Hormel Stays the Course
By sticking to the ages-old company mantra and building upon the momentum of his predecessors, Jeffrey M. Ettinger has Hormel Foods positioned to continue to grow.
January 1, 2007
Some say imitation is the best form of flattery — that when someone copies or borrows a good or successful idea or venture, the originator should not sulk or become angry that others are copying him or her.
While those principles might fly in other places of business, where imitation might be accepted as a viable form of innovation, George A. Hormel, founder of Hormel Foods, never accepted that theory. His company was founded on the opposite rule. “Originate, Don’t Imitate,” proclaims the sign in the lobby at Hormel Foods’ Austin, Minn., headquarters.
As Hormel enters it 116th year, Jeffrey M. Ettinger, current president, CEO and chairman of the board, has kept the company’s mission finely in tune with its rallying cry, which has withstood the test of time.
“Originate, Don’t Imitate,” spurs Ettinger and his colleagues on a daily basis, to find new, innovative products, processes and ideas to bring to the value-added protein marketplace. In Ettinger’s first year at the helm of the massive corporation, he has watched several innovations find quick success upon their launch and has the company positioned to continue its steady growth as a well-respected innovator of value-added products.
The first 365 days
Ettinger took over from Joel Johnson as president and CEO of Hormel in November 2005, and secured the position of chairman of the board one year later, when Johnson retired from that position as well. Ettinger, who is only the ninth president in the company’s long history, previously had been a Hormel Foods group vice president and president, CEO and chief operating officer of Hormel’s Jennie-O Turkey Store division.
At the time of his promotion in 2005, Ettinger gave insight into how his reign might play out, at least in the short term, telling The National Provisioner, “In the future, my role will be to build on the many strengths of Hormel Foods, identifying new ways to continue our strong growth by meeting the ever-changing needs of our consumers.”
A little more than a year later, Ettinger sings the same tune, explaining that the changeover at the top really didn’t have an earthshaking effect as some corporate changes could cause.
“The key to remember is, I didn’t come into a turnaround situation,” he adds. “If a company has been struggling and they bring in an outside person, there is more of an expectation or need for that person to say, ‘OK, we’re going here. We’ve been zigging and now we’re going to zag.’”
Ettinger points to the successful situation Johnson left him to inherit, a corporation that had doubled sales and tripled earnings during Johnson’s tenure.
“So it’s really a matter of trying to take the baton, not drop it and keep the progress going forward,” Ettinger says. “That’s all the more reason for me to not come in with a dictatorial style or with a very strongly divergent direction. Our strategies have been working, and it’s really more a matter of just growing with them and continuing to find enhancements.”
Of course, Ettinger explains, Hormel’s depth of quality management and employees helped to ease the transition as well.
“There’s a tendency, I think in the modern age, to somewhat glorify the role of the CEO and put huge emphasis on the CEO, and there are probably cases where that’s warranted,” he explains. At Hormel, Ettinger continues, there is no need to glorify the CEO because of the many employees who have worked for the company for 20, 30 or 35 years, or whose parents worked for the company also.
“You’d be disadvantaging yourself if you didn’t access their knowledge and capabilities.”
Despite his giving credit to his team at Hormel, it is noteworthy to mention that Ettinger’s first year produced Hormel’s third-consecutive double-digit increase in profits in the teeth of a challenging year for the industry as a whole. It certainly wasn’t easy for Hormel, but Ettinger points to the balanced portfolio the corporation has, to where it sometimes can weather a storm better than other companies that focus more narrowly on certain niches.
“We weren’t immune from [the external challenges], but we found ways to overcome them. We have perhaps a more balanced business model than some of the more-strictly-protein companies,” he says, pointing to Hormel’s stable grocery division and growing specialty division that helped the company’s 2006 results.
“Aside from results, one of the other major efforts of the year was focused on communication,” Ettinger adds. In 2004, when Ettinger was joining Hormel’s corporate management team, the company was just getting the results of an in-house survey of its employees that shed light on how employees viewed the company.
