Stockholders hear of strong Hormel

Published 12:00 am Wednesday, January 31, 2001

Hormel Foods Corp.

Wednesday, January 31, 2001

Hormel Foods Corp. stockholders heard of a strong company at the firm’s annual meeting Tuesday night.

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The Austin-based multinational marketer of consumer-branded meat and food products posted its 35th annual increase in stock dividends, introduced 183 new products to the market last year and made its largest corporate acquisition ever.

Stockholders also heard Joel W. Johnson, Hormel chairman of the board, president and chief executive officer, explain how the Fortune 500 company is working with General Motors in developing the use of an animal protein in the manufacturing of cast metal parts such as automobile engine blocks.

"The foundry industry makes sand molds to cast metal parts for many industries like automotive and aviation," Johnson said during his address to shareholders. "Traditionally, chemicals have been used to bind the sand to these molds. These chemicals are extremely toxic and the sand they bind is not recyclable. This creates a severe pollution solution.

"In 1996, General Motors Research found a solution to the problem. After testing a long list of other binder options, they discovered that the best alternative to these toxic chemicals is collagen, which is an animal protein. Hence, the connection to our industry."

Johnson said that GM determined that Hormel’s pork and turkey slaughtering operations was the best access to the raw materials to produce what it calls GMBOND.

"We agreed to an alliance with them in further research," Johnson said. "We are now installing production equipment and should be selling GMBOND in the near future. Who would have guessed that a food product would be used in the production of your automobile’s engine block?"

On the financial front, Hormel recently announced its intent to increase its stock dividend from 35 cents to 37 cents per share, mirroring a 2-cent increase the previous year.

Through the firm’s stock repurchase program, Hormel acquired 4.3 million shares in 2000 vs. 4.5 million shares in 1999.

"This program returned $75.3 million in 2000 and $87.6 million in 1999 to our shareholders," Johnson said.

In the company’s annual report, Hormel reports net sales of $3.67 billion for 2000, up from $3.35 billion in 1999. Net earnings saw a boost over the year, from $163.43 million in 1999 to $170.21 million in 2000.

During his address to shareholders, Johnson discussed the firm’s plans to continue its growth in 2001.

"Hormel Foods has an impressive portfolio of brands," Johnson said. "We will continue to build that portfolio."

While Hormel Foods introduced 183 new products last year, they were spread across its grocery and meat products, food service, international, Jennie-O and other subsidiary units.

Lone Star Red, a new Hormel Chili brand introduced in November, is flavored with Tabasco pepper sauce, while SPAM also co-branded with Tabasco for a new hot and spicy brand of the 64-year-old luncheon meat.

Also on the SPAM front, SPAM Oven Roasted Turkey was released in the Austin area last year and went national in early September.

"It is intended to not only drive interest among current users of SPAM, but to appeal to more health-conscious young consumers as well," Johnson said.

During a question-and-answer session after the official business portion of the meeting, several shareholders addressed the floor.

Daniel Johnson, an Austin shareholder, commended the board for a good year, adding that he worked at the plant.

"The first quarter seems to be slow," he said to CEO Johnson.

The president noted that during the end of 1999, there was a lot of stockpiling of SPAM for Y2K survival reasons – "for the Armageddon that never happened." Thus, the product had a high volume of sales during November and December 1999.

"You had a very tough comparison to match," he added.