BOSTON — Three trends will drive sales growth for Hormel Foods, Austin, Minn., in the future: international expansion, health and wellness, and capitalizing on the burgeoning market for on-the-go snack options. With a solid foundation in the meat protein categories, the company sees capitalizing on the three trends as a way of diversifying its position in the marketplace.
|Jim Snee, president and c.o.o. for Hormel|
“ … We acknowledge that our portfolio is primarily a domestic portfolio today, but we believe that our international segments will continue to grow organically through our continued expansion in China, as well as the growth in our iconic brands like Spam and Skippy,” said Jim Snee, president and chief operating officer, during a Sept. 7 presentation at the Barclays Global Consumer Staples Conference. “And we will continue to seek opportunities to expand our global footprint through acquisitions.”
Mr. Snee pointed to such acquisitions as Justin’s Specialty Nut Butter, Applegate Farms, CytoSport, Inc., and Wholly Guacamole as well as the internally developed line of Natural Choice products as examples of Hormel’s focus on products perceived as healthy.
To further clarify how the company would expand in the health category, Mr. Snee pointed to the CytoSport brand Muscle Milk. Hormel Foods acquired the company in 2014 and since then has grown the business so it now holds the No. 2 share in protein powder and No. 1 share in ready-to-drink protein beverages. Now they are looking to expand Muscle Milk into additional categories.
“… One of our goals is to develop products that draw more female consumers to the category, and that led us to launch Muscle Milk Protein Smoothies made with Greek-style yogurt,” he said. “We’re also excited to be launching a reformulated Muscle Milk bar this fall. It will allow us to participate in the fastest-growing segment of the active nutrition category, which is protein bars.”
Within snacking, the company is looking to capitalize on two sub-categories: on-the-go and parties. Mr. Snee noted the number of snacks consumed daily has doubled since 2010.
“And Hormel’s innovation machine has capitalized on this trend with the launch of Rev Wraps in 2013,” he said. “This year, we’re excited to be launching Rev Bites, which is a follow-on innovation consisting of smaller bites in flavors such as turkey, ham and pepperoni.”
Other on-the-go options from the company include Skippy PB Bites and Justin’s Snack Packs.
“… We really like how these two brands fit together,” Mr. Snee said. “They each attract a different consumer. Skippy is more of a mainstream brand associated with nutrition and fun, while Justin’s is a premium lifestyle brand associated with health and wellness.”
While the snacking often is considered on an individual basis, Hormel has done well with its party platters, Mr. Snee said.
“Snacking also takes place in households and during impromptu parties,” he said. “Hormel Gatherings party trays meet the need for any get-together, and this meat, cheese and cracker tray has been doing incredibly well in the marketplace. We’re excited about the innovation that we believe can continue to come in this space. And so, as we think about our performance combined, our pepperoni party trays and Rev product lines have been growing at a rate of 6% since 2013.”
While diversifying the company’s product line may lead to additional growth, it also may insulate Hormel Foods from uncontrollable outside forces that may limit supply and affect earnings. Both the pork and poultry industries, of which Hormel is a significant participant, have been hit hard in the past few years by such animal diseases and PEDv and avian influenza.
“… The last several years have been indicative of some of the risk factors,” Mr. Snee said. “… So something like that in the future certainly could mitigate our ability to hit the top side of the business. But again, we need to focus on the things that we can control, which is that balanced model, which provide us nice offsets to those businesses.”