Meat companies can diversify into non-meat products
Sept. 11, 2013
KANSAS CITY, Mo. – In recent decades, I’ve heard executives at more large-, medium- and small-sized meat and poultry companies say they would like their businesses to begin exporting products or further expand their international businesses as a means to stimulate financial growth. As many of those interested companies have explained, they have gone just about as far as they can on building their domestic businesses and brands.
They see exporting or manufacturing products in other nations as a way to grow their businesses. Any US meat or poultry company that is successfully involved in the global marketplace will tell you exports or operating plants in other nations can add handsomely to an income stream, but that road to potential riches is fraught with numerous major pot holes.
There is another way, but one apparently not many companies are willing to tackle: diversifying your company’s product portfolio by adding non-meat products. This can probably best be done through acquisition vs. building such a business from scratch. Perhaps the most successful of such companies in offering a balanced portfolio of meat and non-meat food products is Austin, Minn.-based Hormel Foods Corp.
Successful industry pioneer George A. Hormel started Hormel Foods Corporation as Geo. A. Hormel & Co.in 1891. The company offered primarily fresh pork products at that time. It has since evolved into a food company offering a wide range of value-added food (meat and non-meat) products.
Hormel’s product portfolio has a long and storied history that was p primarily meat products until recent decades. In 1926, Geo. A. Hormel & Co. developed the world’s first canned ham. In 1929, George’s son, Jay C. Hormel, was named president and became known for creating unusual new products and promotions. In 1935, Jay C. Hormel’s inventive thinking brought about innovative new products such as Dinty Moore beef stew and Hormel chili. In 1937, SPAM luncheon meat was launched and achieved an 18 percent market share within the first year on the market. After World War II: Mary Kitchen roast beef and corned beef hash and Hormel deviled ham were launched.
Throughout the 1950s, the introduction of cellophane packaging revolutionized the food industry. As a result, Geo. A. Hormel & Co. launched 16 new products in 1950 alone, including Hormel skinless frankfurters, Flavor-Saver sliced bacon and link sausage. Hormel Cure 81 ham was introduced in 1963. Fast-forwarding to 1986, Geo. A. Hormel & Co. acquired Jennie-O Foods, the nation’s largest privately-owned turkey processor so the company made its first major move into offering turkey products. During the1990s, Hormel Foods unveiled a number of food products that appealed to consumers’ newly emerging tastes, including Jennie-O Turkey Store spiced and marinated turkey; Hormel Always Tender fresh pork; Hormel microwave bacon; Hormel turkey pepperoni; Hormel turkey chili; Hormel vegetarian chili; and Dinty Moore turkey stew.
Then in 1993, something incredible happened: the company’s name officially changed to Hormel Foods Corporation to more accurately reflect the corporation’s role and industry presence as a diversified, consumer-branded marketer of value-added products. Since then, the company began offering numerous non-meat products through joint ventures and acquisitions.
Such products include:
• Peloponnese brand Greek products range from olives to peppers and grape leaves.
• Wholly Guacamole products. In 2009, Wholly Salsa products were introduced and new flavors have since been added.
• Hormel Country Crock side dishes are sold in the refrigerated meat department. Country Crock is a registered trademark of the Unilever Group of Companies and used under license.
• Herdez salsa.
And then on Jan. 3, 2013, Hormel raised a lot of eyebrows when it announced it was acquiring the Skippy peanut butter business from Unilever United States Inc., of Englewood Cliffs, NJ, for approximately $700 million.
"The acquisition of the Skippy peanut butter business represents a significant opportunity for Hormel Foods. It allows us to grow our branded presence in the center of the store with a non-meat protein product and it reinforces our balanced portfolio," said Jeffrey Ettinger, Hormel’s chairman of the board, president and CEO, at the time of the announcement. "The fast-growing international line will also strengthen our global presence, and should be a useful complement to our sales strategy in China for the SPAM family of products."
Hormel Foods previously demonstrated its interest in complementing its value-added meat portfolio with extensions into such areas as Mexican food and side dishes, Ettinger told industry analysts at that time during a teleconference.
“We’ve talked about wanting to have a balance between packaged products and protein,” he continued. “We’re excited about having the ability to bring on what we think is a good fit in the packaged food space. This enhances our position as a packaged food player in a logical way on the domestic side. We’re also excited about outside the US — $100 million in sales is a 30 percent sales increase through our reported international sales right off the bat and it’s growing at a good clip.”
Diversifying into non-meat products might not be appealing to some or many US meat and poultry companies as a way of stimulating financial growth, but that opportunity is definitely there for those companies that dare to travel down that road.