AUSTIN, Minn. — It’s a party at Hormel Foods these days in the wake of its $3 billion acquisition of the Planters peanuts, Cheez Balls and Corn Nuts brands, its largest ever deal.
Jim Sheehan, Hormel’s executive vice president and chief financial officer, said adding the Planters snack brands to Hormel’s meat trays, Chi-Chi’s chips and salsas, Hormel Chili, and Hormel Pepperoni means that soon Austin, Minnesota's Fortune 500 company will dominate any gathering like a Super Bowl party.
“Now that we have the nut section, you could have a complete social event and never buy a product outside of Hormel’s brand,” he said.
This deal, which is expected to close in the second quarter, shows Hormel’s hunger for the "high-growth area of snacking,” according to Sheehan.
“Snacking is significant. This will give us a number brand in the nut category,” he added.
This adds more non-meats to Hormel’s portfolio. When this deal is done, 25% of its retail sales will be of non-meat products.
Of course, Hormel still has a meaty center with its more than 80-year-old Spam product line, which, despite its age, has been racking up record sales for the past seven years.
The Planters brand has an almost 100% recognition with consumers, but Hormel wants to breathe some new life into it. Hormel first identified Planters as a possible acquisition at a strategy meeting in 2016. Talks with the Kraft Heinz Co. about buying Planters started before the COVID-19 pandemic began in early 2020.
While Hormel is known for regularly buying popular brands in the grocery aisles, this deal is on a much larger scale than any it has ever done. In the past five years, it has spent a total of $3 billion buying up small companies.
“This is a goal we’ve had for a long time. … to make a very impactful acquisition in the 3 to 4 billion range,” said Sheehan. “The genesis of this goes back when we bought Skippy. … We’re an important player in the peanut business.”
Hormel believes that legacy brands, such as Planters or even Spam, can be preserved, while also being updated and expanded. The company has been working to create new products, such as Skippy squeeze peanut butter and its plant-based Happy Little Plants line. Rapid innovation is part of the company’s overall strategy.
Of the all products that Hormel sold in 2020, 15% of them did not exist in 2017.
Adding Planters to its collection of brands won’t spur any direct changes at the Austin production facilities, but Sheehan said it will benefit Austin.
“We are very committed to the community that we are in and this will make us a stronger member of the community,” he said. “All of a sudden, Austin, Minn., is not only a major player with Spam, chili and pepperoni. It is now a major player in the peanut business.”