Written by: Kyle Stock
|% Daily Value*|
|Word Count 2441||14%|
|Est. Reading Time 13 min.||17%|
|Est. Speaking Time 20 min.|
|Dale-Chall Readability Index 10.5|
|Flesch Reading Ease Score 50.9|
|Publish Date||August 15, 2016|
* Percent Daily Values are based on a 24,000 word-count. Your daily values may be higher or lower depending on your reading preferences
The only futuristic thing at the Spam plant two hours south of Minneapolis are two 130-foot-tall robots that grab pallets full of cans—giant cubes of cubed meat—from high up in the rafters and swing them down to a loading bay.
The rest is innovation circa 1970, or earlier. The whole place, just across the street from the corporate headquarters of its parent, Hormel Foods Corp., is dim, warm, and smells like a grade-school cafeteria. There’s a massive seven-story oven where the sealed cans are cooked: legions of pneumatic arms tirelessly grab and fold boxes, whirring cylinders unwind giant spools of garish labels, and a few workers huddled at the end of the line wearing hair-nets (and occasionally beard-nets) stack packages onto palettes.
Don’t bother asking to peek behind the giant, towering wall where the pork parts are actually chopped into a slurry. “We just don’t let people do that,” says plant manager Tim Fritz.
Once chilled to 28 degrees and pumped into cans, the product slides along a metal track, snaking through the jaundiced facility like the world’s longest and saltiest toy train: SPAM SPAM SPAMSPAMSPAM SPAM SPAM SPAMSPAMSPAMSPAMSPAM SPAMSPAM SPAM
Some 250,000 cans clicking along every day, six days a week.
Spam, more than any other product, defines Hormel. Through its 125-year history, the company’s strategy has been simple: protein, preferably with a long shelf life. Its other brands—Dinty Moore beef stew, Mary Kitchen hash, Real Bacon toppings, Herb-Ox bouillon cubes and its eponymous chili—sound like the shopping list for a Cold War fallout shelter.
In 2014, Hormel filed a patent for a meat sandwich that lasts longer than 14 days. As Chief Executive Officer Jeffrey Ettinger put it, Hormel maintained “a very American-dominated portfolio with a lot of kind of traditional American food type items.”
This is not, in short, a brand given to taking risks or chasing trends.
But around 2007, Hormel quietly embarked on a venture that would take it deeper than it had ever been into the cupboards and kitchens of Americans, many of them immigrants, many of them young. It led to a series of acquisitions and a blitz of research and development that helped round out its pantry of products and inoculate it against the fickle modern food trends of a kale-and-quinoa world.
One of the first things it did was hire an anthropologist.
Tanya Rodriguez was finishing up her doctorate at the University of Wisconsin when she ran across the listing on her department’s job board. The name “Hormel” popped out at her immediately.
Rodriguez, now 42, knew the brand well. Her childhood hadn’t been easy — her mother, a single parent, struggled to raise three kids on her own. Rodriguez spent much of her youth as a second parent to her younger siblings. For her, Hormel didn’t evoke slaughterhouses or meat-slinging robots. It was nostalgia: cooking dinner for her younger brother and sister, her grandparents’ kitchen in San Antonio, Tex.
“The reason I even applied was my grandma’s Spam and eggs,” Rodriguez says. “That’s my gente, that’s my people.”
For all the white-bread-Americana of its portfolio, Spam is an international food, a staple in some 44 countries from the Philippines to England. In Hawaii, it’s a substitute for fresh tuna. In South Korea, a little tower of Spam cans is a traditional holiday gift, a vestige of U.S. military rations during the Korean War. Hormel has long known about those cultural appetites. But about a decade ago, executives started to lose track of exactly how their products were being used in the home market. They began to suspect shelf life might be shrinking.
In the 10 years that ended in 2007, the foreign-born share of the U.S. population swelled, from 9.7 percent to 13 percent. And for the first time in history, more than 100 million U.S. residents were under the age of 25. To consumer-facing companies, these were two of the most attractive demographic groups. Both were massive and offered what consultants call great lifetime value: These people weren’t likely to stop eating anytime soon. Yet they weren’t inclined to answer a phone survey or sign up for a focus group to share their eating habits.
Hormel was struggling to reach them. In 2004, it launched four “ethnic” prepared meals under its eponymous brand, including “Szechuan-style beef strips” and “Southwestern Pork Carnitas.” The trays sold poorly and were yanked from shelves in 2006.
