Hormel Foods is aiming for sales of new products to accelerate from their levels in 2007 to 2012, the chief executive of the US food company has said.
Speaking at the CAGNY analyst conference yesterday (22 February), Hormel chairman, president and CEO, Jeff Ettinger, said having beaten targets to create US$1bn in sales from new products between 2000-2009 by 2007, it has extended its target to $2bn of sales in these products by 2012.
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Ettinger described the company’s balance between financial conservatism and an innovative culture, adding that the “key to Hormel’s success is innovation”.
He said that all products that the company works to develop are “convenient and flavourful”, as well as having some kind of healthy element, although he added that some aspects of the portfolio, like bacon and Spam, will “never have that perception”.
Ettinger stressed that new products need to “look familiar to customers” and that many of its traditional brands, or “legacy brands” as he described them, can be applied to more modern brands. “We are blessed with brands that are well known and have a certain amount of stretch to them,” he said.
One brand the company has extended, is its Hormel brand with the Hormel Pepperoni and Hormel Party Tray. He said that Hormel Pepperoni has been with the company for many years, and it has been able to innovate the brand both through new packaging as well as through gaining a better understanding of how customers use its products.
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By GlobalDataEttinger said that while many use the product on pizzas, others use it as an ingredient and as a snack, so as a result, the company has created pepperoni minis, sticks and other products to cater to these needs.
He also said that the company is expecting hog prices to rise 15-20% this year while grain prices are forecast to rise some 45-50% over this year.
While he announced the first round of pricing actions today, the company is also working to implement cost savings initiatives across the country, to counter concerns that the price rises will not account for increased input costs.
However, Ettinger emphasised that the price rises would not come at the cost of growing the business.
“We try to work in a partnership with the retialer to get the optimal pricing level. Everyone knows that we have a lot of costs to cover, but we need to ultimately address what the consumer desires and needs are. The key barometer for us is whether our items are growing. As we move into a higher and higher cost environment we realise there is a certain unknown around what consumer reaction will be, not just for the most recent price increase, but for the one that’s probably going to be undertaken in the fall.”
Ettinger also suggested that the company is considering acquisitions, particularly in Asia.
“We have the cash and debt capacity to pay for acquisitions, and we would consider an acquisition in Asia if the right deal comes along at the right time and at the right price”
