By:
Ryan Marshall
Principles of Finance
Prof. Upstrom
11/22/2010
“I kept constantly before me the challenge: ‘Originate, don’t imitate!’ and made it one of the key
commandments of the organization.” – George A. Hormel
Hormel Foods has been serving customers quality food products for 120 years. Hormel has a
long history of being a responsible corporation that started with the founder of the company,
George A. Hormel. Today, the company continues to bring new products and innovation to offer
quality products that set them apart from their competitors in the food industry.
George A. Hormel started his company in and old creamery in Austin, MN and turned it into
a meat packing facility in 1891. Within three years of the first meat packing plant opening
Hormel expanded on to its building, which was the first of many expansions to the factory. The
company set up its first branch sales office in Minneapolis, Minnesota in 1901. Soon after
Hormel expanded their branches and opened a distribution center in Duluth, Minn. in 1904 and
offices in St. Paul, Minn. in 1905; Chicago, Ill. in 1913; Dallas, Texas in 1916; and Atlanta, Ga.
in 1918. Hormel was the first company to create canned ham in 1926. With all the success of the
canned ham, Hormel came up with a unique distribution channel through a trucking system. This
trucking distribution system created a more specific distribution line so the company didn’t need
to rely on the standard rail road system of distribution.
The trucking distribution system turned out to be very
successful, Hormel could reach more customers and
reach them faster. In 1941 the Hormel Foods sold over
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one-billion cans of SPAM and began creating and selling news canned meats. Hormel Foods
became a very innovative firm, adapting to the consumer needs. In 1988, Forbes Magazine
called Geo. A. Hormel & Co. the most innovative firm of the year. In March 2000, Meat
Marketing & Technology magazine named Hormel Foods the “Company of the
Decade.”(http://www.hormelfoods.com/about/history/default.aspx)
Hormel’s mission statement is as follows. “Building upon our heritage of innovation and
quality, together we will elevate the everyday experience by making Hormel Foods the favorite
part of any eating occasion.”(hormelfoods.com) Hormel Foods is an American company that is
listed on the Fortune 500 list in the United States. Hormel is a multinational manufacturer and
marketer of high-quality, brand-name food and meat products for consumers throughout the
world. Hormel produces foods such as hams, bacon, sausages, franks, canned luncheon meats,
stews, chilis, hash, meat spreads, shelf-stable microwaveable entrees and salsas. Hormel sells
food under many brands, some of which include the Chi-Chi's, Dinty Moore, Farmer
John, Jennie-O, Lloyd's, Spam and Stagg brands. The company operates in the US, Australia,
China, Canada, Japan, Korea, Mexico, the Philippines and Vietnam. It is headquartered in
Austin, Minnesota and employed about 18,500 people as of October 28, 2007. The company
recorded revenues of 6,533 million dollars during the fiscal year ended October 2009.
Today, Hormel is expanding their product line with ethnic foods like Hormel® pepperoni
minis and CHI-CHI'S® Fiesta Plates™. The Hormel Company is starting to push the product
line called Hormel® Compleats®. These “Hormel Compleats” are meals that target a consumer
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that was a fast, hot, and nutritious meal that takes no time at all. The company is targeting
families that want a nutritious meal that the whole family can share without much preparation
and clean up time. Along with this line they have introduced and premium chili product line that
aims towards the family demographic.
Hormel Foods has three major competitors in the United States that sell products in the same
market. The three major competitors are ConAgra Foods Inc., Kraft Foods Inc., and Tyson
Foods Inc. These three companies advertise, promote, and sell to the same consumers in the
marketplace. Hormel keeps expanding their product lines the reach more consumers and to stay
ahead of its competitors.
SWOT Analysis
Hormel Foods has much strength as we remain stuck in an economic recession. Hormel has
had forty-three consecutive years of increased annual dividends to its shareholders. Since
becoming a public company in 1928, the corporation has never missed a dividend payment. In
the economic recession taking place in the United States the previous statistic is very promising
to a stock market investor.
