Hormel Foods’ 2021 Growth Path Looks to Digital and Capacity Investments

Hormel Foods expects to leverage the benefits of its increased capacity — and its experience — as it heads into 2021.

The company has become more adept at weathering the near-constant uncertainty COVID-19 has brought, including managing rapid changes in staffing, company executives shared in an earnings call. As it faces challenges expected from a second wave of the virus and potential foodservice shutdowns, it now has the advantage of leaning on past pandemic learnings in order to navigate.

“The bottom-line is we do not expect there to be the same level of chaos as there was nine months ago,” said Jim Snee, chairman, president and CEO.

The No. 59 consumer goods company reported net sales of $2.4 billion in its fiscal fourth quarter, which is down 3% from the prior year, primarily due to foodservice declines and production limitations. Organic net sales were down 4% for the quarter.  

Full-year net sales, however, tallied $9.6 billion, up 1%, and organic net sales increased 2%.

As it heads into the new year, Hormel has made investments to increase capacity — including upcoming plants in Iowa and Nebraska, slated to open in the first quarter and first half, respectively — that are expected to serve as key components in delivering sales and earnings growth.

It also expects some of the savings derived from its One Supply Chain initiative to accelerate.

“Those savings have paid dividends in a very difficult operating environment this year,” said Jim Sheehan, Hormel Foods executive VP and chief financial officer, “and allowed us to do things that we wouldn’t have been able to do in the past, and other things that we did much more efficiently.”

The company continues to shift investments toward e-commerce, including in sales capabilities, consumer insights and analytics, and is excited about the growth it’s seeing, said Snee.

Hormel named Leslie Lee VP of digital experience last month to lead its digital and e-commerce business strategy, including its digital product management, and data analytics and insights for the company's portfolio.

“We’ve done all the right things to support the growth of this business over the long-term,” noted Snee.

The company is currently in the midst of an ambitious digital transformation initiative known as Project Orion, encompassing three paths: HR and benefits, finance, and supply chain. The first two have been completed, and the company expects to see significant benefits from the efficiencies and business insight they’re gaining as they head into 2021.

“The amount of analytics that we are getting, and the scope of information that we now have to operate the business, has expanded drastically even in the last quarter,” said Sheehan.