“We knew that traditional marketing insight work would not apply here,” said Jim Splinter, vice president of grocery products. Hormel would have to find these people in the field. That’s where Rodriguez came in.
Hiring an anthropologist has become a common move for consumer-facing companies. But a decade ago, social scientists were just beginning to gain favor in corporate human resources departments. Car companies were fond of them, as were tech companies. In both cases, watching regular people interact with an intricate product proved invaluable to whip-smart engineers who didn’t find their creations all that complicated.
Food, however, was different. It sells with a jingle, not a user manual. “At the time, it required a good bit of lateral thinking,” says Scott Aakre, Hormel’s vice president of new product development.
After Rodriguez applied, Hormel flew her out to its headquarters in Austin, Minn. This is where Hormel executives spend most of their time: a town with 24,000 residents and sparse restaurant options. If one were on the hunt for the country’s next hot eating trends, Austin, Minn., might be one of the last places they would look. There’s Hardees, Perkins, a couple of taco joints, and Piggy Blues BBQ, where one can order deep-fried sticks of Spam. When Chief Operating Officer Jim Snee celebrated his birthday in April, his wife chartered a bus to take a group to Butcher & the Boar about two hours away in Minneapolis, where they could order peanut butter-stuffed jalapenos and ribs smothered in tabasco molasses.
It was nothing like the food environment Rodriguez grew up in. But Hormel’s hiring team was particularly intrigued with her research. Her dissertation was on medical pluralism, how different cultures quickly adopt each others' folk cures. A person battling something such as pancreatic cancer, she found, might supplement chemotherapy with Santeria or some other form of ritual healing, even if the spiritual practice wasn't culturally familiar. Hormel realized that she might be able to find similar insights into how people adapt their diets.
With an agreement to let her finish her doctorate, Rodriguez was hired for her first Hormel project: Embed at Michigan State University and follow students from class to keg parties and poetry slams.
Though Rodriguez interviewed students and wasn’t exactly undercover, she lived in a dorm and spent much of her time just observing and taking notes. “It was a fly-on-the-wall view," she says, "and it was amazing.”
It turns out that the challenge for Hormel among teens and twentysomethings wasn’t fruits or vegetables or even snacks; it was smartphones. Apple Inc.’s iPhone had just come out, and nearly every student Rodriguez saw eating was doing so with one hand, swiping through texts and social media accounts.
She reported what she observed, then hit the road for Hormel, poking around people’s pantries, scoping out regional grocery stores, and eating incessantly. She helped one of the country’s largest retailers overhaul its deli-meat display. She crisscrossed the Midwest in a rental car, chatting with farmers and truckers at convenience stores about what they ate on the road. And she hunkered down with a financially strapped woman who was having a “staycation” in Kansas by pitching a tent in her backyard. The menu: Top Ramen, sauce from Chinese takeout packets, and Skippy peanut butter. “It was absolutely delicious,” Rodriguez says.
Hormel executives and scientists generally don’t hang out in backyard tents. “We forget that food is sometimes one of the most emotional parts of our life,” Aakre explains. “She is really able to sense that emotional connection and the role that food plays for people. You will never find that in any focus group.”
More recently, Rodriguez has been hanging out with cancer patients after their chemotherapy treatments. Figuring out what they can stomach and what they have the energy to prepare helped Hormel develop Vital Cuisine, a line of microwavable meals it started selling in May.
“I always carry tissues,” she says. “They’re part of an anthropologist’s toolbox.”
Since Hormel hired Rodriguez, many other brands have followed suit, either adding staff anthropologists or tapping into a crop of new consultancies such as Stripe Partners, a London-based studio that has done work for Bacardi Ltd., Duracell Inc., and Nike Inc.
“This stuff has been happening from the mid-'90s onward, but there has been a big crescendo in the 2010s,” founder Simon Roberts says. “When I set up the company in 2012, the key word ‘ethnography’ on Google ad words cost about 10 cents. Now, you’d pay $20 or $30 a click.”
Ed Liebow, executive director of the American Anthropological Association, says corporations increasingly struggle to make sense of the big data sets they collect on their customers. Exacerbating understanding is the fact that most traditional research relies on reported behavior, which is often disconnected from what people actually do. With food, in particular, this is tricky; people invariably say their diets are more healthy than they are.
“We’re everywhere now,” Liebow says. “In health care, finance, software, technology, medical-device design, the entertainment industry, you name it.”
At Hormel, Rodriguez became a critical sounding board when the company began shopping in earnest for products that played into its protein strategy.