One of the few weakness that Hormel Foods has is the lack of presence they have in the in
Europe is not great. For a corporation to be a well defined company these days globalization is a
key attribute that needs to be gained to achieve ultimate success. Hormel has recognized this
weakness and is attacking the problem head on. Hormel Foods recently achieved a license with a
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Danish company called Tulip International. This license agreement gives Hormel Foods the
opportunity to sell directly to the United Kingdom and other areas of Europe. This is a giant step
in the right direction of globalization for Hormel. This creates a new market and the possibility
of new product lines as well.
Hormel continues to attract new consumers. They are aiming towards ethnic foods due to the
expanding population within the United States. Hormel foods had created a joint venture with
Grupo Herdez to market Hormel products in Mexico. Grupo Herdez then turned around and
created another joint venture with Hormel Foods to market the Grupo Herdez products in the
United States. Along with other ethnic foods, Hormel created an Asian food line by the name of
the House Of Tsang brand, including sauces, marinades, soups and oils. Along the lines of a
Mediterranean brand, Hormel created Peloponnese in 1995 to produce natural, healthful
specialty foods from that region. (hormelfoods.com/about)
With any Corporation that involves the production of quality food, the threat of disease,
famine, and lack of resources is always in existence.
Hormel insists on the quality of their processing of
their products to ensure safe consumption. A perfect
example of this quality is found in Hormel Jennie-O
Turkey product line. The Jenny-O turkey line has
maintained a strong reputation for quality, flavor,
health and convenience. They maintain a clean and
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high quality farms to produce their product to ensure a safe product for the consumer and their
family.
Hormel Foods stock information
Stock Information
Ticker Symbol
last price
HRL
47.64
47.67
52-week high
37.08
608,097
0.84
52-week low
Volume
Dividend rate
Dividend yield
1.76%
I chose to research Hormel Foods because I had prior knowledge of the company before this
was assigned. My father, Mark Marshall, works for Catalina Marketing Group and they work
directly with Hormel Foods. They work together on promotions and coupon packages for
grocery stores and convenient stores. My father visits the Austin, MN Hormel Foods
headquarters on a weekly basis and has built a great relationship with the company. I took on the
task of researching Hormel Foods to get a glimpse of what my father is engaged in on a weekly
basis, and receive a firm grasp on the company as a whole.
Hormel Liquidity Table
Liquidity Table
2009
2008
2007
Current ratio HRL
2.2987752
1.840917527
1.8528385
Current ratio CAG
1.9448482
2.11968744
1.6657081
Quick ratio HRL
1.2442667
0.836680619
0.8796294
Quick ratio CAG
1.1558786
0.962391208
1.1381426
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Hormel Foods is in great position to be able to pay off their short-term liabilities with their
short-term assets. 2009, turned out to be a great year for Hormel when it came to their current
ratio. ConArgra, Hormel’s competitor, seems to be in the same position as Hormel. They seemed
to have better year in 2008, but they would still be able to pay their short-term liabilities
currently without any problems. Judging from the quick ratio for Hormel wasn’t in the best of
positions in 2007 and 2008. The ratios in both of those years were lower than one, meaning the
company would not be able to pay-off the short-term liabilities. They turned it around in 2009
and are in a successful position currently.
Asset Turnover
Asset turnover
2009
2008
2007
Inv. turnover HRL
1.7696543
0.523886609
0.5666723
Inv. turnover CAG
0.5288515
0.414612724
0.4623371
FA turnover HRL
0.3907695
0.420401776
0.3792882
FA turnover CAG
0.3236571
0.295131291
0.3587802
total asset t/o HRL
1.7696543
1.867815854
1.8248877
total asset t/o CAG
1.029085
1.122167737
1.3478808
The Asset turnover ratios reveal that Hormel Foods has a higher ratio compared to its
competitor, ConAgra. This trend is prevalent throughout all three years of the chart. This chart
can be an indication about the pricing strategy of the two companies. Companies with low profit
margins tend to have high asset turnover, while those with high profit margins have low asset
turnover. I believe this is due to the size of Hormel Foods Compared to its competitor. Hormel is
a smaller company compared to ConAgra; this is due to the difference in globalization between
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the companies. ConAgra has expanded its markets globally expanding its profit margin
considerably. Hormel Foods should improve their profit margin with the license agreement with
Tulip International and direct distribution to the United Kingdom.
