How Hormel Became a Snack Company
Hormel Foods is a company that everyone knows but doesn’t always fully understand as it’s a unique entity in the consumer products world. Whether it’s the company’s surprisingly broad lineup of brands and presence in diverse categories, blended approach to serving food and foodservice retailers, or acquisition strategy, there are a lot of layers to what Hormel is today.
The Austin, Minn.-based company has quietly become a major global branded food company whose annual sales this year will easily surpass $10 billion for the first time. Credit for the milestone goes to the June 2021 acquisition of the Planters snacking business from the Kraft Heinz Co. for an effective purchase price of $2.79 billion. Suddenly, a company known for brands such as Skippy, Spam, Hormel, Columbus, Jennie-O, Natural Choice, Applegate, Justin’s and Herdez, among others, has become an even bigger player in snacking with the addition of one of the world’s most iconic brands.
“We think about where consumers have been and where they are continuing to go, and the snacking space is an area that really hasn’t shown any sign of slowing down,” says Jim Snee, Hormel chairman, president and CEO, regarding the Planters acquisition. “We were pretty well developed in snacking, but didn’t have any one significant brand that really stood out. Planters really affords us that opportunity.”
Planters is a more than $1 billion brand, but there was more to the logic of doing the deal than simply bolting on additional sales volume. The brand helps Hormel balance its portfolio and provides deeper exposure to the snacking category, consistent with living up to the vision of being a global branded food company. However, it’s the ability to turn loose Hormel’s innovation, marketing and consumer insights infrastructure to unlock new possibilities for Planters that has Snee and other senior leaders excited.
“We love that we have this balanced portfolio, and Planters really helped us further achieve balance not only in terms of just our general business segments, but also the center of the store portfolio with the non-meat protein aspect of it,” Snee says. “We saw balancing effects, and we saw the scale that we really, really want to get in the snacking space. But then, as we dug in, the marketing and innovation team looked at it and saw opportunities that made it even more compelling and exciting for us.”
Retailers should be excited, too, given Hormel’s track record of bringing innovation and growth to its brand portfolio, whether acquired or homegrown, and helping drive growth in the categories in which its brands reside. That gives P.J. Connor, Hormel’s group VP and president, consumer products sales, a powerful message to share with retailers thirsting for innovation from CPG companies.
“We’re really good at coming out with a creative innovation when we get our hands on brands,” Connor asserts. “You can see all the things that we’ve done with Skippy, whether it’s Skippy Squeeze, Skippy Protein or Skippy Snacks.”
The same could be said of the Columbus brand, with its unique packaging approaches to make charcuterie more accessible and expand usage occasions, or the recently acquired Sadler’s Smokehouse foodservice brand now gaining retail distribution.
What is “Snealing?”
Recognizing that snacking has morphed into so many occasions, Hormel invented a word for this trend. Connor and others use “snealing,” an odd-sounding mashup of “snacking” and “meals,” to describe Americans’ noshing behavior, a term that Snee jokes has nothing to do with his name.
“Consumers are snacking today more than ever before,” affirms Luis Marconi, group VP of the grocery products division. “It is moving across different consumption occasions, and consumer segments are also evolving. You have the good-for-you snacks, and you have indulgence, you have pragmatic snacking, you have entertaining. There are multiple angles for the occasion. So that is a very rich ground for us as marketers to position our brands.”
Hormel’s brands are well positioned because of the company’s balance between serving food retailers and foodservice operators. The company can serve customers however they choose to engage with Hormel brands. This approach proved effective during the pandemic, because as foodservice demand evaporated, Hormel was able to shift capacity to focus on retail where demand was surging. This also meant that the company didn’t have to tap the brakes on promotional activity the way that some CPGs that were less effective at managing supply chain disruptions had to do.
