WEBVTT - Hormel CEO Discusses Acquisition of Planters

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<v Speaker 1>This is Bloomberg Business Week with Carol Masser and Bloomberg

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<v Speaker 1>Quick Takes Tim Stinovic on Bloomberg Radio. Well, it's a

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<v Speaker 1>company whose brands you definitely know Spam, Skippy, Hormel, Deli

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<v Speaker 1>meets h and Chili Applegate and most recently Planters thanks

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<v Speaker 1>to an acquisition. And it came out this morning with

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<v Speaker 1>its latest quarterly update both profit and revenues topping Alice's estimates,

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<v Speaker 1>and it did send Tim the stock higher. Joining us

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<v Speaker 1>with more on the business and outlook is Hormel Chairman,

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<v Speaker 1>CEO and President Jim Sunee. He's on the phone. He

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<v Speaker 1>is in Minnesota, So Jim, nice to have you here

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<v Speaker 1>with us. How are you. I'm doing really well, Carol,

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<v Speaker 1>thanks for having me on today. Yet weather cold? How

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<v Speaker 1>are you guys doing well? I'll tell you what We're

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<v Speaker 1>used to this unlike some other parts of the country,

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<v Speaker 1>so we we were always cold this time of year.

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<v Speaker 1>But I think we know how to manage it. Yeah,

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<v Speaker 1>you guys definitely do well. Listen, you investors seem to

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<v Speaker 1>be responding to how you guys are managing the company,

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<v Speaker 1>responding favorably after your latest quarter. Um, tell us about

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<v Speaker 1>what's been driving momentum. It was really a strong first

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<v Speaker 1>quarter for us, so a great way to start our

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<v Speaker 1>fiscal um actually record sales in the quarter, and it

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<v Speaker 1>was across all four of our businesses, and we haven't

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<v Speaker 1>seen that kind of sales growth since two thousand and sixteen. So,

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<v Speaker 1>I mean, as you can imagine, you know, continued strong

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<v Speaker 1>retail sales are international business continues to be really really positive. Um.

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<v Speaker 1>We're starting to see some signs of recovery in our

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<v Speaker 1>food service business. That's really the part over the last

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<v Speaker 1>year that you know, early in the pandemic, we saw

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<v Speaker 1>food service restaurants, hotels, their business you know, collapse. But now,

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<v Speaker 1>as you know, more states are opening up, vaccines more

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<v Speaker 1>widely distributed, we are starting to see some signs of recovery.

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<v Speaker 1>So that's that's got us really optimistic for the balance

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<v Speaker 1>of the year. He Jim. I'm really eager to get

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<v Speaker 1>more color into the decision to buy Planters from Kraft Times.

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<v Speaker 1>It was announced earlier this month UM three point three

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<v Speaker 1>five billion dollars UH. It includes corn nuts UH and

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<v Speaker 1>some other brands as well. The effective purchase price about

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<v Speaker 1>two point seven nine billion dollars. Why is this a

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<v Speaker 1>good fit for Hormel. It's about Mr Peanut though, let's

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<v Speaker 1>just lay it out there. It's about Mr Peanuts. Everyone

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<v Speaker 1>knows Mr Peanut. Sorry, go ahead, Uh Spam s Fami

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<v Speaker 1>needed a friend or Stiffy needed a friend? Um, you know, actually, Tenda,

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<v Speaker 1>it's a great question. But this is a business that

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<v Speaker 1>fits in our portfolio so perfectly. I mean, it starts

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<v Speaker 1>with it. It's an iconic brand. So when you think

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<v Speaker 1>about the brands and Carol you mentioned a whole bunch

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<v Speaker 1>of them at the top. You know, our brands are

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<v Speaker 1>so well known, so well recognized, and we know how

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<v Speaker 1>to manage brands. Were great stewards of brands, and so Spam,

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<v Speaker 1>Skippy and now Planters, as you know, they've been around

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<v Speaker 1>for a long time. We know how to nurture them.

