Pilgrim’s Pride: Failure to Communicate


Tim J. Smith, PhD
Founder and CEO, Wiglaf Pricing

Published February 1, 2009

Price signaling is always a touchy subject.  Managed right, it can improve profits and avoid any negative legal or ethical implications.  Managed poorly, it can either be a missed opportunity to correct poor pricing practices or create a legal nightmare.  Fortunately, there are both business case studies and legal precedence to guide executives and chairpersons through this challenge.  If we read the signals right, Tyson Food is attempting to communicate in a legal and ethical manner, but there appears to be a failure to listen by Pilgrim’s Pride.

Nagle and Holden speak well to the issue of the importance of managing prices at the industry level.  They state “One of the most important times to communicate intentions is when planning a price increase.”

On January 5th, Tyson Foods got a new interim CEO, Leland Tollett, aged 71, after the last one walked out.  Within three weeks in the post, he again placed Tyson at the pricing and capacity planning leadership position in the chicken industry by announcing the completion of a reduction in output of about 5% in December 2008.

Normally, after an industry leader announces a capacity reduction amid an industry wide pricing challenge, competitors will receive this information and respond with similar announcement and capacity reductions.  Legally, courts usually accept these moves as “conscious parallelism” and will not pursue them as collusion.

We can see a nice example of a similar effort at conscious parallelism in the LCD industry of Summer-Fall 2006.  LG Phillips and AU Optronics both made public statements announcing a forthcoming reduction in capacity utilization and followed by a reduction in capital expenditures in the Summer of 2006.  In the following months, the prices of LCD screens on a per-square-cm basis reversed its decline, and even temporarily increased.  No legal actions pursued AU Optronics and LG Phillips on this specific set of actions to the best of my knowledge.

Similarly, in the coffee market of winter of 2007, Folgers, Maxwell House, and Chock Full o’Nuts all raised prices within the same span of time by about 4%, improving industry wide profitability.  Again, no legal actions followed any of the above competitors with respect to their announcements or actions, to the best of my knowledge.

For the chicken industry however, we saw similar announcements from both departed CEO’s of Tyson Foods and Pilgrim’s Pride back in the summer of 2008.  Unfortunately, their saber rattling was somewhat empty without the necessary reduction in chicken production and prices failed to improve.  This time around, Tyson Foods upped the ante with not only doing some saber rattling, but even observable action.

Nagle and Holden go on to state “… it may be necessary to announce and then withdraw it a number of times until potentially opportunistic competitors get the message that no price increase will go through without them.”

Unfortunately, more than a week later, at the time of this writing, Pilgrim’s Pride isn’t responding and they have a missed opportunity to resurrect industry wide sound pricing practices.  We contacted Pilgrim’s Pride for comment in the hopes of being able to demonstrate price leadership and followership, but to no avail as no comment was provided.

Pilgrim’s Pride lack of response in the form of a similar announcement could be dismissed as a company dealing with the pressures of bankruptcy proceedings.  Yet it would be too generous to yield to Pilgrim’s Pride this luxury.

Other companies have managed this economic turbulence with decent results in the same time that Pilgrim’s Pride has been floundering in pricing and capacity management, harming chicken prices industry wide.

  • Burlington Northern Sante Fe Corp income grew 19% as price increases and higher fuel surcharges helped offset a 7% decline in volume as measured by rail car units.
  • Monsanto Co.’s fiscal first-quarter profit more than doubled as farmers bought higher-price seeds and chemicals despite a cooling farm economy.  Monsanto’s strong pricing strategy helped boost earnings, with high-value corn seed prices increasing 15% to 20% last year and likely to increase a further 25% this year.
  • Sur La Table is specializing in selling coffee centers starting around $1,000.  To help sell these deluxe café-style espresso makers reaching north of $3,000, salespeople are instructed to encourage customers to compare the cost of Starbucks to the savings they will generate from using their own gourmet coffee solution.

The Wiglaf Journal itself has written repeatedly on how to manage prices during this turbulent economy and Pilgrim’s Pride in particular.

At this point, we believe that we have a failure to communicate.  I can humbly accept that they aren’t listening to the writings of an adjunct professor at DePaul University, but it is hard to dismiss the numerous case studies from which they could have learned, and the clear industry leadership provided by Tyson Foods.  Thus, it drives the conclusion that Pilgrim’s Pride is managed incompetently.  Furthermore, the only constant has been Chairman Lonnie “Bo” Pilgrim, so perhaps the finger should point to him.

Don Tyson and Tyson Foods will simply have to either walk away from the industry, an unlikely and most likely the wrong strategic choice, or go back into the battle once more until Pilgrim’s Pride either collapses from its own errors or straightens up.

