Master of Agribusiness / Department of Agricultural Economics / Ted Schroeder / Johnsonville Sausage’s core business is to produce premium fresh and ready to eat
(RTE) sausage. To accomplish this on the fresh side of the business, the organization
procures and slaughters all of their own animals. The type of animal that Johnsonville
Sausage procures is called a “fancy sow”. This type of sow averages 500 pounds and has
had three or more litters of piglets. Johnsonville Sausage is the largest procurer of this type
of sow accounting for 23% of the overall market. The largest contributor to the finished
product cost is the meat. Over the last two years, the organization’s business has been
faced with a number of challenges related to mass liquidations within the hog industry as
well as increased sow prices due to lower supplies. Specifically, these issues have
impacted the expected profitability as an organization and lead Johnsonville Sausage to
question whether the supply projections within the industry will meet future growth needs.
Because of these factors, Johnsonville Sausage is looking at how they can create more
value for the sow that is slaughtered in order to utilize the whole animal to its highest
potential, increase overall profitability to the organization and increase available sow
supply within the industry.
Within the business today, 55% of a sow that is harvested goes towards making the
meat formulations (batter) utilized in fresh sausage production. The other 45% of the sow
can be broken down into three key areas: sales credits, drop credits and rendering. Items
within these three areas are classified as by-products and are sold to industries such as
human consumption, pet food, pharmaceutical, medical, academia, commercial fishing and
rendering to name a few. The issue that Johnsonville Sausage faces is how to define new
channels, create new products, and increase customer base and volume for those parts of
the sow that are not utilized in fresh sausage production thus driving increased value for
these by-product items. In conjunction with this, how do they create more profitability for
those items that are consistently harvested and sold today?
The focus of this research was to create a project portfolio for the by-product
business within Johnsonville Sausage. The goal of the portfolio was to identify industries
and projects that would drive the greatest profit maximization for the by-product business
and in return achieve the greatest return per sow. To accomplish this, optimization models
and net present value (NPV) analyses were utilized. Utilizing the tools, I found that within
Johnsonville Sausage’s existing by-product business, they have the opportunity to increase
profitability by 54% from what was achieved in 2010. In conjunction with this, a NPV
analysis on a further processed pork loin was conducted. Results of this analysis proved
that creating this type of concept for Johnsonville Sausage was a more value added solution
financially as compared to the traditional manner in which pork loins are sold today.
| Identifer | oai:union.ndltd.org:KSU/oai:krex.k-state.edu:2097/19757 |
| Date | January 1900 |
| Creators | Oium-Zube, Teresa |
| Publisher | Kansas State University |
| Source Sets | K-State Research Exchange |
| Language | en_US |
| Detected Language | English |
| Type | Thesis |
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