Dive Brief:
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The Interfaith Center on Corporate Responsibility investor coalition is calling on Sanderson Farms, Inc., to shift its pro-antibiotics position, according to just-food.com. Sanderson is the third-largest chicken producer in the U.S. and the only major one that has not committed to limiting the use of such drugs.
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As You Sow, an Oakland, California-based non-profit shareholder group, sent an open letter to Sanderson in September proposing that the company stop routinely using medically important antibiotics for disease prevention in healthy poultry. "Unnecessary antibiotic use is contributing to the global health crisis of antibiotic resistant bacteria ('superbugs')," the group said.
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At the company's most recent annual meeting in February, more than 30% of Sanderson's shareholders supported such a proposal — also submitted by As You Sow. In its proxy memo recommending a "no" vote, Sanderson argued that antibiotic-free chicken is more expensive to produce and that the company was trying to keep production costs and consumer prices down.
Dive Insight:
Sanderson isn't the only food producer to feel shareholder pressure for policy changes. Earlier this year, an investor group proposed that Kraft Heinz issue a comprehensive sustainability report on its environmental, social and governance performance and goals.
The company promised to do more in these areas, and the proposal was withdrawn just before the annual meeting. Other shareholder proposals asked Kraft Heinz to adopt recyclable packaging and assess its supply chain's impact on deforestation. The company opposed both ideas, and they were voted down in April at the annual meeting.
Tyson Foods, Pilgrim's Pride and Perdue Farms have committed to reducing or removing antibiotics from their chicken supply. Some have tried unique practices like Perdue, which puts oregano in the birds' water in the hopes that the herb's antioxidants will help to keep them healthy.
Sanderson, however, has disputed claims about antibiotic use being bad and it is in the midst of a campaign to educate people about their beliefs. In August 2016, it bucked the industry's "no antibiotics" trend by advertising why the company uses them. Some are concerned that exposure to antibiotics in food may lead to resistance in humans when the drugs are used, but Sanderson has argued this threat is overblown.
Sanderson's most recent earnings report showed that fourth-quarter sales were up but demand was down — which is expected after Labor Day — but chicken production and live weights were both higher than the company expected, and administrative costs also increased.
Sanderson points out that its customers are not demanding antibiotic-free chicken, and that the company is not marketing its products to organic and specialty foods stores where other chicken producers sell "premium" products.
"We have no indication that we are losing market share because of our existing product lines, and unlike others in our industry, our market share has grown significantly in recent years. We believe that if we discontinue the preventative use of antibiotics at this time, our customers may seek alternative, lower cost suppliers," the company stated in the proxy memo.
However, consumers are seeking out antibiotic-free chicken more often amid concerns that their use in food could lead to antibiotic resistance in humans. This has prompted companies to make changes in their supply chains to reduce or eliminate antibiotics altogether. Poultry processors have applied a number of alternatives to antibiotics to treat sick animals and prevent the spread of disease, including improved feed products, better animal genetics and enhanced animal handling and management practices.
While Sanderson recommended shareholders vote down the first antibiotics proposal put forward early this year — and most of them followed that advice — a proxy advisory firm called Institutional Shareholder Services recommended a "yes" vote. The firm said that Sanderson is not keeping up with its industry peers and is courting harm to its reputation and running regulatory risks.
Sanderson may also be taking a risk by ignoring trends in consumer preferences and persistent calls from shareholders to limit antibiotic use. As long as sales stay up, the company isn't likely to be too concerned. However, the trend toward antibiotic-free poultry isn't going away. It will be interesting to see how shareholders vote on the antibiotics proposal at the company's next annual meeting early in the new year.