Hormel Foods 2020 – Inside the company's growth strategy

by Keith Nunes
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Hormel products
Hormel Foods' sales for fiscal 2016 were $9,523,224,000 compared with $9,263,863,000 during fiscal 2015.
 

NEW YORK — Despite a lackluster food and beverage marketplace, where growth among large companies has been rare, Hormel Foods Corp. management reaffirmed its commitment to achieving 5% annual top-line growth, 10% bottom-line growth and margins that are in the top quartile of the company’s peers by 2020.  

The goals, reaffirmed during the company's 2017 investor day June 15 in New York, are ambitious given how Hormel has performed. During fiscal 2016, Hormel Foods earned $890,052,000, equal to $1.68 per share on the common stock, up from net income of $686,088,000, or $1.30 per share, in fiscal 2015.

Sales for fiscal 2016 were $9,523,224,000 compared with $9,263,863,000 during fiscal 2015.

Skippy, Justin's Cytosport, Hormel
Hormel Foods has rapidly diversified its portfolio during the past six years with the acquisitions of Skippy, CytoSport and Justin’s.
 

Jim Snee, president and chief executive officer, said six strategies will give Hormel Foods the momentum to achieve its goals. The six strategies include continuing to become a more diversified food company; expanding and accelerating its food service business; expanding its international footprint; reducing volatility and increasing balance throughout the business; divesting assets that do not perform; and modernizing Hormel’s supply chain.

Jim Snee, Hormel
Jim Snee, president and c.e.o. of Hormel Foods

“We are deeply rooted in the meat protein space, and that’s a space that we know and we love both in the retail, food service channel, (and) domestic and international space,” he said. “But over time, we have to become a broader food company and build that balance across our portfolio.”

Hormel Foods has rapidly diversified its portfolio during the past six years with the acquisitions of Skippy peanut butter, CytoSport sports nutrition products and Justin’s nut butters.

“But beyond non-meat protein, we’ve also been able to increase our presence in what we call this flavor enhancement area: salsas, sauces, dips and hot sauces …,” Mr. Snee said.

Management also sees opportunities to translate the branded product successes it has had at retail to food service. The focus will be on delivering insights and solutions to improve food service operation efficiencies.

Hormel fire-braised meat for food service
Today, food service represents 27% of Hormel’s total portfolio.
 

“ … The fact is when you think about all of the macro issues happening in the world today, the macroeconomic issues, we could not have asked for better alignment to support the expansion and growth of our food service business,” Mr. Snee said “What's happening with operators? They can’t get labor. Wages are escalating. Nobody knows what’s happening with health care.

“And guess what, food service is becoming blurred. Yes, there’s traditional restaurants (and) hotels. But retailers, retailers are delving into this food service space. They’re trying to capture their fair share of those dollars that left the retail store. The prepared food efforts from retailers is greater than any time in my history with this company. …We have the knowledge and the expertise to export throughout our organization to capitalize.”

Today, food service represents 27% of Hormel’s total portfolio, and a key point of differentiation is the company’s focus on brands, including Café H, Jennie-O Turkey Store, Fire Braised Meats and Austin Blues.

“We also create products that meet specific operator needs such as pizza toppings, sliced meats, bacon and precooked products, making our food service operators’ preparation easier and more cost-effective,” said James M. Splinter, group vice-president of corporate strategy.

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