“One of the things that came out of the survey was a sense that employees had a general confidence in Hormel; we’ve been around a long time and have a great track record of success,” he says. “But they didn’t have a great understanding of our strategies, why we were doing what we were doing or where we were headed.”
With Ettinger planning to hit the road and visit the plants in his new role as president and CEO, the timing was right to share more broadly the goals and strategies of the company. Ettinger practiced what the company now preaches about increased communication, having embarked on a roadshow of sorts in his first year and a half, getting out to all the facilities, sharing his vision and expectations and listening to the needs and desires of his team.
Ettinger visited 22 facilities in the past year alone, relays Julie H. Craven, vice president of corporate communications, meeting in venues ranging from a cleared out area of a plant’s distribution center to a bowling alley’s conference room in one of the smaller towns that is home to a Hormel facility.
The challenge to originate
Hormel’s focus on communication has not gone for naught. Ettinger has done well stressing communication, particularly within the company. That, in turn, has helped employees buy into programs that focus on results. One example would be Hormel’s Billion-Dollar Challenge, a program started a few years ago to quantify the success of the new products launched this decade.
“It was really in recognition that, we knew we had a lot of successes in the new product area, but — to use a baseball analogy — they tended to be singles and maybe a double once in a while,” Ettinger explains. “Any given one of them, you wouldn’t look and say, ‘Oh my, there’s something that’s driving Hormel’s results.’”
However, when you added up the sales of those new items, a virtual home run started to take shape. So in 2004, The Billion-Dollar Challenge debuted. Each year, Hormel tracks sales of products introduced from the year 2000 to the present. In 2004, products introduced this decade produced nearly $500 million in sales.
“That became the genesis, and we said, ‘Let’s keep this going. By the end of 2009, if we look back at the decade, looking only at sales in that year, let’s try to generate sales of $1 billion from items that didn’t exist prior to this decade,’” Ettinger says. “We track that on an aggressive basis, and this last year, we saw a substantial uptick in our progress — of our $5.7 billion in sales in 2006, over $850 million were from items that weren’t in existence prior to 2000, and this is now Year Seven of the decade.”
The program obviously has helped build support for origination of ideas, giving employees a hard-and-fast goal for new product initiatives that Hormel continuously investigates.
“It has helped to shed light on how we have been doing and to galvanize people’s interest in continuing that kind of progress, and it’s been embraced well,” Ettinger continues. “It’s really across the board too.”
Some of the items he points to as being significant contributors to the $850-million-plus sales in 2006 range from items created earlier in the decade, such as Hormel’s refrigerated entrée line, to items that have had success and expansion, such as Hormel’s microwave, single-serve line. Ettinger also mentions the successes of Hormel’s party tray line, the Jennie-O Turkey Store Oven Ready products and a number of burger products in both foodservice and retail.
“There are just a lot of little successes through the company that add up,” he says. Those little successes have added up to solid growth every year, including 2006.
Ettinger’s satisfaction with the results of 2006 fits well with the company’s mantra, as well as his own vision for the long-term success of the company — goals of five percent top-line and 10 percent bottom-line growth each year.
“In my ideal scenario, we wouldn’t necessarily grow much faster than [we have] in any given year,” he explains. “We’ve been a stable, ‘Steady Eddie’ company, and we’re not looking to make some massive gamble or radical change to the business model to get a super-acceleration of growth only to have it derail us. We’d be happy with methodically growing our business at the rates we’re talking about.”
Some would consider those goals aggressive, especially with external challenges, from energy issues to food-safety and health threats among others, cropping up as frequently as they have in recent years. However, Ettinger and his management team believe that open communication and informed employees make hitting those marks a realistic goal.
A Natural fit
Hormel’s recent success hinges greatly upon its ability to innovate and bring new products to the market. As previously mentioned, the motto, “Originate, Don’t Imitate,” reminds employees daily of the overarching strategy at the company.
“[But] it’s not just new product innovation here,” Ettinger explains. “It’s something our engineering group thinks about, our quality-assurance group thinks about; it’s finding better ways to do things no matter what aspect of the business it is.”
