Waylon Cunningham
(Reuters) – An upcoming vote by Denny’s Corp shareholders could force the company to set targets to reduce the use of pork from suppliers that keep pregnant pigs in strict conditions called gestation cages.
The Humane Society of the United States, a Denny’s shareholder, filed the proposal ahead of the diner chain’s annual investor meeting on May 15.
The proposal was backed by Institutional Shareholder Services, an influential consulting firm that often determines how shareholders vote on sensitive issues.
ISS said this is the first time Denny’s (NASDAQ:) has received a proposal to disclose the percentage of group-free pork in its supply chain and phase out gestation crates.
ISS said it conducted an analysis that found Denny’s lags behind five competitors, including Cracker Barrel (NASDAQ:) and IHOP parent Dine Brands, because it fails to clearly articulate the steps it is taking to reduce its dependence on pork suppliers. who use maternity crates. . According to ISS, Denny’s used exclusions in its language to “significantly weaken” the transparency of its commitment to phase out maternity crates from its supply chain.
Known for its affordable breakfast, Denny’s in 2012 pledged to eliminate the use of gestation crates, which the Humane Society describes as single cages in which “pigs are confined so tightly that they can’t even turn around,” from its pork supply chain.
But over the next decade, Denny’s reported “no significant progress” or set any targets to reach its goal, putting it at odds with other chains, according to the Humane Society shareholder proposal. “We think it’s time for shareholders to step in.”
remove advertising
.
In contrast, rival Cheesecake Factory (NASDAQ:) reported that 73 percent of its pork was crate-free by the end of 2023 and that it plans to eliminate crates from its supply chain by 2025. The company did not respond to a request for comment.
In a proxy dated April 4, Denny’s board of directors recommended shareholders vote against the proposal, saying its requirements would be excessive, unnecessary and ineffective. “Unfortunately, the pork supply industry is not growing as expected,” the report said.
In a statement to Reuters on April 19, Denny’s said reducing the number of gestation boxes is “a challenge in our industry” but recognizes “the importance of moving toward more humane practices.”
Walmart (NYSE:) shareholders will also be asked to vote on a similar proposal at the upcoming annual meeting. Walmart recommended that its shareholders vote against the proposal, which it believed was unnecessary. “The market does not currently support a rapid transition away from maternity crates,” the retailer said in an April 25 statement.
Two years ago, McDonald’s (NYSE:) faced pressure from billionaire activist investor Carl Icahn to completely eliminate gestation crates from its pork supply chain. He lost his battle for board seats and to shine a light on animal welfare. McDonald’s did not respond to requests for comment.
Denny’s, which had about 1,631 locations at the end of 2023, had previously sought to avoid facing investors with a similar shareholder proposal from the Humane Society. A Denny’s executive negotiated the deal with the group privately, according to emails reviewed by Reuters.
remove advertising
.
In exchange for the Humane Society’s rejection of the 2022 proposal, Denny posted language on its website saying that about a third of its pork comes from suppliers that at least limit the use of gestation crates. Denny’s also relaxed its commitment to phase out gestation crates and allow suppliers to use them until pigs are confirmed pregnant, which veterinary experts say could take several weeks.
Steve Meyer, a consulting economist for the National Pork Board and the National Pork Producers Council, said switching from aging crates to open pens is a significant investment for pork farmers, but restaurant chains can source pork without gestation crates if they are willing pay more for it.
Panera Bread (NASDAQ:) estimated in 2022 that it could save $3 million by eliminating its obligations to suppliers that limit the use of gestation boxes, but has not decided to do so, according to internal documents reviewed by Reuters.
Denny’s again amended its website language following the Humane Society’s 2024 proposal and now reads that it believes half of its pork could come from suppliers that limit gestation crates by 2028. But the target “depends on supply constraints of some products, market conditions and increased prices.” expenses.”