Maple Leaf to Separate Pork Business

Tuesday, November 19, 2024

‘We’ve been thinking about this for a while.’

By Matt Jones

Maple Leaf Foods announced in July that it would spin off its pork business into a separate independent company. The as-of-yet unnamed business (referred to in the meantime simply as ‘the new Pork Company’ in Maple Leaf’s press materials) is expected to be launched properly in 2025.

Dennis Organ, who had previously been president of the ‘Pork Complex’ for Maple Leaf Foods and will serve as CEO for the new enterprise, explains that the decision to split the company was intended to take advantage of their unique business model. He also states that the new Pork Company will be a world-leading organization producing sustainable meat “the right way” to unlock its own significant growth potential.

“We’ve been thinking about this transaction for a while,” says Organ. “With the unprecedented challenges that have faced the pork industry, and market conditions starting to normalize, now is the time to unleash the pork business. It is about creating a win-win situation for both companies – building on the natural synergies where each can benefit from the other, while also allowing each to pursue their individual growth strategies going forward.”

Industry reaction

Reaction to the news from the pork sector has largely been positive, says Cam Dahl, general manager for Manitoba Pork.

“There is a view that this will increase the ability of the new pork organization to really concentrate on production and efficiencies at the plant in Brandon,” says Dahl, referring to Maple Leaf Foods’ 650,000-square-foot processing facility. “That is going to be good for producers in Manitoba, as well as the Canadian pork industry as a whole. So I would say, overall, there has been a positive response to the announcement.”

In Manitoba, Maple Leaf runs both its own sites, such as the aforementioned processing facility and other farm operations and also purchases from individual pork producers in the province. Those partnerships with individual producers look as though they will continue with little disruption.

“Maple Leaf has been quite communicative on this,” says Dahl, when asked whether Maple Leaf had been in touch with the producers they work with in the province. “I know they have held meetings with producers, and that’s good to hear.”

“Our pork producers are important partners in our growth plans going forward and the new Pork Company will continue to maintain and build valued relationships,” added Organ.

While Maple Leaf is a national (and international) brand, their operations have been limited in certain areas. Denise Cassidy, executive director with both the PEI Hog Commodity Marketing Board and NB Pork, notes that Maple Leaf purchased Hub Meat Packers in June of 2001 and then stopped slaughtering hogs in New Brunswick in August 2003. A facility in Prince Edward Island was closed in 2008 and a processing facility in Berwick, N.S. was closed in April 2011. The company has had few interactions with the region since.

“So basically, (pork producers in N.B. and P.E.I.) are fairly indifferent towards these choices,” says Cassidy. “Maple Leaf has certainly not been active in the Maritimes for a significant amount of years and they would not be at all on anyone’s radar at this time.”

Cassidy notes that while Maple Leaf is a national brand, their production has been more focused in Western Canada. Maple Leaf’s products are easily found in Maritime grocery stores but the Maritime pork industry – which relies heavily on exports to Quebec and Ontario – doesn’t perceive them as competition.

Further details

While the companies will be separate from each other, Maple Leaf Foods will retain a 19.9 per cent ownership share of the new pork company, and there will be an evergreen pork supply agreement between the two businesses. The company says that connected-but-separate approach will deliver value for both businesses while also allowing them to pursue their individual value-creation opportunities.

“Under this agreement, the new Pork Company will continue to provide Maple Leaf Foods with a secure supply of high-quality, sustainable pork at market prices, to meet the needs of its Prepared Foods business, providing the new Pork Company a strong anchor customer while allowing it to grow its already material business with customers around the world,” says Maple Leaf promotional materials.

Organ is quoted in the same news release as saying that the new company would be a keen investment opportunity, providing access to a premium, value-added pork producer with a clear vision.

“We are already setting the standard for best practices in sustainability, animal welfare and high-quality pork production,” said Organ. “We have seen positive momentum in the business in recent quarters as pork markets continue to normalize following several years of market disruption, and we are extremely well-positioned as a standalone company to leverage our unique advantages to drive growth and generate value.” BP