

  DON TYSON became a billionaire in part because he never ate like one. Even after he got rich, Don Tyson preferred to dine at Neal’s Café, the Springdale greasy spoon where he used to have lunch with his father. Don would show up at the airport for a business trip with his breakfast in a paper bag from McDonald’s. He joined the growing herd of Americans who grabbed their lunch from a drive-through window. And Don took note of what he saw there. He noticed how restaurant patrons were in a hurry. When they bought lunch, they wanted something they could eat in a car, something they could get fast, and something they could get cheap. American eating was migrating away from the dining room and into the passenger seat. Don went to fast-food restaurants like Wendy’s, Burger King, and McDonald’s and watched the patrons who stared up at the backlit menu boards to order their dinner, and he saw the future.

  The future had just one problem, in Don’s estimation: Chicken wasn’t on the menu. The fast-food industry was built squarely on the hamburger, and for good reason. Hamburger was a malleable meat, easy to shape into patties of various sizes, and to ship and speed-cook in cramped kitchens. Chicken, on the other hand, was still sold by the drumstick and the breast. Tyson had broken new ground by selling boneless breasts, which were easier to cook, but the product was still mostly served in homes or upscale restaurants. Don Tyson, before anyone else, saw that America’s menu needed to change. Chicken was simply too cheap, and too plentiful, to be ignored any longer. Between 1970 and 1978 alone, the retail price of fresh chicken had fallen 11 percent. And it was less than a third the price of beef and less than half the price of pork. In the 1930s chicken had been a luxury dish: When Herbert Hoover talked about putting a chicken in every pot, he meant that every American family would achieve a certain measure of affluence. But Don Tyson had seen firsthand how the new model of chicken farming had changed that. The big chicken houses, the mechanized slaughterhouses, the advanced breeding, had all come together to make chicken the cheapest meat available. McDonald’s, Wendy’s, and Burger King couldn’t afford to keep it out of their product lines. Don Tyson would make sure of it.

  * * *

  By the early 1970s, Tyson’s Foods had moved out of its offices on the rundown side of Emma Street in downtown Springdale and into a new office building on a secluded hilltop west of town. The senior executives still held their Monday meetings, but, in a nod to the more civilized schedule of corporate America, Don Tyson moved the meeting from six o’clock to noon.

  Haskell Jackson sat at the table as he always had, listening intently and taking notes. Buddy Wray joined him, having moved into marketing and sales full time. Joe Fred Starr was often there, as was Leland Tollett, the man who had recruited Wray into the company and now oversaw much of Tyson’s operations. Since going public, the company had simplified its name to Tyson’s Foods, from Tyson’s Feed and Hatchery. The name change reflected a deeper change at Tyson, which now had the streamlined feel of a real corporation. This wasn’t John Tyson’s scrappy upstart anymore. It wasn’t a hatchery, it didn’t sell feed, and it was on its way to becoming one of America’s biggest companies.

  Usually, Don Tyson’s managers went around the table and briefed the group on the latest events in their division. That kept everyone abreast of what was going on across the entire company. One afternoon, Don Tyson took the floor himself and said he had something important to announce.

  — Somebody seated at this table is going to take over daily operations for me, he told his lieutenants.

  Jackson was puzzled by the statement. Don wasn’t resigning, but he was clearly laying out the proposition that he would be stepping aside at some point.

  — The job is just getting too big for one man to do. So somebody sitting here is going to have to do it instead of me.

  There was a kind of awkwardness in the room as everyone absorbed what he said. Each one of them had apparently just been given the chance to run the company. Don didn’t indicate whom he preferred to take his spot. What was left unsaid was that each of them would have to prove they were up to the task, or were at least more prepared than their peers. The full meaning of what just happened sunk in slowly, but the resulting dynamic was clear to everyone. The top executives were competing every day, against each other, to prove which one would take the throne when Don stepped aside. Jackson noticed an almost immediate change in his coworkers. The men once operated like a well-trained football team. No one thought about gain
ing an advantage over someone else. But almost immediately after that meeting, a kind of quiet striving sunk into daily life at Tyson’s Foods. Managers were quick to take credit for their work, and they often kept their best ideas to themselves. The race was on among the chiefs at Tyson. Little did they know the competition would last for more than twenty years.

  The relentless competition within Don Tyson’s leadership team helped drive the company into an unprecedented era of growth. A string of mergers brought dozens of large, independent chicken companies under the control of Tyson Foods. At the same time, Tyson refined its internal operations and created a well-oiled system of interconnected farms and slaughterhouses that could easily supply the nation’s biggest food retailers. The system would help Don Tyson execute his vision of a new kind of poultry company, and it would ultimately reshape the industry.