1 Hormel Place
Company Mission: To be a leader in the food field with highly differentiated quality products that attain optimum share of market while meeting established profit objectives.
Quality Policy: We will supply defect-free products and services which conform to clearly defined requirements to meet the needs of our customers, employees, and others we serve.
The five principles of quality management form the foundation of this policy. They are: the definition of quality is conformance to customer requirements; the system of quality is prevention and continuous improvement; the performance standard is zero defects; the measurement of quality is the price of nonconformance; all work is a process.
Hormel Foods Corporation is a diversified producer of packaged-food products, emphasizing quality, convenience, nutrition, and ethnic foods. Hormel has successfully evolved over its more than a century in business from meatpacker to value-added food manufacturer. In addition to its flagship SPAM brand, Hormel also produces and sells products under such brands as Chi-Chi's, Dinty Moore, Dubuque, Farm Fresh, House of Tsang, Jennie-O, Light & Lean 97, Marrakesh Express, Mary Kitchen, Peloponnese, Po River Valley, Top Shelf, and, of course, Hormel.
Meatpacking Business Founded in Late 19th Century
Hormel's history began when the company's founder, George A. Hormel, borrowed $500 in 1887 to form a retail meat market and pork packing business with his partner, Albrect Friedrich. Hormel established a powerful precedent when he refused to be complacent about their early success and pushed ahead with his plans to set up and operate a packing house. He and Friedrich agreed to disband their partnership in September 1891, and in November of that same year Hormel and employee George Petersen had transformed a small, abandoned creamery into a meatpacking plant complete with smokehouse and slaughterhouse, operating under the name George A. Hormel and Company. In addition, he opened the Hormel Provision Market to sell his products; it quickly became the town's largest and most successful retail meat business.
Faced with low profit margins and competition from large meatpackers who could afford state-of-the-art refrigeration facilities, Hormel made expansion his first priority. Within the first few years his two brothers and other members of his family had joined the business, allowing George Hormel to put down his cleaver and devote himself exclusively to management. In 1899 Hormel spent $40,000 to upgrade his facilities, building a new refrigeration facility, new pumps and engines, an electric elevator, smokehouses, and a hog kill. In 1901 the company acquired several acres of adjacent land, and two years later it constructed additional facilities such as a casing processing room and a machine shop. In 1908 it also opened a new office facility, which the company used for more than 60 years.
During this period of expansion Hormel also worked to refine and improve its products. In 1903 it registered its first patent, "Dairy Brand," with the U.S. Patent Office. In 1915 Hormel began to produce several lines of dry sausage, a product that proved particularly popular with ethnic consumers.
In an effort to increase sales volume, Hormel sent salesmen outside of Austin to set up branches and distribution centers. By 1920 the company operated branches in Minneapolis, Duluth, St. Paul, San Antonio, Dallas, Atlanta, Birmingham, and Chicago. In 1905 George Hormel traveled to England to establish the foundation for an export business. Between 1905 and the end of World War I, exports grew to constitute about a third of the company's yearly volume.
Hormel and Company participated fully in America's World War I effort. To control the price and supply of meats, the government regulated the meatpacking industry. Hormel expanded its labor force and the hours they worked to help satisfy the increased demand for meat both at home and abroad. With so many American men, including George Hormel's son Jay, away at war, the company employed women for the first time in its history. In addition to producing meat for the war effort, Hormel employees bought Liberty bonds and donated an hour's wages per day to the Red Cross.
Survived Scandal Following World War I
When Jay Hormel returned from the war, he rejoined the company and uncovered a scandal that very nearly put Hormel out of business. The company's assistant controller, "Cy" Thomson, had embezzled more than $1 million from the company and had channeled it into several poultry farms. The company had borrowed $3 million that year for operating expenses and hoped to repay the sum at the end of the year. At year end, however, they were unable to do so, and George Hormel had to confront his bankers and convince them to extend the loan.
The embezzlement scandal provided George Hormel with additional incentive to fortify his company. He did so by arranging for more reliable capital management, by dismissing unproductive employees, and by continuing to develop new products. In 1926, after years of research, Hormel introduced "Hormel Flavor-Sealed Ham," America's first canned ham.