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<v Speaker 1>Planters happens to be in a very very attractive category

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<v Speaker 1>for us to snacking category, and so we've already got

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<v Speaker 1>a pretty well developed snacking business, but it's across all

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<v Speaker 1>parts of the company. Um, this is really an opportunity

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<v Speaker 1>for us to focus in in the snack nuts. And

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<v Speaker 1>if you think about how much it makes sense when

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<v Speaker 1>you think about the Skippy business, we have the Justine's

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<v Speaker 1>business we have. This is just a natural evolution of

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<v Speaker 1>of that portfolio. The other thing that it does for

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<v Speaker 1>us is, you know, over time, we've been very intentional

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<v Speaker 1>about being less and less of a commodity meat company,

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<v Speaker 1>and some of the acquisitions we've made over over the

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<v Speaker 1>last several years have really moved us further down that path.

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<v Speaker 1>And so this is this is just another step. And

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<v Speaker 1>you know what's even more exciting is by far, it's

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<v Speaker 1>the largest acquisition our our company has ever made. So

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<v Speaker 1>as as I've been telling our team all week, you know,

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<v Speaker 1>there's a lot to love about this business and we're

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<v Speaker 1>just we're really excited to get to work on it.

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<v Speaker 1>Hopefully that will be some time in May. Now, I

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<v Speaker 1>know that you expect to see synergies of between fifty

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<v Speaker 1>and sixty million dollars a year. A year, by million dollars,

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<v Speaker 1>I should say, by where exactly are those synergies coming from.

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<v Speaker 1>Are they coming from bulk buying products, are they coming

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<v Speaker 1>from headcount reduction? What's happening? Yeah, you know, it's going

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<v Speaker 1>to come from a little bit of everywhere. And so

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<v Speaker 1>you know, when we think about procurement and our ability

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<v Speaker 1>to have additional scale in some of the categories that

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<v Speaker 1>are common, and we would expect to be able to

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<v Speaker 1>to save some money. Um, we also think there's going

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<v Speaker 1>to be some revenue synergies. And you know, there's parts

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<v Speaker 1>of our business that we're not very well developed in.

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<v Speaker 1>So I think convenience stores, you know, you walk into

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<v Speaker 1>convenience store today, we have very little presence with our

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<v Speaker 1>current portfolio. Planners, on the other hand, has a huge presence.

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<v Speaker 1>So I think we're going to have the opportunity, with

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<v Speaker 1>their knowledge and expertise, to introduce more and more of

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<v Speaker 1>our products into the convenience store model. So it's really

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<v Speaker 1>going to be be a combination of some costs, some

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<v Speaker 1>operational and then some revenue centergy So I kind of

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<v Speaker 1>ask you to would frustrate you, Jim, I'm looking at

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<v Speaker 1>the Bloomberg terminal and you know, nobody, none of the

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<v Speaker 1>analyst community that follows you has a buy on the stock. Uh,

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<v Speaker 1>there's about ten holes in three cells. Do you feel

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<v Speaker 1>like there's something wall streets missing about your story? Are

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<v Speaker 1>you frustrated a little bit by it? You know, it's

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<v Speaker 1>really hard to say that, Carrol, because you know, when

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<v Speaker 1>you look at our trading multiple today. I mean we're

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<v Speaker 1>at the top of our our peer group, and so

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<v Speaker 1>you know, for us, you know, we don't get so

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<v Speaker 1>bogged down in that. It's really all about you know,

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<v Speaker 1>we always call ourselves a show me company that says,

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<v Speaker 1>now we've got to show people what we can do.

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<v Speaker 1>And so as we're able to grow sales and ultimately

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<v Speaker 1>grow earnings, and if we get that kind of multiple,

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<v Speaker 1>it's going to take care of itself. So I think

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<v Speaker 1>are I think we get a lot of positive recognition

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<v Speaker 1>from the analyst community. Um, they just want to see

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<v Speaker 1>more from us, and and acquisitions like Planners really allow

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<v Speaker 1>us to do that. So is Planners that you said,

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<v Speaker 1>you guys have done a series of acquisitions that have

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<v Speaker 1>helped you become less of a commoditized meat business. Is

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<v Speaker 1>there something else on your radar? I know you're like

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<v Speaker 1>digesting this one, no pun intended, but like there are

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<v Speaker 1>a lot of companies and brands who are getting rid

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<v Speaker 1>of underperforming brands and kind of honing their companies. Is

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<v Speaker 1>there something else that you think would be another good

