Whirring and clicking nonstop, the conveyor belt sweeps the baby chicks along their fateful route. Clustered closely around the belt are about a dozen workers separating the males from the females. Further down the assembly line, more workers are grabbing the tiny birds and forcing their beaks up to a nozzle, which dispenses drops of a vaccine for respiratory ailments.
This is the "sexing" room of the Salisbury hatchery of Perdue Farms Inc., where more than 1 million chicks get this kind of treatment weekly.
It is the final stage of a process that began about three weeks earlier, when workers brought in carts of eggs from farms all along the Delmarva peninsula. More than 300,000 eggs are put into incubation each day, and they will be kept for the next 18 1/2 days at a temperature of 98.8 degrees Fahrenheit and at 62 percent relative humidity, said Kenneth Lambert, manager of the hatchery.
From the hatchery, the birds will be picked up by Perdue trucks and taken to one of the hundreds of chicken houses that dot this swath of farm country. Here a chicken will spend its brief life in close confines with some 10,000 other "broilers," as the bird is known in the business.
Automation is no less prevalent in the chicken house than in the hatchery, as funnels working like clockwork deposit feed, formulated through computer modeling, for the chickens to eat. Twenty years ago, farmers say, it took more than 2 1/2 pounds of feed to produce a pound of chicken. Today, thanks to dramatic scientific advances in the genetics and nutrition of chicken-breeding, it takes less than two pounds.
At the end of about seven weeks, the Perdue trucks will return once again to carry the chickens, which now weigh about 4 1/2 pounds, to their final destination: one of the company's six "processing plants." A processing plant is the chicken industry's euphemism for slaughterhouse. In little more than an hour, a live chicken will be killed, cut up and prepared for delivery -- as soon as the next morning -- to a supermarket somewhere along the Northeast corridor.
This entire cycle, or something very close to it, is repeated in the facilities of eight other companies here on the Eastern Shore. It is the stuff of the modern broiler business, a national business that got its start in these parts more than 40 years ago and that has since undergone sweeping scientific and industrial transformations.
For the men who run the business now, today's highly integrated, automated industry is a far cry from the ramshackle wire chicken coops they tended as youths. David Bruning, a Maryland farmer who has been growing chickens since 1956, says, "It's like the difference between a Model-T and a BMW -- the business has so changed."
The story of this transformation is the story of the Delmarva chicken industry, one of the most competitive of the eight major production areas in the country. A number of the industry's bellwethers do some or all of their production here, including Perdue, Holly Farms Foods and Con Agra Inc. And nearly 500 million broilers were produced here in 1984, ranking the region fourth in national production, according to figures assembled by the Delmarva Poultry Industry, a trade association.
The region -- an area 100 miles long and 60 miles wide, made up of parts of Maryland, Delaware and Virginia -- is perhaps the most densely concentrated chicken-producing area of them all, said Bill Stephens, DPI's executive assistant. Included is the most productive county nationwide: Sussex County, Del., where about 150 million broilers are grown annually.
Plus, Stephens is quick to add, it all started here.
That was back in 1923, according to research by George Chaloupka, a University of Delaware poultry specialist. Wilmer Steele, of Ocean View, Del., was reportedly the first commercial broiler producer, growing 500 chickens in a 16-foot-square broiler house. It took 16 weeks to grow the first flock, and the broilers averaged 2 1/4 pound live weight. They sold for 62 cents per pound.
Up until then, many people had backyard flocks, but the idea of growing chickens just to produce meat for commercial sale was entirely new, said William Haffert, the editor of Broiler Industry, a trade journal. He said, "Delmarva was the first to really, truly commercialize the practice."
In the beginning, the business was a fragmented one. As recently as 20 years ago, said Stephens, there were up to 20 companies on the peninsula, and they were involved with a variety of jobs, from running the hatchery or the breeder farms to operating a feed mill or processing plant.
That number has shrunk to nine as part of the relentless process of consolidation and integration that has marked the broiler industry since its inception. The companies that remain are fully integrated, usually owning at least one hatchery, feed mill and processing plant, while contracting out the actual growing of the chickens to some 3,000 farmers around the peninsula.
The deal for these contractors is straightforward: They provide the chicken house and the labor, while the company provides the chickens, the feed and technical expertise. The farmer is paid a set fee, about $150 per thousand birds, plus a bonus depending on performance, industry officials say.
The consolidation process is one industry officials expect will continue, given the ever-more complicated technological demands of the business. "Poultry is a lot more capital- and labor-intensive. It takes a lot of money. Some smaller operators have trouble making that kind of investment," says Russ Danzig, Con Agra's Delmarva controller. Con Agra, the country's largest broiler producer, puts out about 1.3 million birds a week at its plants on the peninsula.
A cyclical business that runs on very narrow profit margins when it is profitable, the broiler industry tends to weed out the smaller operations in times of trouble, producers say. They say that a revival of the wretched times that prevailed in the business up until about two years ago could well prompt even more contraction in the marketplace.
For now, however, the nine companies on the Shore are enjoying the fruits of two of the more profitable years ever in the industry. Most are privately held firms, and their executives are silent as to exact income figures. But in 1984, Stephens says, the poultry industry as a whole achieved a 3.3-cent net return for each pound of chicken produced, following a net loss in 1983. Comparable profits are expected in 1985.
Various explanations are advanced for this surge: an expanding economy; the growing health conciousness of the American people; the relative cheap cost of chicken compared with other meats; declining feed costs, and, perhaps most important, the rise of a whole new fast-food market.
Although fast-food chicken is no new concept, as any connoisseur of Kentucky Fried Chicken knows, a dramatic change in the industry was ushered in two years ago when McDonald's unveiled its Chicken McNuggets, according to Broiler Industry's Haffert. Haffert says McDonald's huge demand for deboned chicken accelerated the trend toward production of what is known in the business as "further processed" chicken. Further processing can include doing just about anything to a chicken after it is cut up, from deboning and marinating it to producing TV dinners.
