Hormel Foods has initiated a lot of changes for its Jennie-O Turkey Store subsidiary, and those changes are already producing promising results.
Jim Snee, Hormel Foods president, chairman and CEO, highlighted some of those changes, through comments included in both a press release and a quarterly earnings call on March 1.
Hormel had earlier announced plans that it hoped would improve Jennie-O Turkey Store’s financial performance. Among those are integrating the company’s business functions into the greater Hormel Foods company, putting more focus on consumer demands and becoming much less of a commodity-driven business.
For the first quarter of fiscal year 2022, the Jennie-O segment finished a highly successful period, with profits up 62% and net sales up 15%.
"We continue to take transformative actions at Jennie-O Turkey Store and are starting to see the benefits," Snee said. "We have a plan for the integration of all business functions into the broader Hormel Foods organization, including our supply chain, selling organization and marketing team. Our actions will lead to a more demand-oriented and optimized turkey portfolio that is better aligned with the changing needs of our customers, consumers and operators. This is expected to result in improved long-term growth, higher profitability and lower earnings volatility."
Beginning in the first quarter, the Jennie-O Turkey Store team implemented a program to optimize the company’s commodity portfolio while simultaneously increasing investments into branded, value-added products. Additionally, the company integrated the Jennie-O Turkey Store and Hormel Foods research and development teams.
The company also plans to integrate other business functions, such as the selling organization and marketing teams, into the broader Hormel Foods organization by the start of fiscal 2023. In addition, the company will integrate the Jennie-O Turkey Store supply chain into the broader Hormel Foods One Supply Chain by the start of fiscal 2023.
The company previously announced that it would close one of its two plants in Willmar, Minnesota – the one located on Benson Avenue. Snee said the closure of that facility is on pace to occur during the second quarter of fiscal 2022.
As these changes take place, Hormel expects the Jennie-O Turkey Store business to deliver higher growth and profitability along with other financial benefits, including increased asset efficiency, higher manufacturing throughput, better labor utilization and avoidance of capital expenditure, Snee explained. The expectation is that these changes will drive selling, general and administrative cost synergies of as much as $30 million annually by fiscal 2023.
While Jennie-O Turkey Store’s net sales and profits were up for the most recent quarter, volume wad down 3%, which the company said was largely due to lower commodity volumes as a result of labor shortages.
Also during the earnings call, Snee highlighted the current success and momentum of its Applegate natural and organic meats subsidiary.