Ettinger explains that one of Hormel’s most recent successes, its Hormel Natural Choice line, is a perfect example of how product innovation often comes from necessity in other areas. In the case of the Natural Choice line, Hormel was looking to improve food safety in the production of pre-sliced luncheon meats and ended up with a product that resonated with consumers.
“For us, this was a great example of how innovation started in our research-and-development and engineering areas, looking at high-pressure pasteurization as a food-safety technology,” he says.
Hormel had targeted pre-sliced luncheon meats as an area into which it would have liked to expand, Ettinger explains, but it had to be the right fit and right timing.
“Sliced meats is a large category, but it’s one that Hormel had been a pretty minor player in prior to this, so we’d always looked at that as being something we could do,” he says. “However, we didn’t want to enter it with a ‘me-too’ product. We only wanted to go into that if we truly had a point of difference.”
The development of high-pressure pasteurization at Hormel gave the company just the differentiation it needed.
Typically, Ettinger adds, pre-sliced luncheon meats are one of the more challenging items to produce from a food-safety perspective, because of the increased surface area of the product and processes such as hand-shingling of slices prior to packaging. High-pressure pasteurization gave Hormel the in-package intervention it needed to ensure a safe pre-sliced product.
“Once we had it in place, we asked, ‘Well, now what can we do with this?’ And the answer was that we could now take out any preservatives in products and still retain excellent shelf life and excellent product quality,” he says.
Another draw to using high-pressure pasteurization for Hormel was the fact that, since the product no longer needed the preservatives for shelf-life or food-safety reasons, it would deliver an excellent, unaffected taste, “the true, clean, original taste of the products,” Ettinger says.
Hormel Natural Choice was rolled out first as a pre-sliced luncheon meat, and the company followed up later in 2006 with a non-sliced product line for the deli counter. Ettinger adds that nearly 80 percent of retailers in the U.S. carry the pre-sliced items, and the he expects bigger things as a second wave of advertising hits the market for the product in early 2007. Hormel also announced a rollout of a roast beef item to the pre-sliced line, joining the three varieties of turkey and three varieties of ham already featured.
Ready for innovation
Jennie-O Turkey Store’s Oven Ready line is another product Ettinger boasts about and believes has a strong future ahead of it, based on its uniqueness and early success thus far.
Following the true definition of “value-added,” the Jennie-O Turkey Store division of Hormel developed its Oven Ready Whole Turkey products as a way to boost its place in the commodity-based, classic holidays segment of the market. According to Ettinger, two propositions drove the development of the Oven Ready line.
First, innovation in whole turkeys was necessary in order to break away from the commodity-based marketplace in which it was difficult for processors and retailers to make any money on items. Second, consumers weighed in on turkeys — the preparation, the cooking, the thawing and everything else — and the company listened.
Ettinger and his team were aware of one desire of consumers: freezer-to-oven capability. Consumers were tired of the pain and sacrifice involved in defrosting the bird, especially in today’s world of increased food-safety awareness.
“It used to be you’d leave it out, and then all the food-safety experts communicated that you really can’t do that,” he comments. “So now you’re supposed to take up, at the busiest food holiday of the year, this huge portion of your refrigerator with a turkey for two or three days, and even then it’s not necessarily always defrosted, depending on what your refrigerator is set at? It’s a hassle.”
The second caveat consumers had when it came to whole turkey preparation was more of an unknown among Ettinger and his peers. Consumers simply did not like touching the turkey, pulling out the insides or doing all the “hands-on” preparation involved, including seasoning the bird.
With the Oven Ready line, consumers can avoid all that “hassle” because the turkey is pre-seasoned and only needs holes cut into the oven-ready bag it is cooked in. Ettinger believes paying attention to that second caveat is a big plus for the product and says that sales have accelerated each year. Meanwhile, Jennie-O Turkey Store rolled out two new Oven Ready items in 2006 — a Bone-In and Boneless Turkey Breast — for which Ettinger has high hopes because it builds on a segment that has value-added potential.
“That would be the emphasis: to try to get it in even more applications,” he says. “And there should be a good shot at doing that, because we’ve always had a pretty sizeable, what we call a ‘5-to-9 breast’ — five- to nine-pound, frozen, bone-in breasts. Those would be featured in the winter, usually, at various retailers. … This provides a more convenient version that both the retailer and the company can make a decent return on.”