In 1929 Jay C. Hormel became the company's second president, and his father, George, became chairman of the board. Under the new president the company continued to expand its product line: some of the company's best-known products--Dinty Moore beef stew (1935), Hormel chili (1936), and SPAM luncheon meat (1937)&mdash-tered the market and became extremely popular.
The company survived a bitter labor strike in 1933, during which disgruntled union employees, armed with clubs, physically removed Jay Hormel from the company's general offices and shut off the plant's refrigeration system. The two parties reached a compromise within three days. Soon, the company gained recognition for its innovative labor relations policies. Jay Hormel developed the "Annual Wage Plan," under which employees were paid weekly, their working hours fluctuated according to need; employment was considered permanent and workers were guaranteed a year's notice before they could be terminated. In addition, the company introduced profit sharing, merit pay, a pension plan, and a joint earnings plan. Under this plan, in 1983 Hormel employees received more than $4 million.
During his tenure Jay Hormel cofounded the Hormel Foundation, which controlled the company through holdings of its capital stock, and which served "religious, charitable, scientific, literary, or educational purposes." This foundation funds the Hormel Institute, a research facility located at the University of Minnesota which conducts highly respected research on fats and other lipids and how they affect human life.
SPAM Became Staple During World War II
During World War II, Hormel and Company became a "war facility" and once again increased its meat production. By 1945 Hormel was selling 65 percent of its total production to the U.S. Government. SPAM, Hormel's canned spiced ham and ground pork product, became the staple of U.S. servicemen throughout the world; in 1941 Hormel was producing 15 million cans a week, and the government was distributing it under the lend-lease program. Overfamiliarity bred substantial contempt and ridicule during and after the war, but the product demonstrated uncanny resilience: by 1959, Hormel had sold over 1 billion cans of SPAM.
When George Hormel died in 1946, Jay Hormel took his place as chairman of the board of directors and H. H. Corey became Hormel's third president. During the eight years of his presidency, the company continued to renovate and upgrade its existing plants and acquire new facilities. It purchased several new packing operations--in Mitchell, South Dakota; Fort Dodge, Iowa; and Fremont, Nebraska. With the wartime restrictions on tin now lifted and with a tremendous demand for Hormel's canned meat products, the company improved its canning facilities in its Dallas and Houston plants and arranged for independent canning companies to manufacture Hormel products. In addition, Hormel made a concerted effort to make better use of its raw material, and in 1947 the company began to produce gelatin from pork skins.
Hormel's product line expanded along with the company's facilities. Mary Kitchen Roast Beef Hash, Corned Beef Hash, and Spaghetti and Beef in Sauce appeared in 1949, along with a new line of meat spreads.
With its constant expansion, the company had to consider how to dispose of its increased waste material. Hormel researchers developed an anaerobic digestive system that removed waste cleanly and efficiently. In 1946 the company financed a $2.25 million sewage system that it shared with the Austin community.
In 1954 Jay Hormel died, and Corey assumed his chair on the board of directors, while R. F. Gray succeeded Corey as president. He held this position for ten years, during which the company continued to pursue quality and efficiency. Hormel added several more slaughtering, processing, and packing facilities throughout the country, and in 1965 it added a new 75,000-square-foot, automated sausage manufacturing building to its Austin plant.
Several new products appeared in this decade as well. In 1960 the company introduced its "Famous Foods of the World" line. The following year Little Sizzlers' sausage entered the market, followed two years later by a fully-cooked sausage product, Brown'n Serve. The largest success of the decade, however, was the Hormel Cure 81 Ham, a skinless, boneless, trim, cured ham with the shank removed.
After another decade of progressive growth under two different presidents, M. B. Thompson and I. J. Holton, the directors realized that in order to remain competitive in the industry, Hormel needed to undertake a wholesale renovation of its Austin plant. In 1975 the company began planning this $100 million, state-of-the-art facility, which opened in 1982. At more than a million square feet, it was among the largest and most productive in the industry, and featured robotic technology and automatic ham deboners. Hormel continued to diversify its product lines as well, introducing precooked bacon and three new varieties of Perma Fresh luncheon meats. By 1980 Hormel was producing over 700 different products.
