Businessmodel of Hormel Foods

Customer Segments

Hormel Foods has a segmented market business model, with customers that have slightly different needs. The company targets its offerings at retailers, wholesalers, foodservice distributors and operators, and other outlets.

Value Proposition

Hormel Foods offers three primary value propositions: accessibility, cost reduction, and brand/status.

The company creates accessibility by providing a broad range of options and making its products widely available. It distributes its products in all 50 U.S. states and throughout the world, with its larger markets including Australia, China, Canada, Japan, England, Mexico, and Micronesia. It also has acquired many companies since its founding, enabling it to greatly diversify its portfolio.

The company reduces costs by providing discounts and deals. It offers free printable coupons on its website for its products.

The company has established a powerful brand due to its success. It markets its products in 75 countries worldwide and generated $9 billion in revenues in 2015. It produces over 30 brands, including prominent ones such as Skippy, Applegate, Spam, Justin’s, and Wholly Guacamole. Lastly, it has won many honors, including:

• Placement on the S&P 500 Index, Fortune 500 List, and Barron’s 500 List
• Recogniton as one of the Most Trustworthy Companies by Trust Across America
• Recognition as one of the 100 Best Corporate Citizens by Corporate Responsibility Magazine
• Recognition as one of the Best Companies for Leaders by Chief Executive Magazine
• Ranking as #1 on the Best Companies to Sell For list by Selling Power Magazine
• M&A Mid-Market Award for Deal of the Year, Mergers and Acquisitions Magazine ### Channels

Hormel Foods’ main channel is its direct sales team. It also sells its products through independent brokers and distributors. The company promotes its offering through its website, social media pages, print/online/TV advertising, and promotions such as contests and sweepstakes.

Customer Relationships

Hormel Foods’ customer relationship is primarily of a self-service nature. Customers utilize its products while having limited interaction with employees. That said, there is a personal assistance component in the form of phone and e-mail support.

Key Activities

Hormel Foods’ business model entails the processing, marketing, and sale of its products to its customers.

Key Partners

Hormel Foods’ key partners are the suppliers that provide the goods and services it needs to process its products. The goods and services fall into the following categories:

• Ingredients – Beans, Edible Oils, Flavors, Food Grade Chemicals, Peanuts, Salt, Sweeteners – Corn, Sweeteners – Sugar, and Tomatoes
• Packaging – Adhesives, Barrier Film & Bags, Closures - Plastic & Metal, Corner Boards, Corrugated Folding Cartons, Glass Jars, Labels, Netting, PET Containers, Plastic Jars, and Tape
• Indirect Supplies – Pallets, Personal Protection Equipment, Poly Bags, R&D Supplies, Safety Supplies, Sanitation Chemicals, and Towels & Tissue
• Services – Laundry and Pest Control ### Key Resources

Hormel Foods’ main resources are its physical resources, which include three plants that harvest hogs for processing; seven turkey harvest and processing operations; and 35 facilities that produce and distribute other manufactured items. It places a high priority on its intellectual property, with 46 issued patents in the U.S. and 17 foreign issued patents.

Cost Structure

Hormel Foods has a cost-driven structure, aiming to minimize expenses through significant automation and low-price value propositions. Its biggest cost driver is cost of products sold, a variable expense. Other major drivers are in the areas of sales/marketing and administration, both fixed costs.

Revenue Streams

Hormel Foods has one revenue stream: revenues it generates from the sales of its products to its customers.