MEAT PACKING INDUSTRY IN U.S.A

Prior to 1830, the meat trade was a highly decentralized business, drawing together individual farmers who produced the livestock, drovers who transported the animals to population centers, and butchermerchants who processed the meat and made it available to consumers. In rural areas (where most Americans lived), meat was locally produced outside of market relationships, as farmers harvested their livestock for home use and sold selected cured products to local stores.
Beginning in the 1820s, entrepreneurs discovered that, whenever possible, it was cheaper to move the slaughterhouses and meat processing facilities to the animals than to ship live animals to major population centers. So long as the meat could be kept from spoiling and transported economically, large-scale production facilities near livestock sources permitted economies of scale in meat production. Growth of internal transportation, principally roads, canals, and steamboat shipping on inland and coastal waterways, allowed nodal points to emerge for packing cured meat, preeminently pork.
Its advantageous geographic location helped Cincinnati become America’s leading antebellum pork processing center. Perched on the banks of the Ohio River in rich farming country, Cincinnati was a favorite destination for farmers eager to take advantage of its superior outlets to southern and eastern markets. Annual production levels exceeded 100,000 hogs in the 1830s and reached 400,000 on the eve of the Civil War. Production was seasonal, with operations commencing once the weather became cold enough to chill the slaughtered meat, and ending in the spring once the rivers became sufficiently clear of ice to ship out the finished product.
Cincinnati’s pork packers were businessmen who rarely soiled their hands by actually cutting meat. Rather than functioning in a daily market gauging sales through personal interactions with customers, Cincinnati’s meat men gambled on long-term demand for pork products in distant ports and cities, anticipating that pigs purchased in November would be sold as bacon, ham, and lard six months later. They were more merchant than industrialist, better attuned to the vagaries of credit and demand for commodities than the mechanics of turning live animals into meat.
By the late 1850s, Chicago was challenging Cincinnati as the nation’s leading pork packing center. The expansion of the nation’s rail network explains much of this change, along with the continued westward movement of agriculture. As railroad track mileage grew to 9,000 in 1850 and 31,000 by 1860, canals and rivers became less desirable means for transporting meat.
Railroads had two principal virtues in comparison to water transport: Trunk routes could convey food to eastern markets on a year round basis, and feeder lines could enter the countryside and bring livestock from landlocked farms directly to central markets. Located astride this rail network, Chicago took full advantage of its transportation advantage and passed Cincinnati as the nation’s leading meatpacking center during the Civil War. By 1870, Chicago produced $19 million of cured pork products, twice as much as Cincinnati.
Cincinnati and Chicago, along with other smaller meatpacking centers, depended on pork for their major product prior to 1880. American consumers preferred their pork cured and their beef fresh; in an era before reliable refrigeration, only cured products could be processed and then distributed from centralized packing facilities. Beef production remained a local business well into the 1880s, as the only way to provide fresh supplies was for cattle to be slaughtered near to where it was consumed.

The emerging large meat packing firms, especially those led by Gustavus Swift and Philip Armour, rose to dominance by exploiting new technology in the beef trade. Expansion of the rail network opened the Great Plains to the commercial livestock business by connecting eastern urban areas with midwestern packing centers. Refrigeration, both of the packing-houses and railroad cars, allowed firms to operate year round and sell to customers far removed from where the animals were slaughtered. Swift was the first meat packing firm to use refrigerated railroad cars to convey meat processed in midwestern plants to eastern population centers.
Armour and other companies quickly followed Swift’s lead. Backward integration, in the form of ownership of central stockyards, assured the large midwestern plants of a reliable supply of livestock, while forward integration, with the creation of wholesale meat outlets (known as “branch houses”), gave them entry into thousands of American communities.
The large meat packing companies were true national concerns with thousands of employees by the early 20th century. Trained livestock buyers scouted for quality livestock in the central stockyards of cities such as Chicago, Kansas City, Omaha, and Sioux City, aided by companyemployed “cowboys” who directed the cows, pigs, and sheep through the sprawling stockyards.
Thousands of packing-house employees turned the animals into meat, watched closely by platoons of supervisory employees. In the branch houses spread all over the nation, skilled butchers processed the carcass beef and pork into cuts suitable for butcher shops and restaurants. Hundreds of clerical employees tracked perturbations in livestock prices, took orders, monitored production, and tried to be the eyes and ears of the plant superintendents and company executives who managed their far-flung enterprise.
The meatpacking oligopoly was firmly established by World War I. In 1916, Armour, Cudahy, Morris, Swift, and Wilson killed 94.4 percent of the cattle processed in the 12 cities that produced 81 percent of the nation’s beef. These five firms also controlled 81 percent of the hog slaughter in those centers. The structure of meatpacking changed little between World War I and the New Deal; the Big Four firms (Armour acquired Morris in 1923) accounted for 78 percent of the total value of meat products sold in 1937.