Although the trend is only beginning to infiltrate Delmarva, it reflects one of the most important developments in the broiler industry: the change from a production-oriented to a demand-driven business.
"The business in general has become more market-oriented," says George Adkins, executive vice president of Townsend's Inc., a relatively small Delmarva broiler company. "Producers look at what the marketplace demands and try to supply that market, rather than just growing chickens and trying to sell them."
The most visible manifestation of the emphasis on marketing is the emergence of brand names and advertising. And almost nowhere is this development more pronounced than on Delmarva, home of Frank Perdue, whose face is one of the most recognizable on television in the Northeast.
The story of Perdue's ad campaign is now legendary in the business, but when it began in the early 1970s, it was something of a joke. Perdue, the chairman of the company, went on TV himself, hawking his chickens with a humorous sincerity, telling his customers that "it takes a tough man to make a tender chicken." The ads were an immediate hit.
The advertising has given Perdue tremendous name recognition in the Northeast, which in turn enables the company to carry its chicken at prices as much as 10 cents per pound higher than the average industry retail price. A company spokesman says telephone surveys indicate that 97 percent of people asked to name a brand of chicken will name Perdue.
Thanks in large part to the advertising and the company's ability to back up the commercials with stepped-up production, Perdue has become the fifth-largest firm in the country. Between 1968, the year it became fully integrated, and 1984, the company's sales grew from $31 million to $741 million, and it processed more than 5 million birds a week in the last year. Without the advertising, says Perdue Vice Chairman Donald Mabe, "there is no way we could have grown as fast as we've grown."
Perdue's constant publicity, as well as his alleged strong-arm tactics, have not always endeared him to his competition. The company once got in a scrape over allegations that it told distributors in the big New York market to drop a competitor or face being dropped themselves by Perdue. And Perdue himself has been an ardent foe of unionism, much to the chagrin of many of his workers.
But his competition generally gives him credit where credit is due. "He took the risk years ago, and he's reaping the rewards," says Charles Allen, president of Allen Family Foods Inc., a processor based in Cordova, Md. "When he first went out with his ad campaign, there was a general feeling in the industry that the guy had lost his marbles. Nobody had put a brand name on a chicken. You know, a chicken is a chicken!"
Compared with other parts of the country, industry officials say, branding and advertising play an unusually large role for Delmarva firms, all of which compete in the lucrative retail market in the Northeast corridor.
It wasn't always this way. Stephens recalled that, 20 years ago, the Delmarva Poultry Industry tried to organize producers to market chicken under the common brand name of Delmarvelous, but supermarkets refused to accept it.
Although some of the firms get along without it, William Rusch, director of marketing for Holly Farms, said it is difficult today to compete in the Northeast without a branded product. While its Delmarva operations are smaller than Perdue's, the North Carolina-based Holly Farms is bigger nationally and offers Perdue its stiffest competition between Norfolk and Portland, Maine, where the two appear to run roughly neck and neck at the head of branded producers.
In the first five months of 1985, Perdue had 19 percent of the broiler market in the Northeast, except for New York, while Holly Farms trailed at 8 percent, according to market research Rusch said has been done for his company. However, in the New York metropolitan area, a region that consumes almost as much broiler meat as the rest of the Northeast combined, Rusch said Holly was leading Perdue at 35 to 26 percent.
Advertising is a key factor in the competition for this market, competition that has grown more intense in the last five years as Holly Farms moved more and more into Perdue's traditional stronghold of New York, while Perdue expanded south into Holly Farms country, according to Rusch. Other companies with Delmarva operations trying to keep pace in the Northeast include Con Agra, which markets Country Pride; Showell Farms, which markets Cookin' Good, and Cargill, another national producer, which sells under the name Paramount.
As for the rest of the poultry producers on the Shore, they make do without advertising, making their main pitch to smaller chains and grocery stores, as well as to the institutional and fast-food markets. But even those that ignore television and radio advertising acknowledge the shifting nature of the chicken business has made concentrating on marketing relatively more lucrative and important.
"Most companies realize that while you can save tenths of a cent per pound in costs, you can make halves and even pennies on the marketing side," said Norbert Hackett, president of Mountaire Corp. in Selbyville, Del.
In the chicken business, executives say, this means catering to customer demand for convenience -- both on the wholesale and retail level. Delmarva companies have begun to make a greater effort to develop what is known in the trade as pre-packaged chicken, a market into which many other production areas already have moved.
Whereas companies used to ship most of their chickens out whole and packed in ice, they are increasingly cutting the birds into parts, arranging them in trays and sealing the trays at the plant. In 1983, more than a quarter of all broilers in the country were marketed in pre-pack form, compared with 13 percent in 1970, according to figures compiled by Broiler Industry.
The reason for the change is simple -- supermarkets like the convenience. As Perdue's Mabe said, "There's no way a chain can wrap chickens as economically as we can wrap them, because of our labor costs per hour and because of our efficiencies in the plant."
Perdue is making a strong move into pre-packaging chicken. Last year it converted a plant in Lewiston, N. C., to produce pre-pack, and this year it is similarly converting a plant in Accomac, Va. Mountaire and Cargill also report they will be making changes at their facilities to accommodate more pre-packaging, while Holly Farms was one of the first into the field.
Further processing is just one more step along the convenience road. With more Americans reported eating chicken, largely because of its relative health benefits, chicken executives say the notion is a sure-fire marketing idea. "The housewife today is one that's usually employed or working, and does not have the time to physically cook a chicken," says Con Agra's Danzig. "She wants it ready to prepare for her meal."