LONDON — Strategic acquisitions are a key component of Hormel Foods Corp.’s “formula for success,” said James Snee, president and chief executive officer. He said the company’s aperture is wide open.
|James Snee, president and c.e.o. of Hormel|
“As we look for acquisition targets, we are focused on finding companies that are aligned with our growth pillars for being more global, multi-cultural, healthy, holistic and on-the-go,” Mr. Snee said during a presentation at the Consumer Analyst Group of Europe conference on March 21 in London. “We’re also looking for acquisitions that are No. 1 or No. 2 in their respective categories. And clearly we want acquisitions where the margins are accretive, and we want to bring more than just a check to the operation. And ideally we want an acquisition that can support or scale an existing business.”
The Austin, Minn.-based company is seeking opportunities both in the United States and internationally, with a focus on Asia and South America, Mr. Snee said.
“We haven’t done exclusively an international acquisition; we’d love to do that,” he said. “Quite frankly, we haven’t done anything to support our very successful food service business. We’d love to be able to support and scale that in some other areas, because everything they’ve done has been on an organic basis.”
Within the past two years, Hormel acquired Applegate, a manufacturer of natural and organic processed meat and poultry products, and Justin’s, a brand of specialty nut butters. Prior to those transactions, the company bought Cytosport, the maker of Muscle Milk, in 2014 and Skippy, the peanut butter brand, in 2013. These transactions underpin Hormel’s efforts to build a balanced portfolio to protect against economic volatility.
“Our balance sheet is pristine, and so we do have the capacity to do a multibillion dollar deal,” Mr. Snee said. “As we look across the landscape, it is maintaining the discipline that’s allowed us to be so successful in the acquisition and integration, especially some of our recent acquisitions.”
Hormel has zeroed in on six key categories that total nearly $13 billion in retail sales and where the company already has a strong presence today. The categories are ground turkey; protein beverages, bars and powders; nut butters; meat snacks; Mexican sauces, salsas and dips; and natural and organic meats.
“Collectively, these categories are growing at a rate of over 6% over the last five years,” Mr. Snee said. “So, when you do the math, it’s easy to see why we’re so positive about our future in these six categories with our leading brands. And we know that brands need consistent support to help them grow, which is why we’ve increased our advertising expense over the last four years by strong double-digits each year.”
Brand building in these high-growth segments is part of the company’s strategic plan to grow sales by 5% by 2020. Another piece is innovation.
“Innovation is in our DNA, and it is a cornerstone of our company,” Mr. Snee said.
He said the company recently set a goal to generate 15% of its sales from new product launches by 2020.“And the team is working hard toward this goal with innovative new items such as Muscle Milk bars, Justin’s snack packs, Skippy P.B. Bites, Herdez Guacamole Salsa, just to name a few,” he said.