Opportunities on the horizon
With only 5% of Hormel’s sales coming from markets outside the United States, management is keen to expand internationally.
“ … We need to find a way to create this U.S. model globally, and we want to find No. 1 or No. 2 brands,” Mr. Snee said. “… We know food service, we know retail, and we would prefer not to have vertical integration. Live production is not something that I’m necessarily interested in all parts of the world as I look to reduce volatility…”
Larry L. Vorpahl, president of Hormel Foods International, said international sales growth will come from the export of Hormel-branded products around the world and strategic acquisitions.
|Larry Vorpahl, president of Hormel Foods International|
“Over the past few years, we’ve made some significant capital investments to grow our business in China,” he said. “The acquisition of the Skippy brand brought with it the Weifang (China) plant, which is allowing us to increase our distribution all across Asia. The new Jiaxing (China) plant will significantly increase our production capacity for refrigerated products, both retail and food service as well as allow for the production of Spam luncheon meat to be sold both in China, and in the long term export it to other Asian countries.
“We will use the model we’ve built successfully in China to expand to other countries, other countries in Asia, Brazil and South Africa. We’re constantly on the lookout for acquisition opportunities that we can use not only to establish a foothold in that country with an established brand but also to gain additional distribution on the current portfolio of Hormel brands that we have today.”
|James Sheehan, c.f.o. of Hormel Foods|
James N. Sheehan, chief financial officer, said Hormel Foods will maintain its investment grade and that he believes the company can carry $3 billion to $4 billion of debt that may come from an acquisition.
“That would be the range that we feel we — depending on the target and depending on the target’s cash flow — where we could maintain that investment grade,” he said.