Dive Brief:
- Hormel president and CEO James P. Snee told analysts at the Global Consumers Staples Conference that the company will continue its "long-term growth story" by diversifying and delivering 5% top-line growth, according to Food Business News.
- Snee said that by 2020, Hormel wants 15% of its net sales to come from items that have been developed in the past five years. The company also wants to expand its footprint in international markets, which account for 5% of company sales.
- Hormel has been transitioning beyond animal proteins through its acquisitions of Justin’s, Skippy brand peanut butter, Muscle Milk and Wholly Guacamole, Snee noted. “We’ve acquired some great non-meat protein items that have really rounded out our portfolio,” he said. “…So, it’s really this rounding out of our business in the protein space, the nonmeat protein and then flavor enhancers that will allow us to evolve to become a broader food company.”
Dive Insight:
Hormel has been on the lookout for M&A opportunities both in the U.S. and worldwide, reflected in the sale of its Diamond Crystal Brands and Farmer John businesses and its recent purchases of Justin's, Applegate Farms and Muscle Milk. These particular buys were seen as favorably positioning Hormel in the nut butter snacks and natural and organic meats categories.
Not all of Hormel's acquisitions have been stellar performers so far. Snee predicted a year ago that the dairy-based Muscle Milk line would be one of the company's key franchises in upcoming quarters. But compared to a year ago, Hormel's operating profit in specialty foods was down 14% in the third quarter and volume was down 8% — perhaps reflecting steadily increasing consumer interest in plant-based protein drinks.
Hormel also continues to expand its overseas footprint. This will make it less dependent on the domestic side of the business, which could help bolster the balance sheet over time.
The company has invested in doubling its production capacity in China and recently announced it had acquired Cidade do Sol, its fist entry into the South American market, for about $104 million. The company produces meats such as mortadella, sausage and salami for Brazilian retail and foodservice markets under the Ceratti brand.
Hormel's main competitors — Tyson Foods, Conagra Brands and Smithfield Foods — appear to be taking somewhat different paths in their acquisition strategies.
Tyson bought Hillshire Brands in 2014 and invested in plant-based Beyond Meat. Conagra bought the Frontera Mexican foods products brand and was in takeover talks with Pinnacle Foods this summer, though the deal did not go through. Smithfield bought Kansas City Sausage and put $25 million into meal-kit company Chef'd. Tyson and Smithfield have also put significant resources into expanding and upgrading existing production facilities.
Hormel has also focused on developing innovative products that differentiate is offerings. Its Vital Cuisine line targets muscle and weight loss due to cancer-related therapies, providing proteins, calories and hydration. The line includes ready-to-eat meals, nutrition shakes and whey protein powders.
Overall, Hormel is counting on its expertise in the industry, its retail and food service customers, and its portfolio of iconic brands to keep sales and profits heading upward.
"Everybody knows Spam and Skippy," Snee recently told analysts. "But when you’ve got such strong brands, 35 of them, that have a No. 1 or No. 2 position, it really helps fuel the direct selling organization. So, this industry-leading expertise is one of the key ingredients that allows us to be so uniquely positioned to successfully compete going forward.”