Bitter Strike and Move Away from Meatpacking in the 1980s
Though this new facility was capable of processing more than two million hogs a year and producing more than 200 million pounds of products annually, the industry began to shrink in the 1980s and Hormel began to feel the effects. In the 1980s consumers began to eat less meat and meat producers for the first time had to struggle to make their products appealing. With a 40 percent increase in the price of hogs, Hormel was pinched. It asked employees to accept wage cuts in Austin of more than $2 an hour. In 1985, the union decided to strike. Fifteen hundred workers left their jobs. Under the glare of national publicity, striking workers harassed the 700 scabs whom Hormel hired five months later. Five hundred union workers eventually returned to work--under lower pay scales--but the others were either dismissed or were forced into early retirement.
The wounds from this bitter strike were slow to heal, but Hormel moved ahead, and under president, chairman, and CEO Richard L. Knowlton (who had accepted a $236,000 raise in the midst of the strike), it adjusted to a rapidly changing market by moving away from the traditional meatpacking business and its many problems and concentrating on satisfying consumers' appetites for processed foods.
In an 18-month period in the late 1980s, Hormel introduced 134 new products, including Top Shelf vacuum-packed unrefrigerated meals with a shelf life of 18 months. Knowlton considered this "one of the most important products ever introduced by Hormel. It represents a revolutionary breakthrough in packaging technology and offers consumers a new level of convenience." After acquiring Jennie-O Foods, a turkey-processing company, in late 1986, Hormel went on to acquire a small producer of fresh marinated chicken-breast entrees in 1988 and targeted its fish operations for expansion in an effort to exploit the more health-conscious market. With these new and acquired products, Hormel overcame a period of sluggish sales and earnings between 1979 and 1984 to record net earnings of $60.1 million in 1988, up from $29.4 million in 1984.
Focus on Healthful, Convenient, Ethnic Foods in the 1990s
In the 1990s, Hormel worked hard to react quickly to consumers' increasing appetite for more healthful and more convenient foods as well as ethnic foods. It did so by seeking out targeted acquisitions and through new products and line extensions. The company also sought out additional opportunities for international expansion.
Hormel's continuing move away from meatpacking and toward value-added food production was highlighted by the 1992 appointment of Joel W. Johnson as president. Johnson became the first president not to have risen through the Hormel ranks, having been hired away from rival Kraft General Foods. Johnson added the CEO title in 1993, then became chairman of the Hormel board as well upon Knowlton's retirement in 1995.
In 1991 Hormel celebrated 100 years in business. The following year, the three grandsons of George Hormel--George Hormel II, James Hormel, and Thomas Hormel--who held control of the company through the Hormel Foundation, filed suit to attempt to force the foundation to diversify its holdings, which consisted almost entirely of Hormel stock. After an initially favorable ruling, the Hormel heirs eventually lost the suit in 1994. By 1996, the company's decision to repurchase as many as 5 million shares of Hormel stock was destined to further increase the foundation's Hormel holdings, possibly setting the stage for future litigation.
Meanwhile, in 1993 the company's own diversification efforts precipitated the first name change in company history: George A. Hormel and Company became Hormel Foods Corporation, a name more reflective of Hormel's food products orientation of the 1980s and 1990s. At the same time, however, the company did not abandon long-time mainstays such as SPAM. Johnson was credited with reviving SPAM sales by repositioning the canned pork mix as a quick and easy base for a "SPAMburger." He called it the "only hamburger made out of ham." The SPAM line was also successfully expanded with low-sodium and light extensions. In 1993 SPAM maintained a stunning 80 percent market share of its sales category.
Hormel aggressively went after the leaner food products category in the early 1990s. In 1992 the company introduced Light & Lean 97 hot dogs, which were 97 percent fat free and were praised for their taste by the likes of Eaters Digest, a consumer magazine. Additional Light & Lean 97 products were soon introduced, including all-beef hot dogs, boneless ham, turkey breasts, smoked sausages, and packaged luncheon meats.
The ethnic foods category was an area targeted for expansion in the 1990s primarily through acquisitions. In 1992 the House of Tsang and Oriental Deli brands were acquired, with Dubuque meats and Herb-Ox instant broths and seasonings added the following year. In mid-1995, Hormel purchased from Rockridge Trading Company the Peloponnese brand, a line of Mediterranean-based specialty foods including olives, olive oil, peppers, stuffed grape leaves, and salad dressings. Later that same year, the assets of Melting Pot Foods were acquired, which featured Po River Valley risotto rice, Marrakesh Express couscous, and Terrazza pasta and beans.
Another acquisition--that of American Institutional Products, Inc. (AIP) in 1994--brought Hormel a presence in the distribution of food products to hospitals, nursing homes, and other health care facilities. AIP made instant food thickeners and pureed food products.
Hormel also spent heavily to add to and upgrade its facilities in the early to mid-1990s. In 1993 it bought from Rochelle Foods a 1.8-million head hog processing plant located in Rochelle, Illinois, then spent $4 million in renovating the site. Hormel also spent $15 million to upgrade its Davenport, Iowa, gelatin/proteins plant, and $20 million to expand and renovate its Fremont, Nebraska, hog processing plant. In 1995 alone, the company spent $97.18 million in capital additions and improvements, the most ever in company history. Meanwhile, in fiscal 1994, Hormel Foods exceeded the $3 billion revenue level for the first time.
Mid-1990s and Beyond
A couple of lawsuits involving Hormel made headlines in 1995. Hormel sued Jim Henson Productions over a wild boar named Spa'am that appeared in the movie Muppet Treasure Island. Although Hormel contended the character tarnished its SPAM trademark, a circuit judge rejected the argument and said it was legitimate satire. Hormel settled a more serious case out of court when it agreed to pay $7.5 million to settle a class-action suit brought by fish distributors and processors who claimed that Hormel's Farm Fresh Catfish Company and six other catfish wholesalers conspired to fix prices for nearly a decade. While some of the smaller defendants had admitted guilt, neither Hormel nor the other major defendants--ConAgra Inc. and Delta Pride Catfish Inc.&mdashmitted responsibility.
In the mid-1990s, Hormel increasingly looked overseas for growth opportunities, and often turned to joint ventures to pursue foreign revenue as well as domestic sales. After opening sales offices in Hong Kong and Mexico earlier in 1994, Hormel in December of that year joined with Beijing Agriculture Industry and Commerce to form Beijing Hormel Foods Co. This venture began constructing a hog processing plant in 1996 to be completed in 1997, which will be able to process 300,000 hogs each year and produce pork products under the Hormel brand for sale in China. In Mexico, Hormel Alimentos S.A., a joint venture with Grupo Herdez S.A. of Mexico, was formed in 1995 to market U.S.-manufactured Hormel products in Mexico. Another 1995 joint venture was with Darling Downs Bacon Cooperative Association Limited of Australia.
The following year saw additional joint ventures. In January 1996 Hormel and the U.K.-based Patak Spices Ltd. formed Patak's Foods USA to import and market Indian sauces, pastes, pickles, and chutneys in the United States. In July Hormel and Grupo Herdez formed a second joint venture--Herdez Corp.--which will distribute Mexican foods products in the United States. Then in December Hormel spent $64.3 million to purchase a 21.4 percent interest in Campofrio Alimentacion, S.A., a Spanish food company based in Madrid. All of these 1996 activities expanded Hormel's already extensive presence in the ethnic foods category.
Although Hormel Foods continued to suffer in the mid-1990s from the adverse affects of its still heavy reliance on pork as raw material for its products, the company overall was stronger than ever. In 1995 Hormel posted its 11th straight year of increased net earnings. More importantly, Hormel's profitability continued to grow, reaching nearly 4 percent in 1995, almost double the levels of the mid-1980s. It was clear that Hormel's diversification was paying off and boded well for the future. The company also maintained a very low debt load, positioning it to continue to make targeted acquisitions or perhaps even make a blockbuster deal that would break it free of its traditional conservative style.
Principal Subsidiaries: Dan's Prize, Inc.; Dubuque Foods, Inc.; Farm Fresh Catfish Company; Hormel Foods International Corporation; Jennie-O Foods, Inc.; Beijing Hormel Foods Co. Ltd. (China); Hormel Alimentos, S.A. de C.V. (Mexico); Campofrio Alimentacion, S.A. (Spain; 21.4%).
Principal Divisions: Meat Products Division; Deli Division; Grocery Products Division; Frozen Foods Division; Specialty Products Division.
Principal Operating Units: Meat Products Group; Foodservice Group; Prepared Foods Group.
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