Dive Brief:
- Hormel has produced significant growth over the past decade, increasing revenue from $5.4 billion to $9.3 billion, more than doubling earnings, nearly quadrupling dividends, producing about a 400% return on its stock price, and increasing its Fortune 500 ranking by almost 100 spots, to No. 304 this year.
- Product innovation, category expansion, and strategic acquisitions have been the keys to Hormel's growth in recent years. Hormel also recently made a push for simpler ingredients to better resonate with consumers.
- "We work with consumers and the business units to find areas where we can either take our existing brands and push them into new opportunities or look for things that we want to create on our own that would be different from the spaces that we're in today," Scott Aakre, VP of corporate innovation at Hormel, told Fortune.
Dive Insight:
Hormel has made a series of acquisitions in the past five years in segments that offer a clue as to where the company wants to expand next. Applegate Farms expanded Hormel's portfolio into the natural and organic meats space. Acquiring Muscle Milk (Cytosport) in 2014 offered Hormel an entrance into performance beverages and the fast-growing liquid meal replacements category.
Once acquisitions are complete, Hormel tends to let those companies operate independently. That independence, combined with a proven ability to drive growth for these startups, was what attracted nut butter snack maker Justin's to Hormel as a potential buyer, the founder told Fortune.
Hormel announced its acquisition of the startup, valued at about three times Justin's annual sales, last month. The high price tag reflects the promise of sales Hormel believes Justin's offers, but also the recognition of Hormel's challenges in producing the same growth by pivoting its Skippy's peanut butter brand into that market.
Hormel has carefully balanced internal innovation, leading to products within the growing medical foods category but also the recently discontinued Spam Snacks line, with an understanding of the company's R&D and operational capabilities. That balance has been key to Hormel's successes so far and will continue to be integral going forward as the company identifies acquisition targets in promising categories.
"It's a combination of our ability to stay current with the consumer on our existing businesses, find new ways to provide solutions for innovation channels, and then also to find acquisitions that can put us in a place that maybe would have been harder for us to create ourselves," Aakre said.