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<v Speaker 1>fit or even it's not specific, are you shopping well

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<v Speaker 1>for the time being? Our CFO took my check book away,

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<v Speaker 1>but well, you know, the beauty of it is, you know,

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<v Speaker 1>the balant, the strength of our balance sheet is just

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<v Speaker 1>absolutely phenomenal, and we had essentially no debt, you know,

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<v Speaker 1>and then what we're going to be able to finance

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<v Speaker 1>this dat at the incredibly low rates, historically low rates,

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<v Speaker 1>and then the cash flow that our current business generates,

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<v Speaker 1>and then the additional cash flow of planters. Um. You know,

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<v Speaker 1>we might be out of the market for a little

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<v Speaker 1>while as we digest this one, but it's not going

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<v Speaker 1>to be that long. And to your point, Carol, we'll

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<v Speaker 1>be back in there. And there are a lot of

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<v Speaker 1>attractive a lot of attractive businesses to us, and some

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<v Speaker 1>of them will have been longer standing and some of

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<v Speaker 1>them are emerging in the beauty. If you look across

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<v Speaker 1>our acquisition history, we've done a little bit of both

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<v Speaker 1>and we've done them both successfully. So so even though

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<v Speaker 1>the CFO is taking your your check book away, um,

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<v Speaker 1>if they had, I'm wondering what's exciting to you out

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<v Speaker 1>there right now? I mean, independent snacks are absolutely booming

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<v Speaker 1>right now, and even snacks that that aren't independent, that

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<v Speaker 1>have been bought up by some of the your bigger

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<v Speaker 1>rivals are absolutely booming right now. What's exciting to you, Well,

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<v Speaker 1>I mean what we're really excited about, tim is is

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<v Speaker 1>just what we have coming into the family with Planters,

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<v Speaker 1>and so we've got a lot of work to integrate

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<v Speaker 1>that business and get it up and running and do

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<v Speaker 1>what we say we're going to do, but our ability

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<v Speaker 1>to leverage that knowledge and experienced in snacking inconvenience stores

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<v Speaker 1>across other parts of our portfolio. So I mean, Justin's

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<v Speaker 1>is a brand that, from my perspective, is going to

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<v Speaker 1>be a huge beneficiary of what we learn from Planters,

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<v Speaker 1>and that's not that snacking category. And so you're exactly right.

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<v Speaker 1>I mean, the snacking business is very strong, continues to grow,

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<v Speaker 1>and Planters just gives us another opportunity to have insights

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<v Speaker 1>and innovation and we'll share those both ways. Things that

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<v Speaker 1>we're doing here at Hormel that we can apply there

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<v Speaker 1>and vice versa. So yeah, it's a very attractive space

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<v Speaker 1>and we're gonna have enough on our hands for for

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<v Speaker 1>a little while that we're not gonna we're not gonna

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<v Speaker 1>get distracted. We're going to get the blinders on and

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<v Speaker 1>get to work. So one thing I've got to ask you, Jim,

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<v Speaker 1>And this is something near and dear to us. I mean,

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<v Speaker 1>we are constantly as a family looking at ingredients and

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<v Speaker 1>healthier food. And you know, that is a significant consumer

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<v Speaker 1>trend that I think the train has left the station

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<v Speaker 1>on it. So I'm just curious, how do you guys

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<v Speaker 1>factor that when you know, people will say cold Cuts

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<v Speaker 1>not the healthiest, um, but you also have things like Applegate, Like,

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<v Speaker 1>so where do you like, how do you move that

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<v Speaker 1>when you still got a lot of brands that some

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<v Speaker 1>people might say or you know, the healthiest for consumers. Well,

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<v Speaker 1>we wouldn't say that, I mean, because it's all it's

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<v Speaker 1>all about consumer choice, right, and some of the some

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<v Speaker 1>of the best brands that we have that appeal to

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<v Speaker 1>consumers in that space you mentioned Applegate, We've got Justine's,

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<v Speaker 1>We've got other internally developed brands like Natural Choice, um,

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<v Speaker 1>you know, so no preservatives and and so I mean,

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<v Speaker 1>we continue to find ways to not only acquire, but

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<v Speaker 1>to innovate, and and it's all about consumer choice. And

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<v Speaker 1>so you know, you've got to you got to think

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<v Speaker 1>about the economic ladder, what consumers can afford. Not every

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<v Speaker 1>consumer today can can afford a premium package of Applegate lunches.

