Hormel Foods Named 2008 Food Processor of the Year

Despite the financial turmoil of recent months, the company announced it will pay its 322nd consecutive quarterly dividend on Feb. 15, 2009. Hormel reported a respectable profit and both volume and sales increases in its fiscal 2008, which ended Oct. 26. Four of the company’s five business units had earnings above a year ago – Jennie-O Turkey Store suffered through higher feed and fuel input costs that it was unable to offset with increased pricing.

Total operating profits for all of its business segments were up 6 percent from a year ago, but net earnings for the year were $285.5 million, compared with $302 million last year, and sales were up 9 percent from 2007’s $6.2 billion.

At a time when America is hunkering down, looking for value and simple wholesomeness, we couldn’t think of a more suitable Processor of the Year.

The history

Meat processing always has been at the core of Hormel. After working in Chicago’s storied meat packing industry, George Hormel and a partner opened a butcher shop and packing house in Austin, Minn., in 1887. Four years later, he was on his own and Geo. A. Hormel & Co. began.

The innovations began almost immediately. “Originate, don’t imitate” became one of George Hormel’s favorite dictums. In 1895, the company “invented” Canadian bacon. In 1926 came the world’s first canned ham. A year later whole chicken and spiced ham were added.

But it was under the guidance of son Jay Hormel that innovative products – and long-living brands – really began to flow. In the midst of the Great Depression (1935) Hormel-brand canned chili and Dinty Moore beef stew were introduced. SPAM arrived in 1937 and achieved an 18 percent market share in its first year.

There were a number of other product innovations over the years: Brown ’n Serve precooked sausages and Cure 81 ham (1963).

There also was expansion. First came plants across America, then in 1955, SPAM luncheon meat was made in Ireland (through a licensing deal). Hormel International Corp., established in 1967, is a wholly owned subsidiary that manages six joint ventures, four licensees and one wholly owned subsidiary in the Americas, Asia-Pacific, China and Europe.

A milestone came in 1982 with the opening of a new Austin flagship plant. With 1.3 million square feet under one roof, it claims to be the world’s largest vertically integrated meat processing plant. It starts with hog harvesting (it processes 19,000 hogs per day) and makes everything from SPAM to precooked bacon to pepperoni. 

While Hormel  wasn’t acquisitive in its first 100 years, that changed with the 1986 purchase of Jennie-O Foods Inc., Willmar, Minn., which was the time the largest privately owned processor of turkeys in the country at the time, In 2001, the company made its largest acquisition to date with the purchase of The Turkey Store. Jennie-O Foods and The Turkey Store were merged to create Jennie-O Turkey Store.

The 1980s were a pivotal decade for the company, as it transformed itself from a meat packer processing commodities to a branded product marketer, which still relies on the strength of its own manufacturing. More recently, Hormel has developed a portfolio of healthier food options with its Natural Choice products and green-label Hormel Compleats.

The culture

One of the first things you notice in a visit to the Austin headquarters is the longevity of the employees. Company officials figure more than 15 percent of the employees have worked for the company more than 20 years.

“The company has long prided itself on the tenure of its employees, its financial conservatism and its innovation,” says Ettinger. He says the tenure pays off in dedication, institutional memory and continuity. Continuity starts at the top: In its 117-year history Hormel has had just nine presidents.

One thing that keeps people interested is the ability to move within the company to different positions — as we mentioned at the start of this article. Another motivator: 100 stock options were given to every full-time employee of the company in 2007, “to unite the … team with one focus and align their interest with that of the shareholders,” says the chairman.

Innovation and conservatism also are themes that run throughout this company. They are not contradictory concepts at Hormel. If anything, they combine to put the emphasis on homegrown products and line extensions.

“New products are nurtured, but we try to be prudent in years one and two,” Ettinger says. “But once we see the hint of momentum, we make the investment.”

Hormel can afford some patience. While it’s a publicly held company, the Hormel Foundation owns 46 percent of the company’s stock (ownership through the trust as well as the foundation), which provides some cushion from the whims of Wall Street.