The Oven Ready products, as well as the Natural Choice lines, show that no matter how long a company has been around, it can be successful so long as it develops innovative products that meet the needs of consumers and retailers. Beyond those lines, Hormel has sunk resources into its shelf-stable, single-serve microwave trays, having installed one new production line in its Rochelle, Ill., plant in 2006, with construction on a second new line under way.
These convenient, grab-and-go products will be featured in Hormel’s new branded-advertising campaign (See “New look for an icon” on this page) and are expected to continue to grow.
One could easily get lost in Hormel’s 1.3-million-square-foot flagship plant in Austin, Minn., if not for the guidance of Mark Coffey, plant manager. Five divisions operate under one roof, employing roughly 1,650 people and pumping out around one billion pounds of product annually.
During The National Provisioner’s visit, a multitude of products were on display, from 4.5-ounce packages of sliced pepperoni for the retail deli, to cans of SPAM, to Always Tender marinated Center Cut Pork Loin Filets, among others.
The entire plant is designed with food-safety and employee morale in mind, says Coffey. Whether it is auto-indexing and auto-loading units that keep product untouched and eliminate repetitive-motion problems for employees, to the pallet lift assist that allows employees to load cartons of Always Tender meats onto pallets at waist level, the entire plant is focused on keeping product and employees safe.
Despite all the automation that takes food-safety and ergonomics into account, the company does have products that need special treatment that only the handiwork of employees can offer. While sliced pepperoni and hard salami were being cranked out by machines two rooms over, employees hand-tied netting on Di Lusso-brand Genoa Salami chubs accurately and quickly. Meanwhile, in the neighboring room, Prosciutto hams cured after being hand-rubbed with the proper spices. On the Always Tender production line, employees manually packed cartons with product by hand.
Further utilization of safety procedures included color-coded frocks for each department, keeping employees from crossing into different departments and potentially contaminating product. Two manufacturing shifts each day are followed by one entire shift devoted to sanitation of the plant.
The jewel of the food-safety emphasis at the plant, however, is the high-pressure pasteurization (HPP) equipment on site. Although most of Hormel’s high-pressure pasteurization is now performed in other plants, Austin’s machine is the original unit that the research and development team used as a prototype.
Water pressure, at 85,000 pounds per square inch, exerts on the product in the unit, killing any bacteria that may have made it into the packaging and to this stage of processing.
The HPP unit in Austin may fly solo at this plant compared to the company’s flagship HPP plant in Osceola, Iowa, but the Austin unit remains an important part of Hormel’s HPP?strategy. During The National Provisioner’s tour, this unit was being used to pasteurize a new product using the FOOL-PROOF™ Oven Ready bag.
Processing and fabrication of an estimated 95,000 hogs per week takes up one division of the plant, while the company’s shipping and distribution center, which processed 1.56 billion pounds in 2006, comprises another division. Aside from the previously mentioned products, the plant’s other three divisions process dry sausage, SPAM, and cured and smoked meats including Hormel Cure 81 ham.
It seems fitting that when Hormel built this mammoth processing complex, it was built on the site of the company’s original manufacturing plant — Hormel is a company with a clear vision for the future, but an eye always on how it attained its success in the past.
Hormel was founded on the premise of “Originate, Don’t Imitate,” and it has continued to live by that mantra throughout its history. Although it has grown exponentially, it has not lost sight of that theory, even through acquisitions and development of new product lines. By staying the course and sticking to the strategies that have produced success for his predecessors, Ettinger has Hormel positioned to continue to build on the momentum it has developed with a balanced, focused product line across many different segments and channels.
Since 2001, when Hormel Foods purchased The Turkey Store and blended it with its Jennie-O Foods division, Hormel has been active in the acquisitions market, especially in the last few years. In that deal, which remains the largest in company history, according to Jeffrey Ettinger, president, CEO and chairman of the board, Hormel learned quite a bit on the tactical needs and strategies needed during any acquisition.
