Speaker 1: This is Bloomberg Business Week with Carol Masser and Bloomberg
Speaker 1: Quick Takes Tim Stinovic on Bloomberg Radio. Well, it's a
Speaker 1: company whose brands you definitely know Spam, Skippy, Hormel, Deli
Speaker 1: meets h and Chili Applegate and most recently Planters thanks
Speaker 1: to an acquisition. And it came out this morning with
Speaker 1: its latest quarterly update both profit and revenues topping Alice's estimates,
Speaker 1: and it did send Tim the stock higher. Joining us
Speaker 1: with more on the business and outlook is Hormel Chairman,
Speaker 1: CEO and President Jim Sunee. He's on the phone. He
Speaker 1: is in Minnesota, So Jim, nice to have you here
Speaker 1: with us. How are you. I'm doing really well, Carol,
Speaker 1: thanks for having me on today. Yet weather cold? How
Speaker 1: are you guys doing well? I'll tell you what We're
Speaker 1: used to this unlike some other parts of the country,
Speaker 1: so we we were always cold this time of year.
Speaker 1: But I think we know how to manage it. Yeah,
Speaker 1: you guys definitely do well. Listen, you investors seem to
Speaker 1: be responding to how you guys are managing the company,
Speaker 1: responding favorably after your latest quarter. Um, tell us about
Speaker 1: what's been driving momentum. It was really a strong first
Speaker 1: quarter for us, so a great way to start our
Speaker 1: fiscal um actually record sales in the quarter, and it
Speaker 1: was across all four of our businesses, and we haven't
Speaker 1: seen that kind of sales growth since two thousand and sixteen. So,
Speaker 1: I mean, as you can imagine, you know, continued strong
Speaker 1: retail sales are international business continues to be really really positive. Um.
Speaker 1: We're starting to see some signs of recovery in our
Speaker 1: food service business. That's really the part over the last
Speaker 1: year that you know, early in the pandemic, we saw
Speaker 1: food service restaurants, hotels, their business you know, collapse. But now,
Speaker 1: as you know, more states are opening up, vaccines more
Speaker 1: widely distributed, we are starting to see some signs of recovery.
Speaker 1: So that's that's got us really optimistic for the balance
Speaker 1: of the year. He Jim. I'm really eager to get
Speaker 1: more color into the decision to buy Planters from Kraft Times.
Speaker 1: It was announced earlier this month UM three point three
Speaker 1: five billion dollars UH. It includes corn nuts UH and
Speaker 1: some other brands as well. The effective purchase price about
Speaker 1: two point seven nine billion dollars. Why is this a
Speaker 1: good fit for Hormel. It's about Mr Peanut though, let's
Speaker 1: just lay it out there. It's about Mr Peanuts. Everyone
Speaker 1: knows Mr Peanut. Sorry, go ahead, Uh Spam s Fami
Speaker 1: needed a friend or Stiffy needed a friend? Um, you know, actually, Tenda,
Speaker 1: it's a great question. But this is a business that
Speaker 1: fits in our portfolio so perfectly. I mean, it starts
Speaker 1: with it. It's an iconic brand. So when you think
Speaker 1: about the brands and Carol you mentioned a whole bunch
Speaker 1: of them at the top. You know, our brands are
Speaker 1: so well known, so well recognized, and we know how
Speaker 1: to manage brands. Were great stewards of brands, and so Spam,
Speaker 1: Skippy and now Planters, as you know, they've been around
Speaker 1: for a long time. We know how to nurture them.
Speaker 1: Planters happens to be in a very very attractive category
Speaker 1: for us to snacking category, and so we've already got
Speaker 1: a pretty well developed snacking business, but it's across all
Speaker 1: parts of the company. Um, this is really an opportunity
Speaker 1: for us to focus in in the snack nuts. And
Speaker 1: if you think about how much it makes sense when
Speaker 1: you think about the Skippy business, we have the Justine's
Speaker 1: business we have. This is just a natural evolution of
Speaker 1: of that portfolio. The other thing that it does for
Speaker 1: us is, you know, over time, we've been very intentional
Speaker 1: about being less and less of a commodity meat company,
Speaker 1: and some of the acquisitions we've made over over the
Speaker 1: last several years have really moved us further down that path.
Speaker 1: And so this is this is just another step. And
Speaker 1: you know what's even more exciting is by far, it's
Speaker 1: the largest acquisition our our company has ever made. So
Speaker 1: as as I've been telling our team all week, you know,
Speaker 1: there's a lot to love about this business and we're
Speaker 1: just we're really excited to get to work on it.
Speaker 1: Hopefully that will be some time in May. Now, I
Speaker 1: know that you expect to see synergies of between fifty
Speaker 1: and sixty million dollars a year. A year, by million dollars,
Speaker 1: I should say, by where exactly are those synergies coming from.
