Most of our coverage of California’s Proposition 12 law has centered around how it will impact egg producers in the United States.
But we shouldn’t forget about its impact on pork producers, such as Hormel Foods and its growers, as well.
Hormel, in addition to being the parent company of Jennie-O Turkey Store, the second largest turkey company in the United States, is also one of the largest pork producers in the country.
Proposition 12, passed by a ballot initiative in 2018, calls for all eggs produced and sold it California to be raised in cage-free housing systems by 2022. It also calls for pork produced and sold in the state to come from farms that allow all breeding pigs 24 square feet of floor space by that same timeline.
While participating in the Barclays Global Consumer Staples Conference on September 8, officials from Hormel Foods were asked how that law would impact the company.
Glenn Leitch, Hormel’s executive vice president-supply chain, said the company and its growers are anticipating changes, and are in the process of adapting to those changes.
“From my perspective, it is a moving target that the rules are being interpreted today, and so we’re paying attention to what that means. Producers will incur some added costs; they likely will have to go to their banker to be able to get some financing to make some changes on their farm sites. The date we have to comply by is January 1, 2022, unless something changes, so that’s all in motion. From a Hormel perspective, we’re going to add some complexity to our supply chain,” said Leitch, who also is formerly the president of Jennie-O Turkey Store.
“We’re going to have segregation in our plants, so we do that today with other items, but this will be another layer of complexity. We also likely are going to look at our SKU counts a little bit differently due to the regulations and how we distribute it to our customers. But at this point in time, we understand the date and the deadline, trying to make sure we understand the rules, and we’re ready to comply by that point in time.”
Jim Sheehan, Hormel’s chief financial officer and executive vice president, added that the company has been analyzing the potential financial impact, and is “quite confident that this will have an immaterial impact to Hormel.”
However, Sheehan also said Hormel expects “the cost involved with Proposition 12 will have an inflationary impact on products going into California.”