Startegic Management Final (Strategic Plan)

Running Head: MODULE 4-HORMEL SWOT ANALYSIS 1

MODULE 4-HORMEL SWOT ANALYSIS 7

Week 4 Written Assignment-

Hormel SWOT Analysis

Author Note

This assignment for Week 4 Written Assignment-Hormel SWOT Analysis is being submitted on October 29, 2017, for Christopher Zombas’ B460/MAN4720 Section 01 Strategic Management Fall 2017 course.

The Business

Hormel Foods Corporation (Hormel Foods) is one of the leading American food processing companies that is based in Austin, Minnesota (in the United States). The company was founded in 1891 by George Hormel which later changed its name to Hormel Foods in 1993 and ever since, the company has recorded various successes in the food processing industry up to now. It has over forty stores located in different parts of the United States and across North America. They manufacture and market branded value-added meat and food products. Their main products include Deli Meat, pantry, ethnic foods and spam among others. Its average revenues as posted in its 2016 financial reports were $9.52 million making the company one of the biggest players in the food processing industry in the United States.

Strengths

Hormel Foods’ main strengths include their strong Research and Development capabilities, the company’s strong focus on the quality of ingredients, and their steady financial performance.

Hormel puts significant resources towards its R&D activities. The company is committed to developing new innovative products and redeveloping or improving existing products. An example of Hormel’s R&D innovative advancements is in April of 2014 the company launched its Hormel Compleats breakfast line of products. This new product line was the first shelf-stable microwavable breakfast meals category to include real eggs. The company kept in mind the time-constrained consumers looking for quick and healthy breakfast options. Hormel Foods Corporation has strong Research and Development capabilities that enable the company to introduce new and improved products frequently.

Hormel’s intense focus on the quality of ingredients is another of the company’s strengths. Hormel’s multifaceted supply chain containing suppliers for hogs, turkeys, ingredients, packaging materials, and transportation allows the company to buy the majority of its raw materials, equipment, and services located locally within the regions where they manufacture their products.

The company also maintains a Supplier Quality Management program which measures its suppliers based on quality, delivery, service, technology, and price. Hormel’s ingredient suppliers are subjected to additional measurements in order to ensure the quality and food safety of their supply chain. If any of their suppliers do not comply with the company’s standards, appropriate action is taken and/or may result in the termination of the partnership. With their strong focus on quality, Hormel can compete with others in their market and industry effectively.

Hormel’s steady financial performance is a strength for the company. They have recorded a consistent growth in its financial results in the last few years. Hormel recorded consistent growth in its profitability over the last few years as well. Steady financial performance provides financial stability to them. Having a steady financial performance allows the company to seek more growth avenues in the future.

Weaknesses

Dependence on few customers as well as their dependence on protein are Hormel’s biggest weaknesses.

Hormel’s five largest customers in each segment contribute a significant percentage of the company’s sales. The loss of one or more of these top customers in any segment could have drastic effects on the company’s total sales. As well, if Hormel is not able to sell its products to these select groups, then it may not be able to find suitable alternatives for selling their products in time to avoid spoilage, etc. Dependence on few customers could, therefore, affect the company’s sales and thereby its revenues.

Hormel’s dependence of protein items such as pork and turkey could be one of the company’s weaknesses. If there was a study that found that pork or turkey themselves were unhealthy or causing illness or disease, the company could face a potentially significant setback. Also, customer preference or tastes may change or deteriorate for these proteins. Weather, natural disasters, or disease may affect these livestock markets which could drive the price for hogs and turkeys way up. This would have a negative effect on Hormel’s profits and revenues.

Opportunities

Hormel’s opportunities include a growing foodservice industry, increasing popularity of natural and organic food, and increasing online retail spending.

The U.S. foodservice industry is expected to continue a steady growth over the next few years. The restaurant industry has witnessed consistent sales growth in the past few years as well. Hormel offers a wide range of products to retail, foodservice and fresh food customers. The improved outlook for the foodservice sector, one of their key customers, would lead to increased revenues for the company.

The demand for natural and organic foods has increased over the years due to increased awareness about the importance of natural foods in the diets. This growth trend is expected to continue. Parents are focusing on providing healthier food options to their children which has helped push the purchasing of organic foods. Consumers are showing their trust loyalty to organic products. Hormel’s Natural Choice brand offers products such as deli meats, dinners, chicken breasts, etc. that do not contain any preservatives or artificial colors. Increases for consumer preferences of natural foods will have a positive impact on the company.

E-commerce sales in the U.S. have been growing significantly over the past few years. Hormel products can be purchased online via food delivery services such as Amazon, Walmart grocery, Cub Foods, or Hyvee food delivery options. The positive trend in online retail spending can be leveraged to strengthen the company's sales further and improve its revenues by getting more of its products to those that previously may have been unaware of their large selection.

Threats

Stringent regulations, rising labor costs in the U.S., and a shift towards vegetarianism in the U.S. are all threats to Hormel.

The manufacturing food products industry is highly regulated in the U.S. Be it new or increased regulations from the U.S. Department of Homeland Security, the U.S.D.A., the U.S. Food and Drug Administration (FDA), or others, Hormel may see increased costs of doing business. The company also has to follow directions from other agencies such as the federal and state taxing authorities, and other state and local authorities that oversee workforce immigration laws, tax regulations, animal welfare, food safety standards as well as processing, packaging, storage, distribution, advertising, and labeling of their products. Hormel’s operations are subject to stringent federal, state, and local environmental laws and regulations pertaining to the discharge of materials into the environment, and the handling and disposition of wastes. Any changes in these regulations may impact the company’s compliance cost structure.

Labor costs have been rising significantly in the U.S. The federal minimum wage increases affect the company. Many states and municipalities have minimum wage rates that are even higher than the federal minimum wage rate due to the higher cost of living in those areas. Hormel’s cost structure will be negatively affected by rising labor costs, which could impact the margin expansion adversely and affect the company’s profitability.

In the U.S. the vegetarian food segment has been increasing. Vegetarians replace meat, beef, and eggs in their diet. Consumers in the U.S. are making changes to their diets from non-vegetarian to vegetarian (at a rapid pace) due to the growth of hypertension and obesity in our country. With Hormel offering an abundance of meat products such as pork, beef, deli meats, sausages, and pepperoni, this growing vegetarian customer base could negatively affect their sales and revenues.

References

Ciura, B. (2016, November 18). Dividend aristocrats in focus Part 45: Hormel. Retrieved from http://www.suredividend.com/dividend-aristocrats-hrl/

Hormel Foods Corporation. (n.d.). Inspired people. Inspired food. Retrieved October 29, 2017, from http://eproxymaterials.com/interactive/hrl2016/

Yahoo Finance. (n.d.). Hormel Foods Corporation (HRL). Retrieved October 29, 2017, from https://finance.yahoo.com/quote/HRL/financials?ltr=1

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