Debt Management
Debt Management
2009
2008
2007
total debt HRL
0.094798
0.124430729
0.1237635
total debt CAG
0.2749191
0.312382036
0.2913722
When a company has more assets than debt it mean the company isn’t relying on leverage.
Leverage pertains to when a company borrows money and owes money. The less leverage a
company uses the better the company looks to investors as a non-risk investment.
Looking at the table, Hormel stands out with very low percentages of debt throughout the
three years of measurement. ConAgra has a considerably higher debt percentage; they are taking
on more debt rather than relying on their assets. As an investor analyzing this table, Hormel
seems to be the better company to invest in according to the three previous years percentages.
Market Value
Market Value
2009
2008
2007
p/e ratio HRL
14.62
17.07
18.13
p/e ratio CAG
7.01
11.82
20.17
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The price earnings ratio shows a decline in both companies, this is probably related to the
economic recession the United States economy is currently in. The Hormel ratio remains to be
higher than ConAgra’s price earnings ratio. Hormel doubled ConAgra’s ratio in 2009, and didn’t
take as big of a decline through the three previous years. This is a very good statistic for Hormel
and future investors.
HRL Price vs. Volume
1,800,025
47
1,600,025
46
1,400,025
45
1,200,025
1,000,025
44
800,025
43
600,025
42
Volume
GMCR
400,025
41
200,025
40
8/30/2010
9/1/2010
9/3/2010
9/8/2010
9/10/2010
9/14/2010
9/16/2010
9/20/2010
9/22/2010
9/24/2010
9/28/2010
9/30/2010
10/4/2010
10/6/2010
10/8/2010
10/12/2010
10/14/2010
10/18/2010
10/20/2010
10/22/2010
10/26/2010
10/28/2010
11/1/2010
11/3/2010
11/5/2010
11/9/2010
11/11/2010
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The Price vs. Volume graph shows a few spikes during the recording period and a consistent
level of high volume. The high levels of volume indicate that there are many traders involved in
the stock and it would be easier to find a trader to buy from or sell too. A lot of activity with
Hormel is a great sign for the company, shows the markets recognition of the company.
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Hormel Foods stock price stays a pretty consistent price, always in the range of a $43 range
and doesn’t spike or decline to often. There were a few days during the data collection period
that stood out due to current events that took place in the marketplace. During the dates of
10/6/10 to 10/14/10 Hormel Foods saw a drastic spike and decline. During this period of time
Cost-Co had a promotion for a product they were relapsing that contained Hormel products. The
product that Cost-Co unveiled was a package called “The End-of-Time Food”. This product
contained a one-year food supply comes complete with 84 gallon size cans of grains, fruits,
veggies, protein & beans, dairy, and baking essentials. The package contained over 5,000
servings and many foods with a shelf life of up to 25 years. The product contained many canned
goods from Hormel Foods and created a buzz around the company resulting in a lot of activity
for investors of Hormel Foods.
At the end of October and the start of the month of
November, there is a subtle spike in stock price after two
week steady decline. On October 26, 2010, Klement’s
Sausage Company, Inc. reported a re-call of their 8oz. beef
jerky sticks. The re-call was due to a hazard of glass and real
meat in their product. This caused investors to invest in
Hormel foods since both companies are in the same marketplace. The spike was in preparation of
consumer substituting Klement’s meat products with Hormel’s meat products.
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Overall, Hormel Foods stock price remained very consistent on a day-to-day basis. Hormel
Foods maintains a reputation of a quality product and its consumer base remains consistent. With
a globalization plan implemented in the near future, I predict a rise in the stock price and a rise in
volume.
