Hormel CEO on major sales growth, college assistance program, COVID-19 response

Jim Snee, Hormel Foods CEO, joins Yahoo Finance’s The First Trade with Alexis Christoforous and Brian Sozzi to discuss its recent fiscal third-quarter earnings report, potential M&A activity and innovation at the company, the launch of its college assistance program and much more.

Video Transcript

ALEXIS CHRISTOFOROUS: Hormel Foods hopes to keep the momentum alive after posting blowout earnings and record sales in its fiscal third quarter. Brian Sozzi and I had the chance to sit down with Hormel Foods CEO Jim Snee to discuss those results and to find out what the company behind Spam and Skippy peanut butter has planned for the future.

JIM SNEE: When you think about brands like Black Label bacon, Hormel pepperoni, Applegate, really a nice mix center of the store and the perimeter of the store. Our international business, very, very strong. Our business in China has rebounded nicely since-- since they've entered the recovery phase. So really, a nice mix of growth across the business.

We did see some recovery in our food service business in the quarter. But the recovery isn't enough to overcome last year's numbers, so we're still trailing behind. But you know, as the food service industry continues its recovery, we'll continue to see growth in that business as well. But all in all, just an absolutely great quarter for the team.

ALEXIS CHRISTOFOROUS: You ticked off some of the names of well-known products we all are very familiar with, like Skippy and Spam. But what about new products, perhaps, that we might see come the fall?

JIM SNEE: Just this quarter, we introduced a number of new Skippy items, a squeezable Skippy item, a protein-- plant-based protein added Skippy item. So we've really continued the innovation march. And as I've looked at the pipeline going forward, it's really exciting. We haven't missed a beat.

One of our corporate key results is we hold ourselves accountable to having 15% of our sales come from items innovated in the last five years. And we've met that goal for-- for this year already. And I mean, again, it's just a testament to our team's ability to continue to deliver results in this uncertain times that we're in.

BRIAN SOZZI: Jim, you have a lot of, I think, folks that cover your stock. They're-- they're starting to buzz about a potential acquisition by Hormel. In June, you took out $1 billion in debt. And you start-- you mentioned on the earnings call that conversations on this front have started to begin again. Where are you looking? And is something possible before year-end?

JIM SNEE: Yeah, I mean, that's-- that's hard to say, Brian. We entered into the pandemic, I think everyone was really just trying to figure which way was up, right, and make sure their business was surviving. And so a lot of that activity went on pause.

But as-- as companies have figured out how to navigate through this-- this new normal, if you will, those conversations are starting-- starting to pick up. And as-- you know, as we think about our strategy for M&A, what's great is we have such a broad portfolio. We can-- we can acquire brands, iconic brands in center of the store. We can acquire brands in retail refrigerated. We can acquire brands with a international flair.

So-- so really, I mean, we're unlimited in terms of the types of businesses that we're looking at. But we're also always going to be really, really disciplined in how we think about the M&A process. And you referenced the billion dollars, and that really does give us a lot of flexibility. I mean, clearly it gives us liquidity.

You know, we did it early on, just to make sure that we maintained a very strong cash position. We had a lot of cash, but we wanted to make sure that we had even more. And now as we get to the other side, it gives us that flexibility to say, you know, if the right acquisition's out there at the right price, again maintaining our discipline, we'll be able to do what's right for the company.

ALEXIS CHRISTOFOROUS: Certainly a nice position to be in, Jim. Speaking of what's right for the company, you-- you started a program, you're calling it a college assurance program. Tell us a little bit about this. It's for employees who have children college age. It's helping to give them some assistance on paying for their kid's education. How does that work?

JIM SNEE: It's our Hormel Foods Inspired Pathway program, and we've been working on it and thinking about it for quite some time. But with all the social unrest that we saw earlier this summer, it really accelerated our desire to get this program out in front of our team members. And so as we think about, you know, equality and how we can make a difference in our team members' lives, equality and education is something that we're really, really focused on.

And so making sure that all of our front line team members, all of our team members, but especially those front line team members, because we do have a diverse workforce from a variety of backgrounds and cultures who maybe haven't been to school themselves, and so affording them the opportunity to give to their children, and their children can go to a two-year community college free of charge, that's life-changing.

BRIAN SOZZI: You mentioned on the earnings call, you recently did a survey of your workers, and it was a stunning stat. 98% of your workers are wearing masks outside of working-- when they are at work for Hormel. How-- why do you think that's the case? I know for a fact that is not the case in most companies right now.

JIM SNEE: Yeah, well-- well, Brian, it's all about the education process, right. So we've-- throughout this pandemic process, we've put safety first for our team members. And part of that is making sure that they understood the implications of what's happening, not only in the community, but in their households and in our facilities, and making sure that they knew they had an obligation, as well, to keep COVID out of their households, out of the community, and to not bring it into the plant. So we created an education program, and it's a simplistic name-- Keep COVID Out, but I will tell you it's a program that's resonated with our team members and with so many others in the industry.

ALEXIS CHRISTOFOROUS: Keep COVID Out. I can get behind that. So Brian, we also spoke to Jim Snee about how they're keeping up with demand, because you remember, they-- they supply the big-box retailers like Target and Walmart, and he said they were doing pretty-- pretty well on that front.

BRIAN SOZZI: Yeah, Alexis, there's been a tremendous boom in people buying food on demand. Target, Walmart, and, of course, Amazon and companies like Hormel, PepsiCo, Coca-Cola, they keep those orders flowing. Snee did say no problems meeting demand from that standpoint. But it was noted on their conference call, Alexis, that they are seeing some labor shortages because of COVID-19, and that is putting some stress on the number of products they can get into retailers. Certainly a situation worth monitoring in the months ahead.