Hormel focused on cost control, growing key brands in 2009

Published 7:06 am Wednesday, January 27, 2010

Hormel Foods Corp. held the company’s annual stockholders meeting at 8 p.m. last night in Austin High School Knowlton Auditorium.

The main theme of the presentation was “Responsible Results.” Jeffrey Ettinger, CEO and president, spoke about the company’s 2009 fiscal year and goals for 2010.

“We’re pleased we had an excellent year in 2009 in growing our products and growing our earnings for our shareholders,” Ettinger said.

Ettinger said Hormel focused on cost control and growing the company’s key brands in 2009. Despite a dip in sales, Hormel reported record earnings last year.

“2009 turned out to be a record year for the company,” Ettinger said. “And given the recession we were confronting, we’re really proud of our team for delivering.”

Ettinger said the company showed improvement over the course of the decade. While sales totals at the start of the decade were about $3 billion a year, they were about $6.53 billion at the end of year. Stock prices started the decade around $20 and has recently been around $38, he said.

While sales growth was up in 2008, Ettinger said Hormel had their third down year from an earnings standpoint. The company also saw significant cost pressures and investment losses at the end of 2008. The company’s focus for 2009 was to deliver bottom line results for shareholders, he said.

Hormel’s grocery products improved earnings by about 9 percent, refrigerated foods improved earnings by about 7 percent, and Jennie-O Turkey Store showed an increase of about 11 percent in earnings, Ettinger said.

Specialty foods and international foods were flat in 2009, he said.

“We wanted to continue to emphasize innovation in our company and to push aggressively for growth, but we recognized the unique recessionary environment, we needed to make sure we preserved and protected our 118-year old company and emerge out of the tunnel on the other end stronger than ever,” Ettinger said.

Jobs

Hormel avoided layoffs in Austin, but Ettinger said the company analyzed all vacant position before they’d be filled. Hormel has about 19,000 employees nationwide, and Ettinger said about 300 seasonal jobs were affected in 2009 nationwide. All but 30 returned to full-time positions, he said.

Ettinger described Austin as still being Hormel’s “corporate hub.” Hormel’s corporate payroll shrunk by about 20 people in 2009 as Hormel was in what Ettinger described as a protective mode where the company didn’t fill open positions. Typically, corporate jobs grow by 40 to 50 positions, and Ettinger said that growth could return in 2010.

Hormel Foods opened a plant in Dubuque, Iowa, yesterday. Currently the Hormel Compleats line is being manufactured in the Dubuque plant. About 80 employees are currently working at the plant, and that number could rise to about 200 employees by the end of the year, Ettinger said.

The plant, which is the first new plant Hormel has built in some time, will produce products for Hormel’s grocery line, Ettinger said.

“It’s going to be a nice facility to have to allow us to continue to grow,” he said.

2010

One of Hormel’s key goals in 2010 will be to increase the company’s sales numbers.

“We really want to restore momentum in sales,” Ettinger said.

One way to do that will be through increased advertising. While advertising remained steady in 2009, Ettinger said Hormel was able to get more for their money as the price of advertising dropped.

Hormel plans to increase ad spending in 2010 by about 10 percent. The company premiered new commercials during the meeting, including a commercial that will air in Japan and a commercial to stress health and wellness with Jennie-O Turkey Store products.

Hormel will focus advertising on Spam, Jennie-O Turkey, and a campaign on the overall Hormel Brand.

Another factor that could drive 2010 growth is the acquisition of Country Crock refrigerated side dishes. The deal, which Ettinger said will likely be finalized within a few weeks, will add a new array of items to Hormel’s portfolio.

“We think we can become a major player in side dishes,” Ettinger said.

Acquisitions

Hormel announced MegaMex Foods in June, and Ettinger said the company is looking to use that venture as a way to expand in that area. MegaMex products will include things like tortilla, salsas and more traditional Mexican foods.

“We’ve been involved in Mexican Food for many years, but we’re really in a position to be now a leader in that category,” Ettinger said. “We have numerous great brands. It’s still very popular in this country both with traditional consumers and with lovers of authentic Mexican Food.”

Hormel has bought about 10 to 12 businesses during the decade.

“Our batting average isn’t perfect, but it’s better than many in the corporate world,” Ettinger said.

Ettinger said Hormel currently has no new business acquisitions to announce at this time. However, he said Hormel has the means for future acquisitions because the company has low debt.

Animal welfare

Lindsay Wright, a spokeswoman for People for the Ethical Treatment of Animals spoke on behalf of the animal rights organization about allegations concerning animal abuse at farms that provide hogs to Hormel.

These allegations stemmed from a PETA undercover investigation in 2008.

Wright requested that Hormel pass a resolution that would include things like requiring all company firms to ban electric shock devices, installing cameras in all animal areas and implementing annual audits to ensure the company is following animal welfare standards.

“Making these animal welfare improvements mandatory for all supplier firms will go a long way in ensuring that this type of reputation damaging incident will never happen again and will allow Hormel to show its customers and consumers that the company takes Animal welfare seriously,” Wright said.

Ettinger responded by saying that hogs involved in the alleged 2008 incident did end up at the Hormel plant. However, he said the farm was not owned by Hormel, and the employees in question did not work for the company either. He also said Hormel takes steps to ensure animal welfare.

PETA’s request was denied by the shareholders.

Strike

One person spoke about the 1985 Hormel strike, and said that this will be the 25th year since the incident. The man spoke about the 50 people who still haven’t gotten their jobs back.

“We’re still seeking justice,” the man said.

He said he wished the Hormel family had been involved in the company because there wouldn’t have been a strike.

The man ended by repeating the phrase “no retreat, no surrender” three times.

Ettinger said the board must weigh the interest of numerous shareholders, and he said he’s confident the board did what was necessary to make decisions at the time of the strike.

2011

Hormel’s 2011 annual meeting will be held six days later than the usual meeting date, on Monday, Jan. 31, in order to provide extra time for the financial statement of the 53-week fiscal 2010 year.