Speaker 1: Are they coming from bulk buying products, are they coming
Speaker 1: from headcount reduction? What's happening? Yeah, you know, it's going
Speaker 1: to come from a little bit of everywhere. And so
Speaker 1: you know, when we think about procurement and our ability
Speaker 1: to have additional scale in some of the categories that
Speaker 1: are common, and we would expect to be able to
Speaker 1: to save some money. Um, we also think there's going
Speaker 1: to be some revenue synergies. And you know, there's parts
Speaker 1: of our business that we're not very well developed in.
Speaker 1: So I think convenience stores, you know, you walk into
Speaker 1: convenience store today, we have very little presence with our
Speaker 1: current portfolio. Planners, on the other hand, has a huge presence.
Speaker 1: So I think we're going to have the opportunity, with
Speaker 1: their knowledge and expertise, to introduce more and more of
Speaker 1: our products into the convenience store model. So it's really
Speaker 1: going to be be a combination of some costs, some
Speaker 1: operational and then some revenue centergy So I kind of
Speaker 1: ask you to would frustrate you, Jim, I'm looking at
Speaker 1: the Bloomberg terminal and you know, nobody, none of the
Speaker 1: analyst community that follows you has a buy on the stock. Uh,
Speaker 1: there's about ten holes in three cells. Do you feel
Speaker 1: like there's something wall streets missing about your story? Are
Speaker 1: you frustrated a little bit by it? You know, it's
Speaker 1: really hard to say that, Carrol, because you know, when
Speaker 1: you look at our trading multiple today. I mean we're
Speaker 1: at the top of our our peer group, and so
Speaker 1: you know, for us, you know, we don't get so
Speaker 1: bogged down in that. It's really all about you know,
Speaker 1: we always call ourselves a show me company that says,
Speaker 1: now we've got to show people what we can do.
Speaker 1: And so as we're able to grow sales and ultimately
Speaker 1: grow earnings, and if we get that kind of multiple,
Speaker 1: it's going to take care of itself. So I think
Speaker 1: are I think we get a lot of positive recognition
Speaker 1: from the analyst community. Um, they just want to see
Speaker 1: more from us, and and acquisitions like Planners really allow
Speaker 1: us to do that. So is Planners that you said,
Speaker 1: you guys have done a series of acquisitions that have
Speaker 1: helped you become less of a commoditized meat business. Is
Speaker 1: there something else on your radar? I know you're like
Speaker 1: digesting this one, no pun intended, but like there are
Speaker 1: a lot of companies and brands who are getting rid
Speaker 1: of underperforming brands and kind of honing their companies. Is
Speaker 1: there something else that you think would be another good
Speaker 1: fit or even it's not specific, are you shopping well
Speaker 1: for the time being? Our CFO took my check book away,
Speaker 1: but well, you know, the beauty of it is, you know,
Speaker 1: the balant, the strength of our balance sheet is just
Speaker 1: absolutely phenomenal, and we had essentially no debt, you know,
Speaker 1: and then what we're going to be able to finance
Speaker 1: this dat at the incredibly low rates, historically low rates,
Speaker 1: and then the cash flow that our current business generates,
Speaker 1: and then the additional cash flow of planters. Um. You know,
Speaker 1: we might be out of the market for a little
Speaker 1: while as we digest this one, but it's not going
Speaker 1: to be that long. And to your point, Carol, we'll
Speaker 1: be back in there. And there are a lot of
Speaker 1: attractive a lot of attractive businesses to us, and some
Speaker 1: of them will have been longer standing and some of
Speaker 1: them are emerging in the beauty. If you look across
Speaker 1: our acquisition history, we've done a little bit of both
Speaker 1: and we've done them both successfully. So so even though
Speaker 1: the CFO is taking your your check book away, um,
Speaker 1: if they had, I'm wondering what's exciting to you out
Speaker 1: there right now? I mean, independent snacks are absolutely booming
Speaker 1: right now, and even snacks that that aren't independent, that
Speaker 1: have been bought up by some of the your bigger
Speaker 1: rivals are absolutely booming right now. What's exciting to you, Well,
Speaker 1: I mean what we're really excited about, tim is is
Speaker 1: just what we have coming into the family with Planters,
Speaker 1: and so we've got a lot of work to integrate
Speaker 1: that business and get it up and running and do
Speaker 1: what we say we're going to do, but our ability
Speaker 1: to leverage that knowledge and experienced in snacking inconvenience stores
Speaker 1: across other parts of our portfolio. So I mean, Justin's
Speaker 1: is a brand that, from my perspective, is going to
Speaker 1: be a huge beneficiary of what we learn from Planters,
Speaker 1: and that's not that snacking category. And so you're exactly right.
