Estrategias De Marca Las Mas Populares

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NTHESPOTLIGHT

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Hormel Finds a Great Fit in Its
Ac:quis'it'ion of Thve Tugrkey St:ore
By Joan Harrison
n the biggest acquisition in its 110year history, Hormel Foods Corp.
recently bought The Turkey
Store Co. for $334.4 million. The
acquisition solidifies Hormel's leading
position in the turkey market and
offers opportunities for improved distribution capabilities and newproduct
introductions.
Although Hormel may be best
known for its pork-related products,
such as Spam and Cure 81 hams, and
canned meat products, like Hormel
chili and Dinty Moore stews, the
company's
Jenmie-O
Foods Inc. division is the
world's largest
turkey processor, ahead of
ConAgra,
which owns the
Butterball
brand, and
Cargill Inc.,
with its
Honeysuckle
White and
Riversideturkey
brands.
Jennie-O, based in Wilhmar,
Minn., has sales of $700 million and
The Turkey Store generates sales of
$309 million. As a result of the acquisition, Jennie-O now has a $1 billion
turkey business and controls about
18% of the $5.5 billion turkey market.
Since the two companies have
developed strengths in different segments of the turkey market, they
have very complementary product16

* MERGERS & AcQuISITIONS

lines. While The Turkey Store's
strength is in fresh, boneless turkey,
particularly ground turkey, Jennie-O
specializes in processed turkey products - including turkey franks,
turkey ham, and frozen turkey burgers - for retail, food service, and deli
operations. As people
become more health conscious and choose to buy
lower-fat meats, the combinedcompanies will be well positioned to offer products through a
variety of channels.
George Dahlman, a food industry
analyst at U.S. Bancorp Piper Jaffray
who
closely
follows
Hormel,
thinks
that the
deal
makes a
lot of
sense and
will
improve
distribution capabilities
and lead
to new
product development. He adds that
JerryJerome, chairman and CEO of
The Turkey Store, is a talented foodmanager.
In a printed report, analysts at
Prudential Securities said that "a
meaningfuil turkey acquisition at seven
times EBIT-DA" looks good to them
and that Hormel's "long-awaited move
to leverage its pristine balance sheet"
makes sense.

"Hormel has been conservative in
the past about making acquisitions and
was waiting for the right deal to come
along, and we certainly believethat
this is the right deal. Turkey is a segment that Hormel had chosen to compete aggressively in, and the right
company became available
at the right time," says Jeff
Ettinger, President of
Jennie-O.
While becoming a bigger player in
the market was a driving force behind
Jennie-O's growth strategy during the
1990s, Ettinger notes, the pursuit of
scale was not the company's top priorityin making the Turkey Store acquisition. At the beginning of the 1990s,
Jennie-O operated the sixth-largest
turkey business in the country, he says.
To put itself in the best competitive
position going forward, the company
decided to build scale in order to help
it grow from a regional player into a
national one. Over a 10-year period,
the company moved from the number
six position to thenumber one position in the market.
During that same time period, The
Turkey Store pursued a different strategy, says Ettinger. It discontinued its
bag turkey business and decided to
focus on fresh, boneless turkey products. "As a result, the company now
has a higher level of profitability on a
smaller sales base," he states.
When WLR Foods Inc., the seventh-largest poultry company in thecountry, was up for sale last year,
Ettinger says that his company passed
on buying it. "WLR, with its
Wampler brand, was the fourthlargest turkey company in the U.S., so
it was significantly larger than The

INTHESPOTLIGHT

Turkey Store, but we really didn't
consider buying it, because it was not
a very good fit with our operation.
The Turkey Store is a great fit with
Jennie-O, and...