“One of the key things that we did during the pandemic is we kept the advertising going, because we knew that there was going to be an influx of new consumers joining the franchise,” Marconi explains. “Our strategic choice was to say, when these consumers are joining us, we need to give them ideas. We need to give them recipes. We need to try to keep them as much as possible within the franchise, because those are going to be the consumers that are going to stay with the franchise in the future.”
Consumers gained during the pandemic have stuck with Hormel brands, according to Marconi, especially more diverse consumer segments and Millennials. One example that jumps out for Marconi is the Herdez brand, which he says is the No. 1 salsa brand in Mexico and is becoming the fastest-growing salsa brand in the United States
“We just introduced Herdez brand avocado hot sauce, and it’s been a tremendous success in terms of gaining distribution,” Marconi says. “When consumers in America want to have a truly authentic experience, they don’t want to go and look for imposter-type of concepts. They really want to pick the real one. And Herdez is delivering against that promise.”
The Foodservice Connection
Just as retailers take an omnichannel approach to serving shoppers, Hormel has an “omni-eating” approach, due to its balanced retail and foodservice operations. The go-to-market strategy has been in place for decades, but it really paid dividends during the pandemic.
“As our foodservice businesses were declining, our retail businesses were expanding, and we were able to make those decisions about where we could pivot, and how to pivot both from a plant and labor standpoint, and meet consumers where they wanted food,” notes Deanna Brady, EVP of Hormel’s refrigerated foods group.
In addition to diversifying Hormel’s exposure to how people eat, having a foodservice operation is a great source of menu trend insights as well as operational insights, because items developed for foodservice with an ease-of-preparation mindset can have application in the home, where convenience is also highly valued.
“One of the toughest items to cook and to do it right, and to do it consistently, is bacon,” Brady says. So Hormel launched Bacon One in foodservice in 2014 to solve a major back-of-house challenge for foodservice operators, but at-home cooks have the same problem. “As we’ve continued to build that business at foodservice, we’ve been thinking when and how can we bring this [ease of bacon preparation] proposition into retail?” she muses.
The same philosophy is being applied to the Sadler’s Smokehouse brand, acquired in 2020. Barbecuing may be a national pastime, but the at-home process can be time-consuming, and its results inconsistent.
“Sadler’s was another one of those items where we know people are tired of cooking at home, and that barbecue is one of the hardest and longest things to cook,” Brady observes. “We felt like with where the consumer is at, it would be a really valuable time to launch some restaurant-style craft barbecue items at retail and help solve the dinner dilemma.”
Winning in a Blurry World
Hormel is most often associated with various meats, but the company’s innovation engine, powered by consumer insights and a full-time anthropologist, means that it’s also focused on plant-based and flexitarian options. For example, the company’s pizza topping plants now manufacture plant-based pepperoni and are exploring other options, including sausage. There’s also activity under brands such as Natural Choice and Applegate — the latter a brand whose tagline is “changing the meat we eat” — to introduce animal and plant-based protein blends.
“Most recently, Applegate introduced Well-Carved, lean protein combined with vegetables,” says Brady, noting that the company also offers plant-based options under the Jennie-O brand. “There’s a lot of opportunity there to look for healthier options, but as a dietitian I’ve always said, ‘It’s all about everything in moderation, and you need to teach people how to eat bacon one day, and how to eat a salad with lean protein the next.’”
The concept of blurring, whether it’s in the protein categories or the way Americans shop for and consume food, is a trend that continues to gather momentum. Snee contends that the company’s brand portfolio and food retail and foodservice approach ensures that it’s positioned to win in a world where the consumption of food is the only constant.
“This whole blurring of the channels is only going to continue to happen from our perspective,” he predicts. “We’re channel agnostic because we have different organizations aligned against different parts of the business. What we’re really focused on is the expertise. Whether it is our refrigerated retail marketing team, in-store, in the deli for that prepared food section or the foodservice segment. Our thing is, wherever the consumer is going to show up, we need to be there, we need to understand it, and we need to have the expertise. We feel really good about how we’re positioned.”