Speaker 1: I mean, the snacking business is very strong, continues to grow,
Speaker 1: and Planters just gives us another opportunity to have insights
Speaker 1: and innovation and we'll share those both ways. Things that
Speaker 1: we're doing here at Hormel that we can apply there
Speaker 1: and vice versa. So yeah, it's a very attractive space
Speaker 1: and we're gonna have enough on our hands for for
Speaker 1: a little while that we're not gonna we're not gonna
Speaker 1: get distracted. We're going to get the blinders on and
Speaker 1: get to work. So one thing I've got to ask you, Jim,
Speaker 1: And this is something near and dear to us. I mean,
Speaker 1: we are constantly as a family looking at ingredients and
Speaker 1: healthier food. And you know, that is a significant consumer
Speaker 1: trend that I think the train has left the station
Speaker 1: on it. So I'm just curious, how do you guys
Speaker 1: factor that when you know, people will say cold Cuts
Speaker 1: not the healthiest, um, but you also have things like Applegate, Like,
Speaker 1: so where do you like, how do you move that
Speaker 1: when you still got a lot of brands that some
Speaker 1: people might say or you know, the healthiest for consumers. Well,
Speaker 1: we wouldn't say that, I mean, because it's all it's
Speaker 1: all about consumer choice, right, and some of the some
Speaker 1: of the best brands that we have that appeal to
Speaker 1: consumers in that space you mentioned Applegate, We've got Justine's,
Speaker 1: We've got other internally developed brands like Natural Choice, um,
Speaker 1: you know, so no preservatives and and so I mean,
Speaker 1: we continue to find ways to not only acquire, but
Speaker 1: to innovate, and and it's all about consumer choice. And
Speaker 1: so you know, you've got to you got to think
Speaker 1: about the economic ladder, what consumers can afford. Not every
Speaker 1: consumer today can can afford a premium package of Applegate lunches.
Speaker 1: Many more can afford a no preservative or preservative free
Speaker 1: package of natural choice. So, you know, we what we
Speaker 1: love about our foot portfolio is you go across the
Speaker 1: spectrum of options and opportunities. We've got something for everyone.
Speaker 1: And even in the in the gross restore retail outlets,
Speaker 1: there aren't too many places in the grocery store that
Speaker 1: you're going to go and you you won't find a
Speaker 1: Hormel brand. It may not Hormel may not be at
Speaker 1: the top of your mind when you're looking at it,
Speaker 1: but brands like Holy GUACAMOLEI are Dez Salsa. You know,
Speaker 1: we've talked about Skippy Peanut Butter, Guinee, Moore Beust, the
Speaker 1: Columbus Grab and Go charcouterie offerings. I mean, the portfolio
Speaker 1: that we've built is absolutely phenomenal and it caters to
Speaker 1: consumers at every point in the economic ladder. Hey, Jim,
Speaker 1: can you talk a little bit about the Inspired Pathways program.
Speaker 1: It's it's something that Hormel launched over the summer and
Speaker 1: it's it's a two year community college education funding for
Speaker 1: that for dependence of team members. Um, take us through
Speaker 1: your thinking behind launching that. Yep, you know, Tim, we
Speaker 1: we obviously had a front row seat everything that happened
Speaker 1: in Minneapolis last year, and so you know, as we
Speaker 1: took a step back and thought about it. I mean,
Speaker 1: one of the things that we do really really well
Speaker 1: as we don't rush in to anything. We're very thoughtful,
Speaker 1: very disciplined. The easy thing to do would have been to,
Speaker 1: you know, to write a check in support of some initiative.
Speaker 1: And what we said is, you know what, let's put
Speaker 1: our money where our mouth is. Let's make a difference
Speaker 1: and make a difference where of matters to our team
Speaker 1: members and to us. And we believe, you know, the
Speaker 1: way you change this world is through education. And so
Speaker 1: knowing that we have so many team members where perhaps
Speaker 1: English is a second language and they've got you know,
Speaker 1: children who maybe don't have the opportunity or the resources
Speaker 1: that some of us had to go to college, how
Speaker 1: can we make a difference for them? And so this
Speaker 1: program is it's going to allow some team members, but
Speaker 1: more importantly, you know, their dependence to get a leg
Speaker 1: up and to really get a head start. And community
Speaker 1: colleges are just a hidden jewel in in our country
Speaker 1: where it's a great place to go and to really
Speaker 1: get started in the higher education world. And so we've
Speaker 1: been hard at work. UM. We've actually got well over
Speaker 1: a hundred applicants already, We've got team members who are
Speaker 1: excited to support those applicants. UM, and so we're we're
Speaker 1: just really excited for the first class. And you know,
Speaker 1: I'm sure you'll hear a lot more from us because
Speaker 1: we're really proud of what we're going to be able
Speaker 1: to do to change the trajectory as some of these
Speaker 1: people's lives. Listen. It's so important, and we're really glad,
Speaker 1: and we do hope you keep us up to date
Speaker 1: on what you're doing, because a lot of individuals just
Speaker 1: need someone to help get them going. I also thought
Speaker 1: it was really fascinating what Jim had to say about
Speaker 1: two tiers in terms our different tiers in terms of
Speaker 1: different consumers. Jim Sneed. He's a CEO at Hormel. This
Speaker 1: is Bloomberg