News Feature | December 2, 2013

Hormel Boasts Big Profits In Q4 Driven By Skippy

Source: Food Online
Sam Lewis

By Sam Lewis

Lowered animal feed costs also benefit the manufacturer of packaged meats

Famous for products like Spam, Dinty Moore stew, and its namesake chili, Hormel released its 2013 fourth-quarter earnings report on Nov. 26. The packaged food company posted big net earnings for the quarter, keeping the company’s full year on track with analysts’ expectations.

For the quarter ending on Oct 27, Hormel is reporting a profit of $157.3 million, up 19% from 2012’s Q4 earnings of $132.6 million. Revenue for the company is also up in Q4, rising over analysts’ forecasts to $2.32 billion, up more than 7 percent from last year’s $2.17 billion. The biggest contributor to the company’s revenue, refrigerated-foods, had sales climb more than 4 percent in the quarter.

Grocery-product sales were also a major contributor to Hormel’s big fourth-quarter. Skippy — which the company bought from Unilever for $700 million earlier this year — played a big role in raising revenue 23 percent and profit 17 percent for the quarter. Skippy has been distributed more widely in the U.S. throughout 2013 and Hormel expects sales of Skippy products to continue to grow in 2014 when the company launches the peanut butter’s first ad campaign in more than 10 years. “The mission in 2014, frankly, on the domestic side is rejuvenating the brand with the Skippy consumer,” says Hormel CEO Jeffrey Ettinger.

Hormel is also expecting continued growth in both profits and revenue in 2014 in its packaged-meats segment. This is in part due to the falling price of animal feed. The harvest of 2013 was plentiful, allowing the price of corn — a primary ingredient in the food of cows, pigs, chickens, and turkeys — to fall sharply with decreased demand. Fueling the anticipated growth, Hormel will increase its advertising budget on its Jennie-O brand, which includes turkeys, turkey burgers, and bratwursts. “Our balanced model continues to smooth out volatility in our earnings stream,” says Ettinger. “We believe our strong brands in niche categories and our focus on innovation to deliver products valued by consumers put us in a position to deliver strong results for years to come.”

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