- Hormel acquired Chicago-based Fontanini Italian Meats and Sausages for $425 million, the company said in a statement. Fontanini makes authentic Italian meats and sausages, and other premium meat products, including pizza toppings and meatballs, for the foodservice sector.
- "This is a strategic acquisition for our high-growth food service division,” Hormel president and CEO Jim Snee said in the release. “We have delivered a strong track record of success in the food service industry … The Fontanini brand is highly regarded, and the addition of these products to our portfolio will allow us to accelerate growth for both Hormel Foods food service and for Fontanini through expanded distribution and new customers."
- Hormel plans to leverage company resources such as R&D, operations, supply chain and finance to grow the Fontanini business. As part of the deal, the food maker gains Fontanini’s new state-of-the-art production facility, which has extra capacity to make other Hormel Foods products as well.
CEO Jim Snee indicated earlier this year that Hormel is looking for strategic acquisitions. “Our balance sheet is pristine, and so we do have the capacity to do a multibillion-dollar deal.”
Hormel is searching for opportunities both in the U.S. and internationally. Snee says there’s no particular target in mind, but the company is searching for companies that “are aligned with [its] growth pillars for being more global, multi-cultural, healthy, holistic and on-the-go.”
The acquisition of family-owned Fontanini doesn’t exactly fit the model Snee describes. What it does represent, however, is an opportunistic and strategic buy for Hormel to strengthen its existing branded foodservice portfolio. Fontanini is a nice addition to the food company’s foodservice lineup, which already includes brands such as Hormel Fire Braised meats, Old Smokehouse pecanwood smoked bacon and a variety of Jennie-O Turkey products. The purchase also could help Hormel even out some of the volatility found in parts of its business, most notably its Jennie-O Turkey Store that has been hit by an oversupply of turkeys across the industry that pressured sales and profitability.
Hormel has a solid track record of successfully buying family-owned and small innovative startup businesses and successfully integrating them into its organization. In recent years, it has acquired Applegate, Justin’s and Muscle Milk. These deals have given the company a stronger presence in fast-growing categories like natural and organic meats and nut butter snacks, as well as on-the-go snacking.
Fontanini will contribute to Hormel’s refrigerated foods segment, which contributes about half of Hormel’s sales. The segment recorded strong profit growth of 38% in 2016. More recently, however, it posted a flat operating profit in the second quarter of 2017.
While Fontanini may not be the multibillion-dollar transaction industry observers — or even Hormel — are waiting for, it’s nonetheless an attractive and strategic deal for a food company looking to grow its foodservice business. After all, the foodservice sector is huge, and many supermarkets and convenience stores are adding foodservice components and exploring in-store restaurants as a way to differentiate and provide value-added offers for shoppers.