Hormel Rises on the Food Supply Chain With Alternative Proteins and -- Wait for It -- Pumpkin Spam?
Hormel Foods is wisely setting itself up for a lucrative future by maintaining a low debt load, avoiding risk by taking on sustainability concerns, and exploring alternative proteins.
Caroline Banton, The Motley Fool
Sep 9, 2019
The protein industry is set to be disrupted in 2020 according to the 2019 Farm Animal Investment Risk & Return (FAIRR) Index, and if the sudden rise of "Beyond Meat" and other copycat start-ups is anything to go by, the disruption is already here. The FAIRR Index looks at food companies' resilience to challenges such as antibiotic use, food safety, sustainable proteins, and animal welfare. And Hormel Foods Corporation (NYSE:HRL)is one company that is already embracing alternative raw materials.
The risks facing food producers in 2020 and beyond
The main takeaway from the FAIRR Index is that the best food sector investments will be in companies that recognize the growing demand for sustainable practices. Such companies are expected to face less risk because they will mitigate their exposure to environmental and associated economic threats.
For example, whether or not you agree with climate change experts, new research shows that food companies' bottom lines are being affected by changing weather patterns. These patterns affect crop yields and market prices. Cal-Maine Foods reported a 30% decline in revenues in the last quarter of the year alone, which the company attributes to extreme weather.
According to Peter Van der Werf , engagement specialist and sustainability expert for Coller Capital, the goal for sustainability and continued profits is for producers and investors to avoid meat and fish as protein sources as much as possible.
Already, meat alternatives are one of the fastest growing plant-based segment categories with vibrant activity from both start-ups and established food companies. In 2018, plant-based meats sales grew by 20% compared to an increase of just 8% in 2017, according to Nielsen data.
The dramatic uptick in growth in the demand for alternative meats is evident, and Hormel is responding to that demand.
Hormel continues to produce niche products
The 2019 Coller FAIRR Protein Producer Index 2019 highlighted Hormel for best practices for water usage and the only company that has established a sustainable agricultural policy that extends to feed-grain growers. In early September, Hormel launched a plant-based alternative Happy Little Plants™ brand at Barclays Global Consumer Staples Conference.
Hormel has been ahead of the curve on the alternative protein front as The Happy Little Plants brand builds on blended protein innovations that started back in 2014. Almost six years ago, the food producer launched the Hormel Fuse burger in the company's foodservice business. After the success of the Fuse burger, Hormel expanded is plant-based offerings to include pizza toppings and the Applegate Blend Burger. Little Plants products will be distributed to select retail outlets with expansion planned shortly.
A look at the company's press releases shows a company with a strong pipeline of new and exciting products to keep the consumer interested. From squeeze-pouch peanut butter to pumpkin spice flavor SPAM (yes, you read that right), the ideas keep coming.
No debt, no problem ...
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