“That got us started in this whole process of studying how to integrate [companies],” he explains of the acquisition of The Turkey Store. “In which cases do you blend companies? In which cases do you integrate the marketing and sales but leave the plant alone? In which cases do you let them continue to run as independent entities?
“So as we made four more significant deals in 2005, and now three or four more deals in 2006, that’s taken a decent amount of time and focus as well.”
Ettinger explains that the acquisition experience has taught Hormel that there are two determinations that have to be made very early in the process, even before the deal is made public. First, how will the new business be run — why was the new entity going to be more valuable as part of the Hormel family than it was as an independent company or division of another company? Second, Ettinger explains, Hormel learned that people decisions needed to be made very quickly as well, regardless of all the other decisions that need to be made.
“We had this laundry list when we started The Turkey Store acquisition, … and within about a week, we realized we had paralysis,” he explains. “Because until you make the management decisions, it’s just [difficult] to get everyone engaged if they don’t even know if they’re going to be part of the team or fit in.
“So you have to decide that right off that bat: who’s staying with you, who is not staying with you and where are you headed in terms of how the company’s going to be managed?”
Through Hormel’s recent acquisitions, management has continued to learn from experience using these tactics, melding some acquisitions into the company, similar to The Turkey Store, or operating them as separate divisions. In the future, this strategy will continue, Ettinger relays.
“I’ve heard others in the industry refer to certain deals as ‘bolt-ons’ — in other words, they’re complementary to areas they are already in. That would accurately describe our primary strategy,” he adds. “We’ve tended to look for items complementary to areas where we’ve already chosen to play.”— Andy Hanacek
New look for an icon
How does a company build a brand that is backed by 115 years of business savvy and is one of the better-known brands in the industry? If you ask Jeffrey Ettinger, president, CEO and chairman of the board of Hormel Foods, he’ll tell you to unify and make it more with the times.
That is Hormel’s 2007 plan of action where the Hormel brand is concerned. Stopping short of calling it a “relaunch” of the brand, Ettinger described to The National Provisioner the new look of the logo and the efforts to unify all the products under the Hormel umbrella, to better connect with consumers loyal to different divisions of the brand.
“They’re all Hormel-branded items to most consumers,” Ettinger says. “But we did some research that indicated that if consumers did cross-shop and understand that the Hormel brand had a broad umbrella to it, those were excellent consumers for us.
“But there were still a lot of consumers that were very familiar with Hormel Chili but were unaware of or didn’t buy [Hormel-branded items] in the meat area, for example.”
Seeing this as an opportunity to enhance sales across the board, Hormel made the decision to devote time and resources to unifying the brand across the different segments it serves. In 2007, Hormel is rolling out a new brand mark with more consistency in the placement of the logo and how the rest of the package is labeled. Even with the redesigned logo, items will still retain their individual personalities on the packaging, Ettinger explains, in the hopes that consumers will remain loyal to the products they love but make the connection to items they may not have tried.
Hormel’s other large brands (Jennie-O Turkey Store and SPAM, for example) will also have significant advertising efforts working for them, as will the rest of the brands in the company, but the rollout of the new Hormel look will be the top advertising priority for 2007. — Andy Hanacek
Supplier excellence awarded
Hormel Foods knows all about challenges. The company has gained successful results by challenging its employees to “Originate, Don’t Imitate,” and through programs such as The Billion-Dollar Challenge.
But using a challenge to get great results doesn’t end at the employees. Each year, Hormel awards its best suppliers, as decided by its supplier quality management (SQM) committee, with the “Spirit of Excellence” Awards. The awards, doled out each spring for the previous business year, honor suppliers who meet or exceed specific requirements established by the SQM committee. For the 2005 year, 51 suppliers in the areas of provisions, purchasing, logistics and engineering were chosen to receive an award.
But the recognition for suppliers doesn’t end there. If a supplier wins a Spirit of Excellence Award at least four times within a designated five years, that supplier has met one of the criterion for a Hormel No. 1 Award, given once every five years. Hormel No. 1 Awards were given to 22 companies in September 2006, the third time Hormel doled out this award to its suppliers.— Andy Hanacek