Executing against pockets of growth
Splinter said management views globalization, multiculturalism, wellness and on-the-go as enduring drivers of overall food consumption behavior.
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| James Splinter, group vice president of corporate strategy for Hormel Foods |
“Unlocking future growth is heavily reliant upon our ability to translate these … food behaviors into shopper, patron and operator insights,” Splinter said. “Once understood, these insights allow us to identify attractive growth spaces. “
On the retail side, he said Hormel has identified six strategic categories ripe for growth: ground turkey; protein beverages, bars and powders; nut butters; meat snacks; sauces and condiments; and natural and organic meats.
“Now when you put these six categories together, they represent almost $13 billion in retail sales and Hormel owns a very impressive 17 percent share of these categories,” Splinter said. “Collectively, these categories have been growing at a compound annual growth rate of 6 percent for the last five years. So, when you do the math, you can see why we’re so excited about our future in these six retail categories with these leading brands that we own.”
“Today, millennials, and many of you know this already, comprise 26 percent of all CPG (consumer packaged goods) dollar volume,” he said. “And by the year 2020, this number will grow to 29 percent, and this really reflects their prime consumption life stage. Indeed, millennials, by the year 2020, will comprise $290 billion of all CPG dollar volume. Simultaneously, my baby boomer generation is decreasing its total share of total CPG job dollar volume.
“So, taking this to the next level and diving deeper into the purchase index for our brands, we see that our organic brand development efforts and recent acquisition activity has positioned Hormel for faster growth with this highly sought-after consumer group. Now when I add the percent of dollars spent from millennials on our brands, it confirms that we are well positioned for growth.
“To illustrate the point, consider that Justin’s receives 43 percent of its dollar volume from millennials; Jennie-O Turkey Store, 40 percent; and Applegate, 43 percent of the dollars spent on this brand, it's coming from millennials.”
E-commerce will also play a role in how Hormel Foods executes against its strategies. Splinter said as the digital economy continues to evolve it will create new consumer behaviors. He said Hormel management has calculated that the US online edible grocery market will reach $23 billion in sales by 2021 and represent 4.5 percent of total grocery sales.
“Thus, for Hormel, we need to grow our enterprise-wide on-line edible grocery sales by more than 17 percent per year to maintain our fair share,” he said. “We see three sources of overall digital on-line growth. The first is digitally transacted sales on the retailer.com site. The second source of volume is digitally influence off-line sales or the business that is influenced by an on-line social media presence, a search, a content or reviews, et cetera. Finally, we expect increased sales from improved analytics such as media-mix analysis, shopper audience segmentation modeling and personalized messaging … all driven by access to data.”
