Dive Brief:
- Hormel experienced a rough quarter in its retail segment, with a 7% year-over-year decline in net sales, a 5% drop in volume and a 14% decrease in profit, the company said in its second-quarter earnings report on Thursday.
- CEO Jim Snee pointed to gains in snacks as a sign of optimism, as Planters and Corn Nuts posted volume and category share gains. He said the company is doubling down on its snacks business. Net sales for Spam, Applegate meats and Hormel’s Black Label bacon increased during the quarter.
- The company attributed a large portion of its decline in retail to turkey, a category facing uncertainty with high costs and less demand as bird flu impacts commercial flocks.
Dive Insight:
Hormel, best known for Spam, Justin’s and Jenny-O, is facing pressure from bird flu and an inflationary environment where consumers are more selective about what they purchase.
Snee said on the company’s earnings call that Hormel expects the turkey market to be weak for the rest of the year. This impacts the company’s guidance for its Jennie-O turkey products. He said the Minnesota firm also is seeing softer demand for some of its canned and convenience food items, along with some of its items in ethnic food groups.
“We are also seeing similar softness across the global flavors vertical and within the Mexican categories in which we compete. These trends are not entirely new, and our teams are actively working to address this in the back half of the year,” Snee said.
He added that the company is doubling down on its snacks strategy with new product launches, including Planters Salt And Vinegar Cashews and Corn Nuts Loaded Taco flavor. Hormel added these brands to its portfolio as part of its “transformative” $3.35 billion deal with Kraft Heinz in 2021.
The meat and snacks giant also pointed to a stronger performance in its foodservice unit, with single-digit percentage point gains in sales and volumes compared to the same period in 2023.
Large poultry companies such as Hormel continue to deal with supply and demand fluctuations due to factors like bird flu and pricing. The company previously announced plans to invest $250 million into its supply chain during the next three years to modernize it.
In a note to investors on Thursday, a JPMorgan analyst said despite Hormel’s retail sales declining, the company has showed signs of improving its margins outside of turkey.