In 2012, Hormel spent $220 million on Wholly Guacamole, a line of refrigerated dips. The next year, it forked out $700 million for Skippy; executives were on the fence about that deal until Rodriguez pointed out that peanut butter is a staple in soups, sauces, dog treats, and occasionally, ramen. In 2014, Hormel added Muscle Milk, a burgeoning line of protein shakes endorsed by Stephen Curry and an entree to the CrossFit craze, for $450 million.
In July 2015, Hormel made its biggest purchase to date, spending $775 million on Applegate Farms, a line of all-natural, organic deli meats that dominate chi-chi groceries where Spam is relegated to bottom shelves, at best.
In May, it plunked down an additional $286 million for Justin’s, a Boulder, Colo.-based company known for organic peanut butter cups and spreads made from almonds and hazelnuts.
Rodriguez's influence also shows in new products within Hormel’s main brands. Since hiring her, Hormel expanded its research staff by roughly 15 percent in a bid to monetize its learnings from the field. A few months after snooping on phone-obsessed college students, the company launched a batch of prepackaged wraps swaddling deli meats and cheeses. They were portable and more important, one-handable. Hormel called the line Rev; by 2015, it was one of the most successful new products in the food business, according to IRI.
More recently, Rodriguez’s recommendation for portable foods trickled down to Skippy, as Hormel began selling P.B. Bites, little containers full of balled peanut butter.
“For us, it wasn’t necessarily about trying to drive for the business solution as much as it was trying to have her help us understand the unarticulated need,” Splinter says.
With Rodriguez in the field, a beefed-up R&D department, and a string of savvy acquisitions, Hormel quietly became an unlikely paragon of a big food company in the 21st century. In the past 10 years, Hormel’s annual revenue fattened by 71 percent, handily beating virtually every other U.S. food company.
Even after a recent price dip, Hormel shares have been more highly valued than most big food rivals for the past five years.
In 2011, Ettinger posted a corporate goal called “five and 10”; he wanted to grow revenue by 5 percent a year and profit by 10 percent. By the end of 2015, Hormel had missed the mark slightly. The sales figure was spot-on, but its average annual profit was 12 percent, a little fatter than planned. Last year, Hormel shares surged by 54 percent, outpacing all but seven other companies in the S&P 500.
Hormel is still Big Food and still very much a protein company.The Spam train is certainly moving faster than ever, infused with counterculture cachet from a wave of snout-to-tail foodies and restaurants like Noreetuh in New York’s East Village, where chef Chung Chow mixes the cubed meat with lemon zest and cheese before folding it into pillowy agnolotti. (A critic from the New York Times said the meat “could almost pass for mortadella.”) Spam sales have grown recently at an average annual rate of 3 percent domestically, and last year 13 percent of U.S. households bought a can of the stuff.
There’s a limit to how far afield the company will go in acquisitions: When it comes to fruits and vegetables, the company still has the appetite of a picky toddler. When asked about produce, R&D head Kevin Myers chuckles. (In addition to a PhD, he has a master's degree in "meat science" from Iowa State University.) Meyers mentions guacamole, cranberries, and the citrus that goes in Hormel marinades and its House of Tsang stir-fry sauces.
“It’s not a big acquisition target for us to buy a bag-salad company,” he says.
The difference is that Hormel now offers a healthier mix of returns, a spread that few of its rivals have pieced together so successfully. Its canned and packaged foods now provide profit margins far higher than those of meat growers like Tyson, while its meats offers sales growth that such cereal and soup-makers as Kellogg and Campbell are struggling to concoct.
“There are food brands that just haven’t been able to grow the top line,” says Bloomberg Intelligence analyst Michael Halen. “But Hormel has been able to look outside the box. They’ve done a good job staying ahead of trends.”
Rodriguez, meanwhile, is still working like an anthropologist, while increasingly trying to consider how the executives might act on her research. “Over the years, I’ve started to think more strategically,” Rodriquez says. “I’ll try to leverage one insight for five different things.”
Lately, she’s been into sour yogurt, yerba mate drinks, and meat that’s been grown—or “cultured”—in a lab. A couple of weeks ago, she saw something in an airport that got her attention: protein bars made out of crickets.
Aakre, in new product development, hears her out. Cricket flour probably isn’t going to anything major in five years, he says: “But we can’t wait five years to talk about it.”
Corrects information about advanced degrees held by Kevin Myers in the 43rd paragraph.