About Rochelle Foods, LLC

The maker of such thrifty pantry staples as SPAM lunch meat and Dinty Moore stew, Hormel Foods produces a slew of refrigerated processed meats and deli items, ethnic entrees, and frozen foods, sold under the flagship Hormel brand, as well as Don Miguel and MegaMex (Mexican), and Lloyd's (barbeque). Food service offerings include Hormel Natural Choice meats, Café H, Austin Blues, 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, consists of branded and unbranded pork, beef, chicken, and turkey products, and accounts for about half of total sales. The Grocery Products segment generates some 20% of revenue through the processing, marketing, and selling of shelf-stable food products, it also includes the results from the Company’s MegaMex joint venture. Jennie-O Turkey Store is comprised primarily of branded and unbranded turkey products.; it rears around 75% of its turkey requirements itself, while the remainder comes from contracted independents.

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 is growing in recent years, aided by 2017 acquisitions of Fontanini (Italy) and Ceratti (Brazil).

Note: The company combined its Grocery Products and Specialty Foods segments at the start of FY2018.

Geographic Reach

Hormel is based in Austin, Minnesota. While 95% of the company's sales come from the US, Hormel boasts operations and/or joint ventures across the globe, including in Australia, Brazil, Canada, China (the world's biggest market for pork), Japan, and the Philippines. Other major markets include Mexico, Micronesia, Singapore, England, and South Korea, and products are marketed in more than 80 countries.

The company has production, processing, and distribution facilities in about a dozen US states, as well as China and Brazil. It has administrative offices in 5 US states, Australia, and China. Hormel sources its hogs from suppliers in Minnesota, Iowa, Nebraska, Kansas, and Colorado.

Sales and Marketing

In the US, Hormel sells its goods through some 1,000 sales personnel, independent brokers, and distributors. Abroad, subsidiary Hormel Foods International Corporation (HFIC) does Hormel's marketing.

Wal-Mart is Hormel's largest customer, accounting for nearly 15% of Hormel's sales. The world's largest retailer purchases products from each of Hormel's five business segments.

Hormel relies heavily on a small group of customers. Its five largest customers in each segment make up the following approximate percentage of segment sales: 47% of Grocery Products, 40% of Refrigerated Foods, 43% of Jennie-O Turkey Store, 49% of Specialty Foods, and 20% of International & Other.

Hormel’s advertising expenses for fiscal years 2017, 2016, and 2015 were $135.6 million, $204.1 million, and $145.3 million, respectively.

Financial Performance

Hormel’s financial performance in recent years has seen generally steady revenue numbers and rising earnings. The company’s sales grew nicely between FY2009 and FY2016 before sliding in FY2017. Net income more than doubled in that same time period, hitting an all-time high of $890 million in FY2016 before falling marginally in FY2017.

In FY2017 (ended October 30, 2017), Hormel’s revenue slid lower by 4% to $9.2 billion. Grocery Products, Refrigerated Foods, and International all saw improvements in sales, however they could not overcome off years in the Jennie-O Turkey Store and Specialty Foods segments. Overall, total volume (in pounds) of sold food dipped precipitously to 4.77 million from 5.19 million in FY2016. The company’s results also battled against an unfavorable comparison as FY2016 had a 53rd week of sales.

Net income for the year decreased 5% to $847 million. The cost of goods (COGS) expense margin ticked up a single percentage point due to higher beef and pork input prices, while all other expenses generally stayed in line with the prior year. The 4% lower revenue along with the 1% increase in COGS made up the downswing in 2017’s earnings.

Cash at the end of the year was $444 million, up almost $30 million from the prior year. Financing activities used $390 million to pay out dividends on common stock and for share repurchases. Investing activities depleted cash holdings by $593 million, mainly to pay for acquired businesses and purchased property & equipment. Operating activities overcame the depletions with a $1.0 billion contribution, most of it from Hormel’s net earnings.

Strategy

Hormel has put in place growth strategies in recent years and is poised to reap the benefits in FY2018. It made three acquisitions in 2017 and opened a new processing plant in China. As well, it has been developing new products with an eye towards shifting its product mix to higher-value offerings. It anticipates growth in its Foodservice segment as it has a broad range of brand name product lines including Hormel Natural Choice, Hormel Bacon 1, FireBraised Meats, and the recently acquired Fontanini Italian meats company.

Internationally, Hormel’s intent is to replicate the standing and branding it has achieved in the US. It wants to be the #1 or #2 brand across numerous product categories and to offer a mix of both shelf-stable and perishable foods. Its new Chinese plant, when at full capacity, will double the number of produced pounds of food, from 80 million to 160 million and will produce SPAM and refrigerated and frozen meat items for sale in the foodservice and retail channels. The Ceratti purchase in Brazil and Fontanini buy in Italy are both part of the firm’s larger plan for geographic expansion.

Another Hormel strategy is to extend existing brands and roll out new brands. While SPAM may be its best known brand, Hormel has a diverse and growing portfolio of consumer products, with Muscle Milk nutrition products being a recent addition. The company is protecting existing markets by bumping up advertising on established brands such as Skippy peanut butter and SPAM.

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.

Mergers and Acquisitions

Hormel acquired Columbus Manufacturing, a California-based maker of deli meat and salami in late 2017. The deal, worth about $850 million, added more specialty, craft, and artisanal meats to Hormel's portfolio. In that same year, it purchased Cidade do Sol, a value-added meats company in Brazil, for $104 million and acquired Fontanini Italian Meats and Sausages for $425 million.

In 2016, Hormel acquired Justin's, a maker of nut butter products such as spreads, squeeze packs, peanut butter cups, and snack packs. Hormel paid $280.9 million for Justin's, which bolstered Hormel's nut butter-based snacking category.

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Rochelle Foods, LLC

1001 S Main St
Rochelle, IL 61068-2190
Phone: 1 (815) 562-4141

Stats

  • Employer Type: Public
  • Director, Internal Audit: Paul Kuehneman
  • Human Resources Manager: Scott Morrison
  • Information Technology Manager: Meg Smith
  • Employees: 700

Major Office Locations

  • Rochelle, IL