Ettinger details Hormel's organic acquisition

by Lawrence Aylward
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Applegate Farms Half-Time organic lunch kits
Applegate Farms will operate as a standalone subsidiary in Hormel’s Refrigerated Foods segment.

AUSTIN, Minn. – Hormel Foods Corp. President and CEO Jeffrey Ettinger says the company has long considered ways to build a natural and organic value-added prepared meats category from the ground up. Instead, Hormel went shopping for the segment to add to its business and on Tuesday announced the purchase of Applegate Farms LLC, the No. 1 brand in the natural and organic value-added prepared meats category, for $775 million. Applegate’s annual sales for 2015 are estimated to be approximately $340 million.

“Clearly, with a 25-year head start and deep expertise and credibility in this space, this transaction provides us a much more meaningful position in the natural and organic space,” Ettinger said today during a teleconference detailing the transaction. “The acquisition will provide our refrigerated foods segment an entrance into the high-growth category of premium, natural and organic meats.”

Applegate was founded by Stephen McDonnell, the Bridgewater, NJ-based company’s long-time CEO. McDonnell said it was his mission when he founded the company 28 years ago to change the way how people think about meat. McDonnell will remain as a consultant.

Ettinger said a growing number of consumers want natural and organic products. “Our core motivation is to be where the consumers are,” he added.

Applegate will operate as a standalone subsidiary in Hormel’s Refrigerated Foods segment and its employee base of about 100 will not be affected. Ettinger said Hormel will relocate a few of its employees to Bridgewater to work for the brand.

Applegate has strategic relationships with a diverse set of manufacturers and processors who draw from approximately 1,800 family farms, Ettinger said. “It’s our goal to keep this supply chain intact,” he added.

Since its beginning in 1987, Applegate has experienced “exponential growth,” Ettinger noted. The company has more than 150 products, including hot dogs, bacon and deli meat.

“Both parties believe that together we can provide a faster path to expanded offerings, allowing us to reach more consumers with the Applegate brand,” Ettinger said.

While Applegate is not in foodservice, that could change under Hormel.

“We created our foodservice group 20 years ago. … It has been steadily growing at double-digit rates for a number of years now,” Ettinger said.

Jody Feragen, Hormel’s executive vice president and COO, said the company expects sales generated by Applegate to grow significantly faster than Hormel’s stated company goal of 5 percent topline growth.
The deal, expected to close in 60 days, was financed with cash and debt, Feragen added.

Ettinger said Applegate buyers “can rest assured there will not be any changes to the way Applegate meats are raised and produced.”

“We want to honor the brand and its special connection with consumers,” he said.

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