HRL Price vs. S&P 500
1,800,025
1250
1,600,025
1200
1,400,025
Axis Title
1,200,025
1150
1,000,025
1100
800,025
GMCR
S&P
600,025
1050
400,025
1000
200,025
25
950
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53
The price of Hormel’s stock remained below the S&P 500 on a consistent basis. There were
two instances when the stock price of Hormel Foods spiked above the S&P 500 line. One spike
was induced due to the Cost-Co product I spoke of previously. The new “The End-of-Time”
product created enough activity to cause a price spike to go above the S&P 500 average. The one
other time the same scenario happened was at the end of August. At the End of August Jenny-O
turkey launched a promotion titled Jennie-O’s “Make the Switch” campaign. This campaign
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promoted healthy eating, and since American love hamburgers, Jennie-O prompted their turkey
burger by giving out free burgers at a California store. The stock price had a lot of activity
during this period of time in anticipation to this promotion.
Being familiar with Hormel Foods previous to this project I thought I knew the gist of the
company. The research I did on Hormel Foods expanded my horizons on the company; I learned
there is some major depth in Hormel’s product line. Hormel has several target markets and
appeal to many demographics across the United States and has a promising future of
globalization. The constant expansion of Hormel’s product line appealing to many different
ethnic cultures shows the innovation this company possesses.
This economic recession that United States is currently undergoing is creating and awareness
of cost savings within consumers. The average American is finding new ways to save money in
day-to-day life. One of the ways consumers are saving money is eliminating extra costs like
dining outside the home. With many Americans consuming meal within their own households,
Hormel Foods has many products that families are consuming. Also with a trend of obesity with
in American youth and adults, Hormel offers a product line that is healthy alternative to
restaurant dining. With high quality products such a Jennie-O turkey products families can
receive a nutritious filling meal for an extremely reasonable cost. Jennie-O turkey is a proud
sponsor of NBC’s hit show “The Biggest Loser”, a show that promotes a healthy lifestyle. The
healthy lifestyle the show promotes is an active life that involves routine exercise and a
nutritious diet. (http://www.nbc.com/the-biggest-loser)
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Hormel Foods is a consistent company that represents to mission statement appropriately.
They remain to be innovative within the market place and continue to expand their distribution.
With a globalization plan in place for the near future, I find this a great company to invest in.
The price of Brazilian beef prices remaining relatively high, Hormel foods continues to creating
a higher profit margin each year of my research. Hormel Foods continues to impress consumers
with products that are nutritious and priced to attract a wide variety of demographics. Hormel
Foods is a great example of a company noticing consumer trends and adapting to the
marketplace. The joint venture between Hormel Foods and Grupo Herdez demonstrates the
innovation that Hormel consists of. Creating a joint venture with a Mexican food organization is
an impressive way to reach a new demographic in this demographic evolution. Based on my
research, I would highly recommend in investing in this company. Hormel Foods has bright
future that can be recognized in several different areas of the company. A wide variety within a
product line, the future of globalization, and a quality product reveals a wise investment
opportunity in Hormel Foods.
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Bibliography

Hormel Foods Home. Web. 22 Nov. 2010. http://www.hormelfoods.com/

"Hormel Foods Company History." Hormel Foods Home. Web. 22 Nov. 2010.
<http://www.hormelfoods.com/about/history/default.aspx>.

"HRL - Stock Quote for Hormel Foods Corp - MSN Money." Personal Finance
and
Investing
MSN
Money.
Web.
22
Nov.
2010.
<http://moneycentral.msn.com/detail/stock_quote?Symbol=HRL&getquote=Get
Quote>.

"CAG - Stock Quote for ConAgra Foods Inc - MSN Money." Personal Finance
and
Investing
MSN
Money.
Web.
22
Nov.
2010.
<http://moneycentral.msn.com/detail/stock_quote?symbol=CAG&ww=1>.

"The Biggest Loser." TV Network for Primetime, Daytime and Late Night
Television Shows - NBC Official Site. Web. 22 Nov. 2010.
http://www.nbc.com/the-biggest-loser/
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