US food group Hormel Foods has the capital to expand through a merger or acquisition in the future, CEO Jeffrey Ettinger said today (20 August).
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Speaking on a conference call, Ettinger (pictured) said Hormel had both the “business platforms” and the “capital availability” to expand on an M&A basis.
“We know we have been much quieter over last couple of years …it hasn’t been deliberate…it just works that way sometimes. The opportunities that we see sometimes for family-owned businesses can take years worth of discussions to reach the right point and then deals that come from the investment banking industry are quicker than that.”
In June, Hormel formed a 50-50 joint venture with Herdez Del, establishing MegaMex Foods to market Mexican foods in the US.
With a number of brands, including Chi-Chi’s, Herdez, La Victoria, Embada and Dona Maria, MegaMex will initially generate revenue of around US$200m.
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By GlobalDataEttinger said the venture represents an investment in an area that it has shown the company is committed to.
“We think the scaling up of MegaMex can accelerate the growth of grocery products….and will allow us to provide a full portfolio of products in that area. We do have other ethnic items in the portfolio and we certainly keep our opportunities open.”
However, Ettinger said the company was keeping an eye on the recent growth in demand for private label.
“We are making as strong an effort as ever to make sure we keep our brand out there. What seems to be happening in the market place is that growth in private label is accelerating. The stores move to leading brands, to private label and maybe not a whole lot else but, in our categories, we benefit from being the leading brand so we make sure we stay that way.
“There are areas where the value is in the eye of the beholder. That said, we have to keep our eye on the significant growth that has been going on in private label.”
Ettinger added that Hormel was open to looking, “on a strategic basis” at a possible “pick-up” of private-label businesses in the future but said the company was not interested in competing against itself.
“We don’t want to create a private-label category against ourselves, we need to give our marketing team a very strong good head start in creating a strong branded franchise in those areas until we think, no we’re not interested in doing that high-pressured pasteurisation. We’re not really interested in being a private-label supplier to compete against ourselves.”