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<v Speaker 1>Many more can afford a no preservative or preservative free

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<v Speaker 1>package of natural choice. So, you know, we what we

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<v Speaker 1>love about our foot portfolio is you go across the

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<v Speaker 1>spectrum of options and opportunities. We've got something for everyone.

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<v Speaker 1>And even in the in the gross restore retail outlets,

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<v Speaker 1>there aren't too many places in the grocery store that

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<v Speaker 1>you're going to go and you you won't find a

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<v Speaker 1>Hormel brand. It may not Hormel may not be at

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<v Speaker 1>the top of your mind when you're looking at it,

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<v Speaker 1>but brands like Holy GUACAMOLEI are Dez Salsa. You know,

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<v Speaker 1>we've talked about Skippy Peanut Butter, Guinee, Moore Beust, the

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<v Speaker 1>Columbus Grab and Go charcouterie offerings. I mean, the portfolio

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<v Speaker 1>that we've built is absolutely phenomenal and it caters to

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<v Speaker 1>consumers at every point in the economic ladder. Hey, Jim,

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<v Speaker 1>can you talk a little bit about the Inspired Pathways program.

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<v Speaker 1>It's it's something that Hormel launched over the summer and

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<v Speaker 1>it's it's a two year community college education funding for

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<v Speaker 1>that for dependence of team members. Um, take us through

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<v Speaker 1>your thinking behind launching that. Yep, you know, Tim, we

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<v Speaker 1>we obviously had a front row seat everything that happened

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<v Speaker 1>in Minneapolis last year, and so you know, as we

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<v Speaker 1>took a step back and thought about it. I mean,

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<v Speaker 1>one of the things that we do really really well

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<v Speaker 1>as we don't rush in to anything. We're very thoughtful,

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<v Speaker 1>very disciplined. The easy thing to do would have been to,

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<v Speaker 1>you know, to write a check in support of some initiative.

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<v Speaker 1>And what we said is, you know what, let's put

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<v Speaker 1>our money where our mouth is. Let's make a difference

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<v Speaker 1>and make a difference where of matters to our team

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<v Speaker 1>members and to us. And we believe, you know, the

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<v Speaker 1>way you change this world is through education. And so

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<v Speaker 1>knowing that we have so many team members where perhaps

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<v Speaker 1>English is a second language and they've got you know,

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<v Speaker 1>children who maybe don't have the opportunity or the resources

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<v Speaker 1>that some of us had to go to college, how

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<v Speaker 1>can we make a difference for them? And so this

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<v Speaker 1>program is it's going to allow some team members, but

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<v Speaker 1>more importantly, you know, their dependence to get a leg

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<v Speaker 1>up and to really get a head start. And community

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<v Speaker 1>colleges are just a hidden jewel in in our country

0:11:48.120 --> 0:11:51.200
<v Speaker 1>where it's a great place to go and to really

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<v Speaker 1>get started in the higher education world. And so we've

0:11:56.760 --> 0:11:59.480
<v Speaker 1>been hard at work. UM. We've actually got well over

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<v Speaker 1>a hundred applicants already, We've got team members who are

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<v Speaker 1>excited to support those applicants. UM, and so we're we're

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<v Speaker 1>just really excited for the first class. And you know,

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<v Speaker 1>I'm sure you'll hear a lot more from us because

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<v Speaker 1>we're really proud of what we're going to be able

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<v Speaker 1>to do to change the trajectory as some of these

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<v Speaker 1>people's lives. Listen. It's so important, and we're really glad,

0:12:19.640 --> 0:12:21.200
<v Speaker 1>and we do hope you keep us up to date

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<v Speaker 1>on what you're doing, because a lot of individuals just

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<v Speaker 1>need someone to help get them going. I also thought

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<v Speaker 1>it was really fascinating what Jim had to say about

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<v Speaker 1>two tiers in terms our different tiers in terms of

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<v Speaker 1>different consumers. Jim Sneed. He's a CEO at Hormel. This

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<v Speaker 1>is Bloomberg