Consumers are becoming more leery of processed foods, yet Spam is still plugging along. Hormel Foods Corp. is even introducing a dried, bite-size snack version of the 78-year-old paragon of processing.
At the same time, Hormel is crossing a new meat frontier — organic and natural — with its recent $775 million purchase of Applegate Farms.
While Spam Snacks is a small bet and Applegate Farms a big one, they represent Hormel's unique position in packaged food, which has kept it mostly free of the industry's malaise. Protein is in high demand from consumers, and the Austin, Minn.-based company specializes in it, from pork and turkey to peanut butter.
Hormel has bolstered its protein offerings by making three big acquisitions in the past three years: Skippy, Applegate and sports drink maker CytoSport. Plus, the company continues to maintain its reputation for coming up with new products, including Spam Snacks and a new peanut butter snack called Skippy P.B. Bites.
"They have probably done a better job than any other food company in reading trends," said Brian Yarbrough, a stock analyst at Edward Jones. "What is hot right now in food is organic and protein."
Protein's power
This year has been marked by a disaster of sorts in Hormel's Jennie-O turkey business. The avian flu that swept across Minnesota in the spring killed 9 million turkeys and chickens, wiping out a big chunk of Jennie-O's bird supply.
But the company is restocking its barns and doesn't expect the bird flu to cause its fiscal-year profits to fall below forecasts.
Despite the turkey woes, Hormel's shares have held up well, outperforming food industry peers this year and over the last five years for that matter.