The seeming stranglehold of the Big Four lasted for a half century. By the 1960s, however, their era was over; in 1962 the old-line firms controlled only 38.1 percent of the meat products sold in America. Hundreds of new firms sprang up in the 1950s and 1960s and took advantage of new and more efficient methods of production and distribution to take chunks of the market away from the old dominant companies.
The collapse of the Big Four’s branch house system facilitated the entry of new firms. Two interrelated developments rendered the branch houses obsolete. First, large supermarket chains proliferated after World War II. These national food retail companies bought meat in large amounts from packing firms, processed it at central warehouses, and then distributed it to local stores. As the importance of independent local retailers waned, the branch houses lost their central role in most urban centers. Second, the enormous expansion of the highway network after 1945 eliminated the locational advantage of the plants built in the rail hubs, and allowed newer, rural facilities away from rail lines to ship their meat to supermarket warehouses for lower distribution costs. Federal grading of meat helped these independent packers to compete on an equal footing with the old companies in their sales to supermarket chain stores.
Concomitant with the decline of the branch mhouses was an enormous increase in meat jobbers, known as “breakers” and “boners.” Used primarily by the new independent beef packers, these jobbers took beef quarters from slaughterhouses and further processed the meat in preparation for resale to retail outlets. As their names imply, these wholesalers “broke” the meat down from quarters into basic subprimal cuts such as ribs, loins, and rounds, “boned” them, and then shipped to supermarket distribution centers.
Retailers used the wholesalers because they provided more flexibility in the choice of cuts offered to the consumer; independent packers used wholesalers because these new companies needed to do no more than simply kill and minimally process their product, reducing initial capital investment and labor costs.
Declining concentration was a transitional phase before a new oligopoly took control of the meatpacking industry. Astute packers such as Iowa Beef Processors (IBP) founder Currier Holman and Missouri Beef Packers president Gene Frye saw an opportunity to dominate the beef trade by attaching “boning and breaking” operations to their slaughterhouses that would assume the tasks of beef wholesalers. This innovation quickly became known as boxed beef because of the containers in which the meat was shipped.
Boxed beef reduced costs in two ways. Meatpacking companies saved money because they no longer paid to ship unusable bones and meat scraps. Savings in transportation expenses allowed them to undercut prices of firms that shipped beef in carcass form and to increase their margin on each pound of beef. Retailers saved money because boxed beef eliminated the skilled and high-paid butchers who had fabricated the carcasses.
With this cost advantage, boxed beef became the new method for controlling the distribution of beef, much as the branch houses had served the Big Four at the turn of the century. In less than two decades boxed beef grew from a supplementary source of supply to the preeminent method of marketing beef. Sales of boxed beef more than tripled between 1971 and 1979 to 4.8 million pounds, and accounted for one-half of all federal beef slaughter at the end of the decade. Boxed beef constituted only 20 percent of the retail market in 1972; by 1989 boxed beef’s national market share exceeded 80 percent.
A survey of leading supermarkets revealed that beef shipped in the form of cattle quarters—the old method of transporting beef—accounted for only 4 percent of their receipts in 1986. Boxed beef was a particularly important source of dominance for a few large firms that mastered this technique of production and distribution. The smaller independent concerns of the 1950s and 1960s rapidly lost ground to the new industry giants in the 1970s as boxed beef flooded the market. The leading four firms accounted for 60 percent of boxed beef sales in 1979 and 82 percent in 1987. IBP alone produced 40 percent of the nation’s boxed beef in the late 1970s. Forward integration into boxed beef emulated the techniques of the old Big Four at the turn of the century; and it was equally effective as a method of dominating the industry, albeit under altered circumstances.
Dominance in beef allowed the large companies to assert control over hog slaughter in the 1980s. Pork is sold in processed form far more than beef, and consumer preference for “brand” products protected Oscar Mayer, Hormel, and other pork processors from new competition. Nonetheless, aggressive entry into pork slaughtering by the large packers prompted the older pork-based firms to concentrate on the processing of meat and to abandon their killing operations. By 1990, the pork industry had bifurcated into slaughtering and processing sectors, each dominated by a handful of firms, albeit different ones.
By 1990, a new dominant set of firms had emerged. The new “Big Three” of IBP, Excell (a subsidiary of Cargill), and ConAgra were almost as powerful as Armour, Cudahy, Swift, and Wilson in their heyday. By 1989 the Big Three slaughtered almost 70 percent of the nation’s steers and heifers and 35 percent of its hogs. These impressive figures understate their power over the distribution of meat in the United States. In 1990, these three companies produced more than 75 percent of the nation’s boxed beef, the form in which most supermarkets receive meat.

The contrast between meatpacking in 1955 and 1990 is striking. In the old stockyard districts of Chicago, Kansas City, and Sioux City, several plants slaughtering a variety of livestock each employed several thousand workers and were located in close proximity to each other. By the 1990s, most meat production was from dispersed plants specializing in either beef, pork, or lamb, usually employing less than 1,000 workers, and widely scattered through the midwestern countryside. Yet much seemed familiar. A small group of firms controlled the industry, drawing on animal supplies from the hinterlands to supply a nation of city dwellers. And technology remained the key to moving large amounts of supplies from farm to refrigerator for the hungry American public.

By Roger Horowitz in the book "Encyclopedia of American Business",Charles R. Geisst (Editor), Facts on File, New York, 2006, p.265-269. Adapted and illustrated to be posted by Leopoldo Costa.