Hormel Foods: Acquisitions Prove Palatable

Hormel Foods Corp. continues to grow its business and share profits with employees.

People do like Spam. The proof is in the profits at Hormel Foods Corp. -- one of IndustryWeek's IW 50 Best Manufacturing Companies in 2005.

Indeed, fiscal fourth-quarter net earnings climbed 17% to $81.7 million on a strong turkey meat market, lower feed costs and improved production, according to a Nov. 23 press release.

The multinational marketer of consumer-branded meat and food products, including Spam and Dinty Moore beef stews, also reported a revenue increase of 10%. The rise in revenue was largely due to the Austin, Minn.-based company's many acquisitions.

In January 2005 Hormel bought Arriba Foods Inc., a Mexican food products manufacturer, for $47 million in cash.

Hormel Foods Corp.
At A Glance


Hormel Foods Corp.
Austin, Minn.
Primary Industry: Food
Number of employees: 15,600
2004 In Review
Revenue: $4.8 billion
Profit Margin: 4.6%
Sales Turnover: 1.9
Inventory Turnover: 8.8
Revenue Growth: 13.8%
Return On Assets: 9.7%
Return On Equity: 18.5%
"Arriba Foods offers an impressive array of high-quality products that will be immediately accretive to our Grocery Products business segment," said Joel W. Johnson, CEO of Hormel, in a Jan. 31, 2005, press release. "These products will further strengthen our growing presence in the ethnic products category."

Hormel then acquired privately held Mark-Lynn Foods Inc., a manufacturer and distributor of foodservice items that include salt and pepper packets, ketchup, mustard, creamer and sugar packets. The March 2005 acquisition cost Hormel approximately $42.5 million.

"Mark-Lynn foods has a well-established capacity to produce multiple lines of dry and wet products, which is an excellent fit with our existing Specialty Foods manufacturing operations," said Johnson in a March 30, 2005, press release.

The company also bought Lloyd's Barbeque Co. from General Mills in April 2005.

Hormel has a long track record for acquiring perfect-fit companies. Its 1986 acquisition of Jennie-O Foods, a privately owned turkey processor, proved to be a profitable undertaking. The Jennie-O subsidiary is the leading turkey processor in the United States.

With great success comes appreciation for employees.

According to the company, Hormel foods announced the largest profit sharing distribution ever made to its employees. More than $15 million -- the equivalent of 2.7 weeks of base salary pay on average -- was distributed to eligible hourly and salaried employees the day before Thanksgiving. The Thanksgiving Eve tradition started in 1938.

"Our work force is the foundation upon which the success of Hormel Foods has been built," said Johnson in a Nov. 23 press release. "It is a privilege to continue this 67-year tradition, which speaks to our partnership with those employees and underscores our recognition of the essential role they play in shaping our future."

In addition to the pre-Thanksgiving bonuses, Hormel announced its 39th consecutive annual dividend increase.

According to a Nov. 21 press release, the annual dividend on the common stock was raised to 56 cents per share from 52 cents per share -- an 8% increase. The dividend will be paid on Feb. 15, 2006, and represents the 310th consecutive quarterly dividend paid by the company. If you do the math, that means the company, which was founded in 1891 and went public in 1928, has paid a regular quarterly dividend without interruption since becoming a public company.

Speaking of 2006, Jan. 1 will mark a new era for Hormel when Johnson retires as CEO. Johnson was elected CEO in 1993 and became chairman of the board in 1995. He will remain chairman after Jeffrey M. Ettinger -- Hormel's president and COO -- is named the ninth CEO of Hormel.

"I am fortunate to inherit such a strong company with a rich heritage and tradition," said Ettinger in a Sept. 27, 2005, press release. "I admire and respect Joel Johnson and his successful track record, and I greatly appreciate his leadership, mentorship and friendship. In the future, my role will be to build on the many strengths of Hormel Foods, identifying new ways to continue our strong growth by meeting the ever-changing needs of our consumers."

A unique way Hormel has catered to its consumers changing needs is via its Spam Museum.

"Just as every Elvis fan longs to visit Graceland, Spam fans worldwide now have their own pilgrimage to make," notes promotional material for the 16,500-square-foot museum located in Austin, Minn. The Museum was opened in 2001.

Another tongue-in-cheek Spam promotion honors Monty Python's SPAMALOT musical. Hormel introduced a limited-edition flavor: Spam golden honey grail in a SPAMALOT collector's edition can.

"Spam products have been spoofed by the Monty Python comedy team for decades," said Nick Meyer, senior product manager, Hormel Foods. ". . . [W]e are pleased to offer this special collector's edition can and Spam golden honey grail to consumers."


Interested in information related to this topic? Subscribe to our weekly Leadership Insights From The IW 50 eNewsletter.

Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish