About HORMEL FOODS CORPORATION

The maker of such thrifty pantry staples as SPAM lunch meat and Dinty Moore stew has turned sophisticated. Besides canned meats, Hormel Foods produces a slew of refrigerated processed meats and deli items, ethnic entrees, and frozen foods, sold under the Hormel brand, as well as Don Miguel and MegaMex Mexican, Country Crock (side dishes), and Lloyd's barbeque. Food service offerings include Hormel Natural Choice meats, Café H ethnic, Austin Blues barbeque, and Bread Ready pre-sliced meats. Hormel is also a major US turkey and pork processor, churning out Jennie-O turkey, Cure 81 hams, and Always Tender pork. More than 30 Hormel brands are ranked #1 or #2 in their respective markets.

Operations

Hormel Foods operates five business segments. The largest, Refrigerated Foods, including pork and beef products and the company's 50%-owned Precept Foods joint venture, accounts for about 50% of total sales, followed by Jennie-O Turkey Store (about 20%), and shelf-stable Grocery Products, such as the MegaMex Foods line, also nearly 20%.

Not so familiar with consumers, the company's Specialty Foods segment (about 10% of sales) packages and sells a variety of sugar and sugar-substitute products, salt and pepper, liquid-portion products, dessert mixes, ready-to-drink products, gelatin products, and private-label canned meats. Its primary customers are retail and foodservice firms. The segment also makes nutritional food products and supplements for hospitals, nursing homes, and other marketers of nutritional products.

The firm's International arm brings in the rest.

Hormel subsidiaries include Alma Foods, Applegate Farms, Diamond Crystal, and Hormel Financial Services.

Geographic Reach

While nearly 95% of the company's sales come from the US, Hormel boasts operations and/or joint ventures across the globe, including in Australia, Canada, China (the world's biggest market for pork), Japan, and the Philippines. Other major markets include Mexico, Micronesia, Singapore, and South Korea.

Hormel has 35 facilities, including three plants that process hogs and seven turkey harvesting and processing locations.

Sales and Marketing

In the US, Hormel sells its goods through sales personnel, independent brokers, and distributors. Abroad, subsidiary Hormel Foods International Corporation (HFIC) markets its products.

Wal-Mart is Hormel's largest customer, accounting for about 15% of the company's fiscal 2015 (ends October) sales. The world's largest retailer purchases products from each of Hormel's five business segments.

Financial Performance

The company has reported stable revenue growth since fiscal 2011, but saw a modest decline in 2015. That year, revenue decreased 1% to $9.3 billion. Although the Specialty Products showed growth (largely due to the acquisition of Muscle Milk nutrition products), and the Grocery Products segment also grew (based on lower meat protein input costs), those gains were tempered by pork price deflation which impacted the Refrigerated Foods and International segments. Avian influenza effects caused Jennie-O Turkey Store sales to drop, as well.

Despite the dip in sales, net income continued its upward trend in fiscal 2015, rising 14% to $686.1 million. This was primarily due to a decrease in the cost of sales. Cash flow from operations rose 33% to $992 million due to changes in inventories and accounts receivable.

Strategy

Hormel's strategy is to extend existing brands and expand into new branded items. While SPAM may be its best known brand, Hormel has a diverse and growing portfolio of consumer products, with Muscle Milk nutrition products as the newest addition. The company is focusing on developing and acquiring new products to drive sales, as well as bumping up advertising on established brands such as Skippy peanut butter and SPAM. Hormel is also looking to grow its ethnic business at home as well as its international sales.

Its research and development expenditures for fiscal 2015, 2014, 2013, and 2012, were $32 million, $29.9 million, $29.9 million, and $29.8 million, respectively. 

The company's Precept Foods joint venture with Cargill markets case-ready fresh beef and pork under the Always Tender brand. Hormel operates another joint venture with Herdez Del Fuerte to market Mexican foods in the US. Called MegaMex Foods, it is integral to Hormel's plan to further diversify its portfolio.

In mid-2015 the company purchased organic processed meat company Applegate, which now operates as a standalone subsidiary. The $775 million acquisition added Applegate's deli meats, frozen burgers, and sausages into the same pantry as SPAM and Dinty Moore stew, and advances the firm's growing push into natural and organic foods.

Hormel is building a new prepared meats manufacturing facility in China; it will produce SPAM and refrigerated and frozen meat items for sale in the foodservice and retail channels.

In 2014 Hormel announced that the company’s SPAM Museum will be relocating to downtown Austin, Minnesota, to support the community’s Vision 2020 project for revitalizing the city’s historic downtown area.

Mergers and Acquisitions

The company acquired Applegate Farms, which produces natural and organic prepared meats, in 2015. That unit now operates as a subsidiary in the Refrigerated Foods segment.

Looking to beef up its menu of non-meat protein products, Hormel has been particularly acquisitive in recent years. In 2014 the company acquired Muscle Milk maker CytoSport in a $450 million deal. Having earned a top spot in the $1 billion protein drink category, CytoSport is helping Hormel attract younger customers. Previously, Hormel acquired Skippy peanut butter in 2013 from Unilever for $700 million. (Hardly peanuts, the deal represented Hormel's largest purchase ever.) With about $370 million in annual sales, Skippy is the #2 brand of peanut butter in the US (behind Smucker's Jif) and the leader in China. The company believes Skippy should be a useful complement to its sales strategy in China for the SPAM family of products.

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HORMEL FOODS CORPORATION

1 Hormel Pl
Austin, MN 55912-3680
Phone: 1 (507) 437-5611
Fax: 1 (507) 437-5108

Stats

  • Employer Type: Public
  • President and CEO: James P. Snee
  • SVP and CFO: James N. Sheehan
  • President and CEO: James P. Snee

Major Office Locations

  • Austin, MN

Other Locations

  • Bentonville, AR
  • Little Rock, AR
  • Phoenix, AZ
  • Taylor, AZ
  • Corcoran, CA
  • Irvine, CA
  • Lathrop, CA
  • Ontario, CA
  • Pleasanton, CA
  • Vernon, CA
  • Greenwood Village, CO
  • Maitland, FL
  • Sunrise, FL
  • Tucker, GA
  • Algona, IA
  • Des Moines, IA
  • Knoxville, IA
  • Chicago, IL
  • Shawnee Mission, KS
  • Franklin, MA
  • Grand Rapids, MI
  • Atwater, MN
  • Brainerd, MN
  • Browerville, MN
  • Danvers, MN
  • Dawson, MN
  • De Graff, MN
  • Eden Prairie, MN
  • Eden Valley, MN
  • Edgerton, MN
  • Fairmont, MN
  • Faribault, MN
  • Hawick, MN
  • Henning, MN
  • Hutchinson, MN
  • Long Prairie, MN
  • Medford, MN
  • Melrose, MN
  • Montevideo, MN
  • New London, MN
  • New York Mills, MN
  • Preston, MN
  • Saint Peter, MN
  • Waseca, MN
  • Willmar, MN
  • Charlotte, NC
  • Fremont, NE
  • Orchard Park, NY
  • Cincinnati, OH
  • Pittsburgh, PA
  • Cordova, TN
  • Arlington, TX
  • San Antonio, TX
  • Bellevue, WA
  • Redmond, WA
  • Almena, WI
  • Barron, WI
  • Beloit, WI
  • Kenosha, WI
  • Albin, WY
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