As consumers’ tastes fragment, Hormel Foods is moving in new directions to build sales and profits.
Hormel Foods is trying very hard not to be grandma’s—or even mom’s—consumer packaged goods company. In fact, officials at the Austin, Minn.-based corporation say they are quickly moving past the days of Spam and Dinty Moore and into a new era that incorporates more flavors and products, not to mention totally new directions in packaging and platforms.
Of course, this is all being done to convert new shoppers to the Hormel label, a strategy that many industry officials feel is absolutely necessary in this day of increased consumer demand and intense competition from a host of sources for shoppers’ dinner plans.
Unlike some of its competitors, Hormel Foods has operated a bit under the radar over the years, quite surprising for a company that has 34 brands ranked either one or two in their respective segments. Now, it seems that the company is making a concerted effort to get the word out that it is a major player in many categories and it is doing all it can to take its image, not to mention sales and profits, to another level.
“Our primary mission is to help grow the categories we are in,” says James Splinter, the company’s group vice president-grocery products. “Innovation is the primary method of growth. We want to offer consumers the right products in the right vehicles. I guess you can say we want to bring our products to market in new ways.”
That is not to say that Spam and Dinty Moore are going away or losing their vaunted spot at this 122 year-old company, which started as a meat packing operation and now markets 47 brands. “We are very proud of our heritage,” says Splinter. “We love Spam and Dinty Moore and what they have done for our company and how they have helped consumers solve their meal needs over the years. Now our job is to develop other products that meet the changing needs of the consumer. We have several new platforms that we think will trigger growth for us.”
What Splinter is talking about is a wide range of items being launched or re-launched by Hormel. They include the purchase of the well-known Skippy peanut butter brand and its 34 SKUs, earlier this year from Unilever, the introduction of the single-serve line of breakfast foods to the Compleats (53 SKUs) line of microwaveable products and even Wholly Guacamole, a line of guacamole dips. Hormel Foods is also putting its mighty resources behind many of its other brands, including a range of ethnic products such as Chi-Chi’s, La Victoria, El Torito and House of Tsang.
Skippy is a great example. Splinter says the company would like to expand Skippy further and build incremental sales from the brand. “Retailers are challenging us today more than ever,” he adds. “Therefore we must have a solid proposition to offer them and know what our role is in these categories. We must position ourselves as being a relevant player in the supermarket industry.”
Splinter and his leadership team, which includes Michael Devine, the vice president-grocery products operations, and Luis Marconi, the vice president of marketing, say that three principles drive the company’s marketing plans. The first is the basic fact that 40% of households earn more than $62,000 annually and these consumers are looking for tasty items that are convenient to prepare for a meal. “Give them great products that can be prepared on the go,” says Splinter.
The second is the generational shift that is taking place throughout the country. As Baby Boomers age and are replaced by Generation X and Yers, not to mention Millennials, the demand for products is changing. The third principle driving the company is the emphasis on the growth of minority populations, specifically Hispanics, and how they are impacting product assortments at retail.
In the end, it all comes down to a simple point. “Protein has an emerging role in nutrition today,” says Marconi. “Our job is to bring real protein to consumers in unique, delicious and convenient ways.”
Adds Splinter: “A key insight we found is how protein drives a lot of consumer behavior now. We are trying to touch on the emotional benefit of protein and how we can best satisfy the needs of consumers. Our products are designed to fit into the changing consumer lifestyles. To give the shopper what she needs is a way that makes it easy to prepare for her family.”
Innovation is also playing a big role in the future of Hormel Foods. Splinter says that the company is focused on offering microwaveable meals, snacking and ethnic products to increase sales. Acquiring products, like the Skippy purchase, is always another option. “If there is a strategic fit, we might be interested,” he adds.
For example, Marconi points to the company’s 50/50 joint venture with Mexico-based Herdez del Fuerte, MegaMex Foods, as a perfect example of the direction of the company. “The vision is to bring the spirit of Mexico to every table,” he says. “Their portfolio is very strong—they have the number one brand of salsa in Mexico. Now, with their help, we have established La Victoria products on the West Coast and Chi-Chi’s products on the East Coast. We see this as a great opportunity to offer an effective portfolio of Mexican foods to the U.S. consumer.”
Devine stresses that Hormel Foods has the manufacturing and distribution capabilities to get the job done. He says that costs are reduced by better communications between divisions as well as the company’s 43 plants scattered throughout the country. He also says opportunities are examined to see where new packaging can be used to increase sales or the image of the product.
To maximize the potential of the company, officials say that they work in strategic collaboration with grocery retailers. “Together we can positively grow this business, especially if retailers give us the opportunity to demonstrate our ability to partner with them,” Splinter says.
In the end, it is all about the consumer, say the officials at Hormel Foods. With consumers demanding new flavors and ingredients, they say that shelf space is needed to meet shopper expectations. “The consumer is the final arbitrator, we have to follow what the consumer wants,” Splinter adds. “That is the ultimate key to success. We know it and we think it shows in our product offerings.”