In the meantime, if the minority shareholders cannot take control from Chairman Lonnie “Bo” Pilgrim, perhaps the courts and bond holders should declare a vote of no-confidence and proceed to break up the institution.  A wise heart will know the proper time and procedure.  .


  • Thomas T. Nagle, and Reed K. Holden, “Competition:  Managing Conflict Thoughtfully,” The Strategy and Tactics of Pricing:  A Guide to Profitable Decision Making, 3rd ed. (Upper Saddle River, NJ.: Prentice Hall, 2002), p. 140.
  • Lauren Etter, Joann S. Lublin, Scott Kilman. (2009) “CEO Quits at Meat Giant Tyson — Richard Bond Departs as 78-Year-Old Don Tyson Becomes More Active.” Wall Street Journal, January 6, Eastern Edition.  http://www.proquest.com.ezproxy2.lib.depaul.edu/ (accessed February 2, 2009).
  • Scott Kilman (2009) “Tyson Posts Loss, but Outlook Is Upbeat.” Wall Street Journal, January 27, Eastern Edition.  http://www.proquest.com.ezproxy2.lib.depaul.edu/ (accessed February 2, 2009).
  • Yun-Hee Kim, “AU Optronics Cuts LCD Output In Bid to Stabilize Falling Prices”, Wall Street Journal, 15 June 2006, p. B3.
  • Yun-Hee Kim, “Samsung Sees No Glut, Will Maintain LCD Output”, Wall Street Journal, 16 June 2006, p. B2.
  • Yun-Hee Kim, “LCD-Price Declines Spur Cuts in Capital-Spending Budgets”, Wall Street Journal, 8 August 2006, p. B4.
  • Yun-Hee Kim, “Demand Bodes Well for LCD Firms,” Wall Street Journal, 22 September 2006, p. B2.
  • Yun-Hee Kim, “LCD Makers Look to Trim,” Wall Street Journal, 22 November 2006, p. B6.
  • Jay Alabaster, “Demand Drives Sharp to Focus On Large, High-End LCD TV Sets,” Wall Street Journal, 15 January 2007, p. B3.
  • Susan Buchanan, “U.S. Roasts Fewer Coffee Beans,” Wall Street Journal, June 20, 2007. p B5F
  • John Kell (2009) “Corporate News: Burlington Northern Net Up, But Downturn Took a Toll.” Wall Street Journal, January 22, Eastern Edition.  http://www.proquest.com.ezproxy2.lib.depaul.edu/ (accessed February 2, 2009).
  • Lauren Etter, Rebecca Townsend. (2009) “Corporate News: Monsanto’s Profit Jumps — Demand Is Healthy, but CEO Sees Signs of a Price War.” Wall Street Journal, January 8, Eastern Edition.  http://www.proquest.com.ezproxy2.lib.depaul.edu/ (accessed February 2, 2009).
  • Juliet Chung (2009) “Coffee Steeps in Value Marketing — Even Pricey Espresso Makers Are Touted as Cheap Starbucks Alternatives.” Wall Street Journal, January 15, Eastern Edition.  http://www.proquest.com.ezproxy2.lib.depaul.edu/ (accessed February 2, 2009).  (Side note:  Sur Le Table is one of the author’s favorite stores though he owns no more than a Bodum French press.)

About The Author

Tim J. Smith, PhD, is the founder and CEO of Wiglaf Pricing, an Adjunct Professor of Marketing and Economics at DePaul University, and the author of Pricing Done Right (Wiley 2016) and Pricing Strategy (Cengage 2012). At Wiglaf Pricing, Tim leads client engagements. Smith’s popular business book, Pricing Done Right: The Pricing Framework Proven Successful by the World’s Most Profitable Companies, was noted by Dennis Stone, CEO of Overhead Door Corp, as "Essential reading… While many books cover the concepts of pricing, Pricing Done Right goes the additional step of applying the concepts in the real world." Tim’s textbook, Pricing Strategy: Setting Price Levels, Managing Price Discounts, & Establishing Price Structures, has been described by independent reviewers as “the most comprehensive pricing strategy book” on the market. As well as serving as the Academic Advisor to the Professional Pricing Society’s Certified Pricing Professional program, Tim is a member of the American Marketing Association and American Physical Society. He holds a BS in Physics and Chemistry from Southern Methodist University, a BA in Mathematics from Southern Methodist University, a PhD in Physical Chemistry from the University of Chicago, and an MBA with high honors in Strategy and Marketing from the University of Chicago GSB.