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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 four 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 produces specialty food products, such as sugar substitutes, salt and pepper, liquid-portion products, dessert mixes, ready-to-drink products, and private-label canned meat. Mexican food joint venture MegaMex contributes to the segment's results as well.

Jennie-O Turkey Store comprises mainly branded and unbranded turkey products. It rears around 75% of its turkey requirements itself, while the remainder comes from contracted independents.

The firm's International arm is growing in recent years, aided by 2017 acquisitions of Fontanini (Italy) and Ceratti (Brazil).

Geographic Reach

Hormel is based in Austin, Minnesota and its products are sold across the US. While 95% of the company's sales come from its home country, 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, the UK, and South Korea, and products are marketed in some 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, Brazil, and China. Hormel sources its hogs from suppliers in Minnesota, Iowa, Nebraska, Kansas, and Colorado.

Sales and Marketing

In the US, Hormel's sales and marketing function comprises more than 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 roughly 15% of Hormel's sales. The world's largest retailer purchases products from each of Hormel's four 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 2018, 2017, and 2016 were $151.5 million, $135.6 million, and $204.1 million, respectively.

Financial Performance

Hormel's financial performance in recent years has seen generally flat revenue growth and rising earnings. The company has been making acquisitions and targeting international expansion to compensate for its declining Jennie-O Turkey Stores (JOTS) business, which has seen sales fall in each of the last five years. 

Sales grew 4% to $9.5 billion as acquisitions boosted sales in the Refrigerated Foods segment and the International segment captured strong demand from China. On the downside, Grocery Products contracted due to weakness in the contract manufacturing business and Jennie-O Turkey Store (JOTS) was weighed down by oversupply.

Hormel's net income grew 20% to $1.0 billion thanks to the positive impact of the 2017 Tax Cuts and Jobs Act and strong performances in the Refrigerated Foods and International businesses. On the downside, JOTS continues to suffer from low profitability and Hormel also faced higher freight costs due to tight industry conditions and low profitability in the CytoSport business.

The company's cash position strengthened slightly in 2018, growing $15.0 million to $459.1 million. It generated $1.2 billion from its operations, while its investing activities absorbed a similar quantity of cash. It generated $11.6 million from its financing activities. Hormel's main cash uses in 2018 were acquisitions, investments in plant and equipment, and dividend payments.

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. 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.

Rochelle Foods, LLC

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

Stats

Employer Type: Privately Owned
Safety Director: Paul Hardcastel
Electrical Technician: Rick Klaren
Director, Internal Audit: Paul Kuehneman
Employees (This Location): 700
Employees (All Locations): 700

Major Office Locations

Rochelle, IL